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A SUMMER TRANNING PROJECT REPORT ON COMPARATIVE ANALYSIS OF HOME LOANS AND ITS OPEARTIONS UNION BANK SUBMITTED IN PARTIAL

FULFILLMENT OF THE DEGREE

(Master of Business Administration)

Faculty Guided:
Ms. Kajal Sitlani

Submitted By:
Bhawani Singh

APEX INSTITUTE OF MANAGEMENT & SCIENCE, JAIPUR (2011-2012)

PREFACE

Realizing that the practical examination is an academic for all round development of a personal. As a part of the course Curriculum Application, the student has to undergo practical training for one and half month. The object of training is to provide the student with an insight to the practical aspects of organization working and build confidence. I have much pleasure in submitting the project report on COMPARATIVE ANALYSIS OF HOME LOANS AND ITS OPERATIONS AND MARKETING taken at UNION BANK, JAIPUR. environment. Such type of training helps students to work on real industrial environment, and to gain practical knowledge and

Acknowledgement

It is with great of gratitude and happiness that I present a thoroughly made project on the Comparative Market Analysis of Home Loans and its day to day operations offered by UNION BANK and other major players in this sector. This project is an insight into the current banking scenario of country in Home Loan Division. In the completion of the project many people have worked with me to carry forward my project. I express my deep sense of gratitude to all that have directly or indirectly helped in the successful completion of the project. I would like to thanks Mr.B.L.Meena ( BRANCH MANAGER) as my Project Guide, whose guidance provide me to experience the practical working and understanding , and all the UNION Bank staff for their interest, untiring efforts, unfailing courtesy, encouragement and cooperation in making a project a success.

There can possibly be no claim to the perfection in the project. In the case I request to bear with any errors, omissions or discrepancies that may have crept in despite due care and caution on my part.

CONTENTS
1. Introduction to the Industry 2. Introduction to the Organization 3. Research Methodology 3.1 Title of the Study 3.2 Duration of the Project 3.3 Objective of Study 3.4 Type of Research 3.5 Sample Size and method of selecting sample 3.6 Scope of Study 3.7 Limitation of Study 4. Facts and Findings 5. Analysis and Interpretation 6. SWOT 7. Conclusion 8. Recommendation and Suggestions 9. Appendix 10. Bibliography

INTRODUCTION OF THE INDUSTRY


About Union Bank: The dawn of twentieth century witnesses the birth of a banking enterprise par excellence- UNION BANK OF INDIA- that was flagged off by none other than the Father of the Nation, Mahatma Gandhi. Since that the golden moment, Union Bank of India has this far unflinchingly traveled the arduous road to successful banking........ a journey that spans 88 years. We at Union Bank of India, reiterate the objective of our inception to the profound thoughts of the great Mahatma... "We should have the ability to carry on a big bank, to manage efficiently crores of rupees in the course of our national activities. Though we have not many banks among us, it does not follow that we are not capable of efficiently managing crores and tens of crores of rupees." Union Bank of India is firmly committed to consolidating and maintaining its identity as a leading, innovative commercial Bank, with a proactive approach to the changing needs of the society. This has resulted in a wide gamut of products and services, made available to its valuable clientele in catering to the smallest of their needs. Today, with its efficient, value-added services, sustained growth, consistent profitability and development of new technologies, Union Bank has ensured complete customer delight, living up to its image of, GOOD PEOPLE TO BANK WITH. Anticipative banking- the ability to gauge the customer's needs well ahead of real-time - forms the vital ingredient in value-based services to effectively reduce the gap between expectations and deliverables. The key to the success of any organization lie with its people. No wonder, Union Bank's unique family of about 27,772 qualified / skilled employees is and ever will be dedicated and delighted to serve the discerning customer with professionalism and wholeheartedness. Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow 5

on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by Institutions, Individuals and Others. Over the years, the Bank has earned the reputation of being a techno-savvy and is a front runner among public sector banks in modern-day banking trends. It is one of the pioneer public sector banks, which launched Core Banking Solution in 2002. Under this solution umbrella, All 2805 Branches of the Bank have been 1200 networked ATMs, with online Telebanking facility made available to all its Core Banking Customers - individual as well as corporate. In addition to this, the versatile Internet Banking provides extensive information pertaining to accounts and facets of banking. Regular banking services apart, the customer can also avail of a variety of other value-added services like Cash Management Service, Insurance, Mutual Funds and Demat. The Bank will ever strive in its endeavor to provide services to its customer and enhance its businesses thereby fulfilling its vision of becoming THE BANK OF FIRST CHOICE IN OUR CHOSEN AREA BY BUILDING BENEFICIAL AND LASTING RELATIONSHIP WITH CUSTOMERS THROUGH A PROCESS OF CONTINUOUS IMPROVEMENT .

Project financing is an innovative and timely financing technique that has been used on many high-profile corporate projects, including Euro Disneyland and the Eurotunnel. Employing a carefully engineered financing mix, it has long been used to fund large-scale natural resource projects, from pipelines and refineries to electric-generating facilities and hydro-electric projects. Increasingly, project financing is emerging as the preferred alternative to conventional methods of financing infrastructure and other large-scale projects worldwide. Project Financing discipline includes understanding the rationale for project financing, how to prepare the financial plan, assess the risks, design the financing mix, and raise the funds. In addition, one must understand the cogent analyses of why some project financing plans have succeeded while others have failed. A knowledge-base is required regarding the design of contractual arrangements to support project financing; issues for 6

the host government legislative provisions, public/private infrastructure partnerships, public/private financing structures; credit requirements of lenders, and how to determine the project's borrowing capacity; how to analyze cash flow projections and use them to measure expected rates of return; tax and accounting considerations; and analytical techniques to validate the project's feasibility Project finance is different from traditional forms of finance because the credit risk associated with the borrower is not as important as in an ordinary loan transaction; what is most important is the identification, analysis, allocation and management of every risk associated with the project. The purpose of this project is to explain, in a brief and general way, the manner in which risks are approached by financiers in a project finance transaction. Such risk minimization lies at the heart of project finance. In a no recourse or limited recourse project financing, the risks for a financier are great. Since the loan can only be repaid when the project is operational, if a major part of the project fails, the financiers are likely to lose a substantial amount of money. The assets that remain are usually highly specialized and possibly in a remote location. If saleable, they may have little value outside the project. Therefore, it is not surprising that financiers, and their advisers, go to substantial efforts to ensure that the risks associated with the project are reduced or eliminated as far as possible. It is also not surprising that because of the risks involved, the cost of such finance is generally higher and it is more time consuming for such finance to be provided. Project finance is the financing of long-term infrastaructure and industrial projects based upon a complex financial structure where project debt and equity are used to finance the project. Usually, a project financing scheme involves a number of equity investors, known as sponsors, as well as a syndicate of banks which provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project itself and paid entirely from its cash flow, rather than from the general assets or creditworthiness of the project sponsors. The financing is typically secured by all of the project assets, 7

including the revenue-producing contracts. Project lenders are given a lien on all of these assets, and are able to assume control of a project if the project company has difficulties complying with the loan terms. Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a project failure. As a special purpose entity, the project company has no assets other than the project. Capital contribution commitments by the owners of the project company are sometimes necessary to ensure that the project is financially sound. Project finance is often more complicated than alternative financing methods. It is most commonly used in the mining, transportation, telecommunication and public utility industries. Risk identification and allocation is a key component of project finance . A project may be subject to a number of technical, environmental, economic and political risks, particularly in developing countries and emerging markets. Financial institutions and project sponsors may conclude that the risks inherent in project development and operation are unacceptable (unfinanceable). To cope with these risks, project sponsors in these industries (such as power plants or railway lines) are generally completed by a number of specialist companies operating in a contractual network with each other that allocates risk in a way that allows financing to take place. The various patterns of implementation are sometimes referred to as "project delivery methods." The financing of these projects must also be distributed among multiple parties, so as to distribute the risk associated with the project while simultaneously ensuring profits for each party involved.

COMPANY PROFILE
2.1 Banking Sector There have been major structural changes in the financial sector since banking sector reforms were introduced in India in 1992. Since then Banks have been lending aggressively providing funds towards infrastructure sector. Major policy measures include phased reductions in statutory pre-emption like cash reserve and statutory liquidity requirements and deregulation of interest rates on deposits and lending, except for a select segment. The diversification of ownership of banking institutions is yet another feature which has enabled private shareholding in the public sector banks, through listing on the stock exchanges, arising from dilution of the Government ownership. Foreign direct investment in the private sector banks is now allowed up to 74 per cent. The co-existence of the public sector, private sector and the foreign banks has generated competition in the banking sector leading to a significant improvement in efficiency and customer service. The share of private and foreign banks in total assets increased to 31.5 per cent at end-March 2007 from 27.6 per cent at end-March 2006 and less than 10.0 per cent at the inception of reforms.

The nationalized banks have more branches than any other types of banks in India. Now there are about 33,627 Branches in India, as on March 2005. Investments of scheduled commercial banks (SCBs) also saw an increase from Rs 8,04,199 crore in March 2005 to Rs 8,43,081 crore in the same month of 2006. India's retail-banking assets are expected to grow at the rate of 18% a year over the next four years (2006-2010). Retail loan to drive the growth of retail banking in future. Housing loan account for major chunk of retail loan.

2.2 An Overview on Union Bank Of India Union Bank of India was inaugurated by the father of the nation Mohandas Karamchand Gandhi. It commenced operations in the year 1920. Union Bank has offered vast and varied services to its entire valuable clientele taking care of their needs. Today, with its efficient customer service, consistent profitability & growth, adoption of new technologies and value added services, Union Bank truly lives up to the image of, Good People to bank with . Anticipative banking is an integral ingredient of value-based services. This ability to gauge the customer's needs long before he realizes, best reduces the gap between expectance and deliverance Manpower is the key factor for the success of any organization. Union Bank has a dedicated family of about 26,000 qualified / skilled employees who will and always will be delighted to extend their services to the customers with heartfelt efforts The Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital is presently held by Institutions, Individuals and Others. The Bank has over the years earned the reputation of being a techno-savvy Bank and is one of the front runners amongst public sector bank in the field of technology. It is one of the pioneer public sector banks, which launched Core Banking Solution in 2002. As of September 2005, more than 719 branches/extension counters of Bank are networked under Core Banking Solution, powered with the centralized technology platform, the Bank has launched multiple Electronic Delivery Channels and has installed nearly 469 networked ATMs. Online Tele banking facility is available to all its Core Banking customers. The multi facility versatile Internet Banking Solution provides extensive information in addition to the on line transaction facility to both individuals and corporate 10

banking with the Core Banking branches of the Bank. In addition to regular banking facilities, today customer can also avail variety of value added services like cash management service, insurance, mutual funds, Demat from the bank. Today there are more than 26,000 employees in Union Bank of India. UBI has been ranked at 5th position among the nationalized bank in India. Overview on banks deposits and advances

Items Deposits Investment s Advances

2003-04 2007-08

2004-05

2005-06

2006-07

2.2.1 Rationale for the study Offering credit is an operation fraught with risk. Before offering credit to an organization, its financial health must be analyzed. Credit should be disbursed only after ascertaining satisfactory financial performance. Based on the financial health of an organization, banks assign credit ratings. These credit ratings are used to fix the interest rate and quantum of installment. This study aims to analyze the credit health of organizations that approach Union Bank of India for foreign exchange credit facilities. After analyzing credit health, the credit rating is determined. On the basis of credit rating, the interest rate guidelines circular is consulted to fix a price for the credit facilities i.e. determine the interest rate. 2.2.2 Credit disbursement at Union Bank of India This project was undertaken at the Industrial Finance Branch of Union Bank of India, at the Credit Department. Financial requirements for Project Finance and Working Capital

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purposes are taken care of at the Credit Department. Companies that intend to seek credit facilities approach the bank. Primarily, credit is required for following purposes:1. Working capital finance 2. Term loan for mega projects 3. non fund based Limits Like Letter of Guarantee, Letter of Credit Companies present audited balance sheets of the current and previous years. These are used to determine the financial health, turnover trends and rise and fall of profitability. Then credit rating is done. The financial health and credit rating are theoretical methods for determining the right interest rate. However, in practice, banks consider other factors such as history with client, market reputation and future benefits with clients. Thus, a difference exists between theory and practice. 2.2.3 Objectives of the project To assess the financial health of organizations that approach Union Bank of India for credit for import export purposes. This would entail undertaking of the following procedures: Analysis of past and present financial statements Analysis of Balance Sheet Analysis of Cash Flow Statements Examination of Profitability statements Examination of projected financial statements Examination of CMA data

To assess the suitability of the company for disbursement of credit. This would involve the following actions: 12 Use of credit rating charts

Evaluation of management risk Evaluation of financial risk Evaluation of market-industry risk Evaluation of the facility Evaluation of compliance of sanction terms

: Term Loan Assesment

Submission of Project Report along.

Carrying out due diligence

Preparing Credit Report

Determining Interest Rate

Preparing and submission of Term Sheet

If not approved

if approved

Preparation of proposal

Submission of Proposal to designated authority

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The success of a feasibility study is based on the careful identification and assessment of all of the important issues for business success. A detailed Project Report is submitted by an enterpreneur , prepared by a approved agency or a consultancy organisation. Such report provides indepth details of the project requesting finance. It includes the technical aspects, Managerial Aspect, the Market Condition and Projected performance of the company. It is neccessay for the appraising officer to cross check the information provided in the report for dtermining the worhiness of the project. Project Details: Definition of the project and alternative scenarios and models.

List the type and quality of product(s) or service(s) to be marketed. Outline the general business model (ie. how the business will make money). Include the technical processes, size, location, kind of inputs Specify the time horizon from the time the project is initiated until it is up and running at capacity.

Relationship to the surrounding geographical area.

Identifies economic and social impact on local communities. Identifies environmental impact on the surrounding area.

MARKET FEASIBILITY Industry description.

Describes the size and scope of the industry, market and/or market segment(s). 14

Estimates the future direction of the industry, market and/or market segment(s). Describes the nature of the industry, market and/or market segment(s) (stable or going through rapid change and restructuring).

Identifies the life-cycle of the industry, market and/or market segment(s) (emerging, mature)

Industry Competitiveness.

Investigates industry concentration (few large producers or many small producers). Analyzes major competitors. Explores barriers/ease of entry of competitors into the market or industry. Determines concentration and competitiveness of input suppliers and

product/service buyers.

Identifies price competitiveness of product/service.

Market Potential.

Will the product be sold into a commodity or differentiated product/service market? Identifies the demand and usage trends of the market or market segment in which the proposed product or service will participate.

Examines the potential for emerging, niche or segmented market opportunities. Explores the opportunity and potential for a "branded product". Assesses estimated market usage and potential share of the market or market segment.

Sales Projection.

Estimates sales or usage. Identifies and assess the accuracy of the underlying assumptions in the sales projection.

Projects sales under various assumptions (ie. selling prices, services provided). 15

Access to Market Outlets.

Identifies the potential buyers of the product/service and the associated marketing costs. Investigates the product/service distribution system and the costs involved.

ORGANIZATIONAL/MANAGERIAL FEASIBILITY Business structure.


Outline alternative business model(s) (how the business will make money). Identify the proposed legal structure of the business. Identify any potential joint venture partners, alliances or other important stakeholders.

Identify availability of skilled and experienced business managers. Identify availability of consultants and service providers with the skills needed to realize the project, including legal, accounting, industry experts, etc.

Outline the governance, lines of authority and decision making structure.

Managerial Personnel Managerial Personnel play a key role in directing the working of the company. It is important for an organisation to have a pool of eficient personnel who bear the capacity to bail the company out from crisis situation and work towards optimum utlisation of organisational resources. Such capacity of the personnel can be determined by having complete details on following key aspects: Market reputation on the promoter / management of the company Hands on experience of the management personnel in the industry / Business managed by qualified personnel Ability of the promoters / management to bail out the company in case of crisis (for example, this could be derived from a strong group company) Decision making Is it concentrated ? Organisation structure / Succession planning / Labour relations 16

Is any group company in default / Any Directors on RBIs negative list / Borrowers track-record in honouring financial commitment Length of relationship with the bank

TECHNICAL FEASIBILITY Technology plays an important role in maintaining a competitive position in this highly competitive market conditions. Investing in the proper technology is the key to success it irrespective of size of business thus for achieving its projected performance, it is important for it to have sound technological background. Such technical competence of the project can be determined by having detailed study done on following key aspects: Determining Facility Needs.

Estimates the size and type of production facilities. Investigates the need for related buildings, equipment, rolling-stock

Suitability of Production Technology.


Investigates and compare technology providers. Determines reliability and competitiveness of technology (proven or unproven, state-of-the-art).

Identifies limitations or constraints of technology.

Availability and Suitability of Location.


Access to markets. Access to raw materials. Access to transportation. Access to a qualified labor pool. 17

Access to production inputs (electricity, natural gas, water, etc.). Investigate emissions potential. Analyze environmental impact. Identifies regulatory requirements. Explores economic development incentives. Explores community receptiveness to having the business located there.

Raw materials.

Estimates the amount of raw materials needed. Investigates the current and future availability and access to raw materials. Assesses the quality and cost of raw materials and markets of easily substituted inputs.

Other inputs.

Investigates the availability of labor including wage rates, skill level, etc. Assesses the potential to access and attract qualified management personnel.

FINANCIAL FEASIBILITY Estimate the total capital requirements.

Assesses the capital needs of the business project and how these needs will be met.

Estimates capital requirements for facilities, equipment and inventories. Determines replacement capital requirements and timing for facilities and equipment.

Estimates working capital needs. Estimates start-up capital needs until revenues are realized at full capacity. Estimates contingency capital needs (construction delays, technology malfunction, market access delays, etc. 18

Estimates other capital needs. Estimated equity and credit needs. Identifies alternative equity sources and capital availability -- producers, local investors, angel investors, venture capitalists, etc.

Identifies and assess alternative credit sources -- banks, government (ie. direct loans or loan guarantees), grants, local and state economic development incentives.

Assesses expected financing needs and alternative sources -- interest rates, terms, conditions, covenants, liens, etc.

Establishes debt-to-equity levels.

Budgets expected costs and returns of various alternatives.


Estimates expected costs and revenue. Estimates the profit margin and expected net profit. Estimates the sales or usage needed to break-even. Estimates the returns under various production, price and sales levels. This may involve identifying "best case", "typical", and "worst case" scenarios or more sophisticated analysis like a Monte Carlo simulation.

Assesses the reliability of the underlying assumptions of the financial analysis (prices, production, efficiencies, market access, market penetration, etc.)

Creates a benchmark against industry averages and/or competitors (cost, margin, profits, ROI, etc.).

Identifies limitations or constraints of the economic analysis. Determines project expected cash flow during the start-up period. Identifies project an expected income statement, balance sheet, etc. when reaching full operation.

Study Conclusions

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The study conclusions contain the information you will use for deciding whether to proceed business. The major categories this section should include are:

Identify and describe alternative business scenarios and models. Compare and contrast the alternatives based on their business viability. Compare and contrast the alternatives based on the goals of the producer group. Outline criteria for decision making among alternatives.

Next Step After the feasibility study has been completed and presented, a carefully study and analysis the conclusions and underlying assumptions. Next, you will be faced with deciding which course of action to pursue. Potential courses of action include:

Choosing the most viable business model, for investment Identifying additional scenarios for further study. Deciding that a viable business opportunity is not available and moving to end the business assessment process.

CREDIT REPORT AND CREDIT RATING The credit report is an important determinant of an individual's financial credibility. They are used by lenders to judge a person's creditworthiness. They also help the person concerned to narrow down on the financial problem areas. Credit report is a document, which comprises detailed information about the credit payment history of an applicant. It is mostly used by the lenders to determine the credit worthiness of an applicant. The business credit reports provide information on the background of a company. This assists one to take crucial business related decisions. People can also assess the amount of business risk associated with a company and then decide whether they would be comfortable in providing them with credit facilities. The degree of interest that would be shown by investors in their company can also be gauged 20

from the business credit reports as they can get an idea of the conception of their customers regarding themselves. Since these records are updated at regular intervals of time they enable people to identify the risk levels associated with a business as well as its future. These reports also allow businesses to get detailed information about the financial status of business partners and suppliers. What Is A Corporate Credit Rating? Ratings can be assigned to short-term and long-term debt obligations as well as securities, loans, preferred stock and insurance companies. Long-term credit ratings tend to be more indicative of a country's investment surroundings and/or a company's ability to honor its debt responsibilities. . The ratings therefore assess an entity's ability to pay debts. There are various organization who perform credit rating for various business organization. Union Bank of India follows a finely defined Credit Rating Model for assessing the creditworthiness of the applicant. The credit rating model asses various aspects of the projects and assigns scores against them thereby determining the risk level involved with the project. It is divided in Four Sections: 1. Rating of the Borrower

Financial Risk Management Risk

2. Market Condition/ Demand Situation 3. Rating of the Facility 4. Business Consideration 5. Cash Flow related parameters 1) Rating of the Borrower: This part of credit rating model deals with assessing the financial and managerial ability of the borrower. The financial ability of the firm is derived by calculating ratios that determine the short term and long term financial position of the firm

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Short term ratios include Current Ratio, determines the liquidity position of the company over a period of one year. The current ratio is an indication of a firm's market liquidity and ability to meet creditor's demands. It is excess of current assets over current liability. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets. According to the guidelines given to UBI the ideal level is at 1.33:1 however the acceptable level is at 1.17:1. However at times current ratio may not be a true indicator, the current ratio for road projects is very high but this does not indicate that the company is not using its assets well but the ratio is high because the activity involves more in dealing with current assets. Hence it is important for the evaluator to understand the nature of the industry. Long term ratio include Debt Equity Ratio is a financial ratio indicating the relative proportion of equity and debt used to finance a company's assets. This ratio is also known as Risk, Gearing or Leverage. A high debt equity ratio is not preferable by an investor as the company already has aquired high amount of funds from market thereby reducing the investor share over the securities available, inreasing the risk. It is aslo important for the lender bank to assess the firms debt paying capacity over a period. Such capacity is derived by calculating ratio like Debt Serice Coverage Ratio minimum acceptable level is 1.50. It also necessary for the lender to determine the ability of the firm to achieve the projected growth by evaluating the projected sales with actuals.However such parameter remains non applicable if the business is new. Finacial risk evaluation is oly one of the parameter and not thje only parameter for determining the risk level. It is important to evaluate the Management Risk also while evaluating the risk relaing to borrower. It is the management of the company that acts as guiding force for the firm. The key managerial personnel should bear the capacity to bail out the company frm crisis situation. Inorder to remain competitive it is essential to take initiatives. Such skills are developed

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over years of experience, thus for better performance it is required to have a team of well qualified and expirienced personnel. 2) Market potential / Demand Situation A Company does not operate in isolation there are various market forces that acts in either favourable or unfavraouble manner towards its performance. Thus the rating would not give true picture if does take market or demand situation in consideration. The demand supply situation / market Potential plays an important role in determining the growth level of the company like Following a favrouable feasibility check, credit rating the next step is preparing term sheet . A Term Sheet is breif document that provides details on aspects like:

Account Details Financial highlights for immediate previous two audited years and projection for proceeding year Nature of Project Cost of Project Means of finace 1. Nature of Facility 2. Purpose 3. Tennure of Term Loan 4. Interest rate Reset 5. Margin 6. Interest Rate, Commission Door to Door Tenor ie.the period within which the entire amount I sto be disbursed. o Repayment Terms o Prime Security o Collateral Security o Upfront fees ie the charges levied by the bank for processing the documents.

3.5 PROPOSAL

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An approved term sheet leads to preparation proposal. A proposal is prepared in standard format, this enables the bank to keep a proper track record and also facilitates proper comparision. A proposal a full fledged document providing details on project submitted and requesting finance from bank. A proposal contains information on following aspects: * Details of Account: It includes name of the Account Holder, Date of incorporation, Line of Activity, Internal Credit Rating level, Address of the Registered Office, Directors, Share Holding Pattern, Asset Classification, Purpose of the Loan. * Securities:Lenders often feel more confident about a loan if they are given a security interest in the assets of a business. Then, if the borrower does not repay the loan as promised, the lender can take the property the borrower pledged, sell it and use the proceeds to repay (or partially repay) the borrowed amount.it provides detailed information on nature of securities given in lieu of the Loan.they are of two types Prime securities, Collateral Secuties Prime Securities: Pari Passu is a term used in banking transactions which means that the charge to be created is in continuation of an earlier charge which might be held by the same institution or by an other institution. Collateral Securities: In lending agreements, collateral is a borrower's asset that is forfeited to the lender if the borrower is insolvent --- that is, unable to pay back the principal and interest on the loan. When insolvent, the borrower is said to default on the loan, in which case the lender becomes the owner of the collateral. It includes details on Nature / Description of collateral security indicating area & location of property Value in Rupees. Date of valuation along with name of Valuer Insurance Amount & Date of Expiry Name of

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Personal guarantee / Corporate Guarantee if any, includes Name of the guarantor, Value of Guarantee. * Financial Highlights: It povides details of important financial elements over a period of years. It includes Details on Paid capital, Tangible Networth, Net working Cpaital,Current Assets, Current Liabilities, Net Profit, Net Sales, Reserves and Surplus, Intangible Asstes, Long Term Liailities, Fixed Assets, Investments, Non current Assets like guarantees , Cash Accruals, Capital employed. It also includes ratios like Debt Equity Ratio, Current Ratio, Debt Service Coverage Ratio and so. The interpretation of the financial data presented provides information on the perfomance trend of the company also of the Projections made. Such financial highlight play an important role in assesing the financial strenghts and weakness of the business.

* Status of the project: A brief of Project In this part of proposal a brief about the project is explained, it includes information on nature, type of project, purpose of the project, commencement details, the promoters and related details of the project. If it is a on-goin project it also gives details on progress and status of progress * Evaluation of Industry : This Section gives brief details on the 1. Scope of the industry 2. Growth level and overall performance of the industry 3. Recent Developments and Trend Evaluation

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* Conduct of the Account: This section provides details on : Regularity in Submission of Stock Statements / Book Debt Statement QPR Statements / Half Yearly Statement Financial Statements CMA Data

* Compliance to Terms of Sanction It furnishes information on following aspect: Completion of Mortgage formalities Registration of Charges with RoC Whether documents valid and in force Compliance of RBI guidelines Whether consortium meetings held at prescribed periodic intervals where the Bank is the leader.

* Exposure details from banking system (existing) (Incl. Our Bank) The sharing pattern of the banks is mentioned in this section of proposal. It includes Name of the bank Percentage of share for the fund based and non Fund based Limits Amount in Rs.

Non Fund based credit are in form of gaurantees like Letter of Credit (L/c), Letter of gaurantee (L/g) Letter of Credit A Letter of credit also known as documentary credit is the most commonly accepted instrument of settling international trade payments. A letter of credit is an arrangement

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whereby a bank, acting at the request of a customer, undertakes to pay a third party by a given date, on documents being presented in compliance with the conditions laid down. Letter of Guarantee A letter from a bank stating that a customer owns a particular security and that the bank will guarantee delivery of the security. A letter of guarantee is used by an investor who is writing call options when the underlying stock is not in his or her brokerage account. A Call Option is an agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. Financial Guarantee: A non-cancelable indemnity bond guaranteeing the timely payment of principal and interest due on securities by the maturity date. If the issuer defaults, the insurer will pay a fixed sum of money to holders of the securities. Financial guarantees are similar to a Standby Letter of Credit, but are issued by an insurance company. A Standby Letter of Credit is a form of insurance on an underlying agreement or obligation (contract), insuring all parties to the contract against failure to perform or pay on the part of one or another party to the contract. Standbys are issued by banks.

Assessment of Non Fund Based Limit 1. Non Fund Based Limits are normally to be sanctioned for exixting customer only who already enjoy fund based limits 2. If new borrower full processing as applicable to Fund Based Limits to be carried. 3. Borrowers background and experience of meeting commitments to be examined in details. 4. L/c limit to be considered as per terms of Purchase or contract, lead period and minimum econmical quantity of supply of stocks 5. Non Fundabsed Limits are to be supported by necessary fund based limits. 6. Past experience of payment of billsunder L/c to be verified before considering new request. 27

7. While Assessing the L/g Limit contract or agreement which is the base for L/g, should be examined in details for any ambigious clauses. 8. Any request for financial Guarantee to be critically examined before takin decision. * Details of Sister/ Allied Concerns: This section provides information about the Sister/ Allied Concerns aspects like various banks. * Terms and Condition: It is important both for the bankand the applicant to safegaurd its interest, this could be achieved by settling at mutually acceptable terms and condition inorder to ensure that both the parties the lender and borrower perform their part of obligation thereby not putting other party at loss. All loans are subject to regulations and conditions. The legal information relating to these regulations and conditions can be viewed in this section. It is advisable for both the parties to read this information carefully before approval. the performance, promoters, share holding pattern, operation exposure and experience from

3.6 DISBURSEMENT: After submission Proposal to Designated/ Sanctioning Authortiy for sanctioning the Term Loan. the authorities may raise querries, if any relating to projects and thereby convey it to the processing officer the processing officer inturn addresses them to the borrower for necessary step to be taken, such querries are required to be solved to the earliest by the applicant for further proceesing of the proposal. If the authoritiees are satisfied and have no further querries with respect to proposal,the Loan gets sanctioned and decided. 3.7 FOLLOW-UP: 28 the disbursement would be released in as per the terms

This is most cruicial stage in process of term loan assesment. Since amount of credit required is usually high, such amounts are disbursed in one installment, they are paid in installments.this helps the lender bank to understand and assess the utilisation of funds disbursed by the lender Bank. Such evualtion is done by obtaining Lenders Engineer Report, it is report that provides complete details of the status of the project. It is prepared on monthly basis. It also provides CA Report, it verifies the Finacial details furnished to bank for further disbursement.this is known as renewal of account.

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of Trading, Liaisoning, Business management and implementation of new Projects. He has been working with the Group for the last seven years. He is on the Board of various group companies including Consolidated Finvest & Holdings Limited. Mr S. R. Yadav Mr. S.R.Yadav is an ex-Executive Director, NCR region, NTPC. He is also a Director on the board for NTPC-SAIL Power Company (P) Ltd. He will be heading the Engineering team in JKL Pvt. Ltd. He is a Mechanical engineer from RIT, Jamshedpur and has work experience of over 35 years in the areas of project planning, erection, commissioning, operation and maintenance. He has been involved in many green field projects of NTPC and was posted in Korba, Bokaro, Singrauli etc. Mr A. K. Sehdev Mr AK Sehdev is an engineering graduate from Delhi College of Engineering. He has over 36 years of experience of Navaratna Companies like IOC and NTPC. He is involved in preparation of action plan, project formulation, project scheduling, FRs and DPRs, cost estimation and cost control, financial analysis, tariff calculations, budget preparation, project engineering and finalization of technical specifications of various packages. Mr P. K. Patnaik Mr Patnaik has many years of experience in IPP (Industrial Power Projects) He had also worked in two UK based company as an advisor. He was VP and country Manager with Kennedy & Donkin Ltd and Head Business Development with Merz & McLellan Ltd. He worked in Lanco Kondapalli also. Prior to joining JITPL as Sr VP (Corporate affairs), he was Head (Corporate Affairs) at Egateway, New Delhi. Mr A C Sarkar Mr Sarkar is Executive Director (Eastern Region-1), Power Grid Corporation of India Ltd (PGCIL) and has work experience of about 35 years of experience in Power transmission. He is an Electrical engineer from Sibpur Engg College. He has been involved in the 30

establishment of the national transmission grid and has experience in the areas of planning, coordination, project management, technical and commercial considerations. He is joining JITPL as Vice-President (Transmission). Mr J. Ramesh Chandra Mr Chandra is Master in Applied physics & Instrumentation. He has work experience of around 33 years in various companies including Desein and BHEL. He has joined JKL Pvt. Ltd as GM (Control and Instrumentation). He has experience of instrumentation process for BTG (boiler, turbine & generator) and BOP (balance of plant), project engineering, design and commissioning. Mr L. P. Soni Mr Soni is a Chartered Accountant and Company Secretary with over 25 years experience in various companies. Mr. Sonis areas of expertise include project financing, working capital management, fund raising through capital market, foreign exchange management, Company law matters. Mr. Soni has been earlier associated with various companies including Surya Roshni Ltd., Maharaja Shree Umaid Mills Ltd. in senior positions prior to joining the group as VP (Finance). Mr Ashok Kr Kucheria Mr Kucheria is M Com and Chartered Accountant and has work experience of over 24 years. He was head of Finance of Jamlal Drilling and Industries Ltd for around 14 years and rose to the post of CFO of the Company. His strengths points are auditing, MIS, Taxation, project financing, working capital management, fund raising, capital market, foreign exchange management etc. Presently he is GM (Finance) for power project and he is involved in resource management and financial closure for the project. Mr P. Girish Mr P Girish is Vice President, (Corporate affairs) in charge of govt liaisoning for Delhi. He has 21 years of experience in corporate affairs, administration in various Companies. Mr. Girish has started his career with Rolls Royce Industrial Power Ltd in the Commercial 31

department. He has been associated with the Malaxmi Infra Ventures Pvt Ltd as General Manager with the major responsibilities of Navabharat Power Pvt Ltd. and Simhapuri Energy Pvt Ltd Nellore based on Imported Coal. He has also worked for Lanco Power Pvt Ltd as a Manager Administration. Mr Naveen Goel Mr Naveen Goel is Head (State Liaisoning), Orissa. He is B .Com from Delhi University and inter in CA and ICWA. He started his career with Jindal Photo Limited since 1995. Mr. B L Dua Mr Dua is General Manager Project Development and Construction. He has over 38 years of experience on civil construction, especially power plants. He has experience of construction engineering and has completed a Diploma in civil engineering. He has been associated with various public sector companies including Central Board of Water, Central Electricity Authority and NTPC etc. 3) Ability of the promoters / management to bail out the company in case of crisis (for example, this could be derived from a strong group company) The experienced directors bear the capacity to bail out the company in case of crisis. 4) Decision making Is it concentrated? A committee of directors comprising of qualified & experienced personnel will professionally manage the company. 5) Organisation structure / Succession planning / Labour relations The company will be a professionally managed company hence, any threat of succession planning is not perceived. 6)Is any group company in default / Any Directors on RBIs negative list / Borrowers track-record in honouring financial commitment?

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The company has confirmed that none of the Directors of JKL Pvt. Ltd are on RBIs defaulters list in respect of JKL Pvt. Ltd. or any other company in which they are a Director. 7) Length of relationship with the bank The Group is new to us. EVALUATION OF INDUSTRY Thermal power stations constituting over 66% of the aggregate installed generation capacity and despite being relatively less environment-friendly as compared to hydroelectric projects (HEPs), thermal power plants offer certain advantages over HEPs as mentioned below: Lesser implementation time-frame: 2.5-3.5 years as compared to 5-6 years for HEPs; Ability to function as base load power plants as compared to HEPs which serve as peakload power plants; Standardized generation technology: independent of project site; Absence of seasonal variations in power generation; Location flexibility: Can be located either close to load-centre or at fuel pit-head while HEPs are site-specific and often located in challenging geographical terrain. Demand-Supply Scenario Power supply position in the country has worsened over the last few years with growth in power demand outstripping new capacity addition with peak power deficit being worst having peak deficit of 13.5% in 2006-07. The energy deficit at the national level has increased from 7.5% in 2003-04 to 9.9% in 2006-07

Projected Power Requirement beyond 2011-12 till 2021-22

With rapid growth of the economy, power requirement is projected to increase significantly over the next decade with per capita power consumption expected to increase from ~612 kWh at present to about 1000 kWh by 2012 (GoIs target for 100% electrification).

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Given the prevalent demand supply deficit scenario and projected growth in power requirement, huge addition in generation capacity is required in the country over the coming decade. Consequently, there exists an attractive business and market opportunity for establishment of power generation plants in the country, especially in the northern & western regions of the country.

Target States for Power Sale In view of the adverse power deficit scenario in western and northern region as mentioned in the previous sections, both these regions have been identified as target markets for ultimate sale of JKL Pvt. Ltd power.

Power Home: Loan Purposes

You can apply for Power Home for the following purposes Purchase of a plot of land and construction of a house thereon Construction of a house on plot of land already owned Purchase of a new house or flat Residual age of the property should not be less than 30 years old (Home Acquisition Plan) Extension or renovation or repair of a house or flat already owned by self (improvement or extension plan) Take-over of existing Housing Loan (Balance Transfer) Pre-allotment booking finance Loan takeover with additional refinance (Balance Transfer + top up) Loan to NRI for purchase of ready residential property only Purchase of residential plots only

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Power Home: Eligibility

Salaried Individuals

Any individual who is in permanent service in Government or reputed companies.

The applicant in all the cases should be above 21 years of age at the time of loan commencement and up to the age of superannuation.

Professionals

Professionals (i.e., doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, and management consultants only) can apply.

The applicant should be above 21 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity.

Self Employed Individuals Any individual filing Income Tax returns can apply.

The applicant in all the cases should be above 21 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity.

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Power Home: Documentation

Documents Required The following documents are required along with your loan application

In Society Cases Society Allotment Letter. Site Plan Society Receipt. Development Charges (Rs. 10/Square yard).

In Case of Housing Board Allotment Letter. Possession letter. Regularization cum NO dues Certificate. Convenience Deed (for structure). Perpetual Lease Deed (for Land).

In case of Development Authority Site Plan.

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DA Registered Lease Deed.

In Case of Industrial Corporation Allotment Letter. Site Plan.

File Documentation

Purpose Proof identity of

Salaried Voter's ID card or driving license or

Others

PAN card or photo credit card or Voter's ID card or driving license employees ID card or defense or police or PAN card or photo credit card or government department ID card Latest salary slip showing recent salary certificate Bank account statement electricity bill or latest all IT returns for the last 2 years and 2 years certified by a CA or latest or Bank account statement or latest electricity bill or latest mobile or telephone bill or latest credit card statement or latest LIC policy or insurance latest premium or receipt or NSC other similar mobile

Proof of Income

deductions or Form 16 along with computation of income for the last

telephone bill or latest credit card statement or latest LIC policy or Proof of residence insurance premium receipt or employers letter certifying the current mailing address or latest NSC or other similar address instruments or existing indicating house the lease

instruments indicating the address

agreement Bank statement or Last 6 months Pass Book where salary or income is 37

Last 6 months

credited Guarantor form

Optional

Optional

PROPIETORSHIP FIRM Last three yrs. Saral form. Computation of income. Trading &P&L a/c. Balance sheet.

PARTNERSHIP FIRM The above Documents + Partners Capital a/c. Partnership Deed.

COMPANY Memorandum &Articles of Association. Board Resolution.

COMMON DOCUMENTS

Either single a/c or joint a/c with other family members (father,mother,son) with regular source of income Individuals who may be employed/self-employed in business having regular income Last one year Statement in case of Current A/C. 38

Address proof. Photo ID. IF Customer is already taken any other Loan than Track Record of that loan. Indian Citizen -21 years of age

Note: With these Documents we also take a blank cheque of processing fee. (That is Max.0.50%of loan amount)

Power Home: Loan Amount The limits on the loan Max. Rs. 300 lacs for Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Ahmedabad, Hyderabad, Gurgaon, Noida and New Delhi. For other Cities Rs. 100 lacs. Max. Rs. 10 lacs for repairs Margin For loan up to rs. 200 lacs, 20% of the cost of the property

For loan up to rs. 200 lacs, 35% of the cost of the property

Power Home: Terms and Conditions

Repayment Repayment period for home loans shall not exceed 25 years

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Repayment period of pre-allotment bookings of housing loans shall not exceed 1 year

Repayment period of improvement or renovation or extension of existing property shall not exceed 10 years

Security Equitable mortgage of the property to be financed by way of deposit of title deeds. Disbursement The loan will be disbursed in full or in suitable installments, taking into account the requirement of funds and progress of construction, as assessed by the Bank directly to seller or builder or local development authority or supplier of materials etc. Processing charges or admission fee Processing fee equivalent to 0.50% of the loan amount (applied for) will be collected along with the application form (taxes as applicable). Penalty for early closure 2% of the principle outstanding in case of takeover by other bank or HFC, otherwise nil. Value Added Services Credit card will be issued free of annual fees. No hidden or built-in costs Quick processing and disposal of loan applications Flexible repayment options Other Attaractive Features Bank reserves the right to reject any application without assigning reasons thereof 40

The applicant will undertake to inform the Bank as and when there is a change in address or employment No repayment penalty Flexible repayment schedule Easy and convenient EMIs Sanction within 72 hours on receipt of application in full as per requirement Pay interest on daily reduced balances

The terms and conditions mentioned above and elsewhere under the scheme are subject to modification from time to time solely at Bank's discretion.

Rate of interest (w.e.f 15.02.2010) for Home Loans up to rs. 5.00 lacs Period Upto 5 yrs. >5 yrs.-10 yrs. >10yrs. to 15 yrs. >10yrs. to 25 yrs. Fixed 9.75% N.A. N.A. N.A. Floating BPLR -2.75%=9.00% BPLR -2.50%=9.25% BPLR -2.25%=9.50% BPLR -2.25%=9.50%

Rate of interest (w.e.f 15.02.2010) for Home Loans up to rs. 5.00 lacs and 30.00lakh Period 1st, 2nd, 3rd Fixed Upto 5 yrs 5-10 yrs >10-15yrs >15yrs to 20yrs 41 9.75% N.A. N.A. N.A. 4th yr Onwards Floating BPLR-2.75% i.e.9.00% BPLR -2.50% i.e.9.25% BPLR-2.25% i.e.9.50% BPLR-2.25% i.e.9.50%

Rate of interest (w.e.f 15.02.2010) for Home Loans up to rs. 30.00 lacs to 50.00 lacs

Period Upto 5 yrs. >5 yrs.-10 yrs. >10yrs. to 15 yrs. >15yrs. to 25 yrs.

Fixed 10.75% N.A. N.A. N.A.

Floating BPLR -2.50%=9.25% BPLR -2.25%=9.50% BPLR -2.00%=9.75% BPLR -2.00%=9.75%

Rate of interest (w.e.f 15.02.2010) for Home Loans up to rs. 50.00 lacs to 200.00 lacs Period Upto 5 yrs. >5 yrs.-10 yrs. >10yrs. to 15 yrs. >15yrs. to 20 yrs. Fixed 10.75% N.A. N.A. N.A. 4th yrs Onward Floating BPLR -2.25%=9.50% BPLR -1.75%=10.00% BPLR -1.50%=10.25% BPLR -1.50%=10.25%

Rate of interest (w.e.f 15.02.2010) for Home Loans above 200.00 lacs Period Upto 5 yrs. >5 yrs.-10 yrs. >10yrs. to 15 yrs. >15yrs. to 25 yrs. Fixed N.A. N.A. N.A. N.A. Floating BPLR -1.75%=10.00% BPLR -1.25%=10.50% BPLR -1.00%=10.75% BPLR -1.00%=10.75%

INTEREST RATES UNDER FESTIVE OFFER (Till 15th Jan. 2010): Tenure Loans up to 5 lakhs First 3 years (Fixed) 42 8.50% Repayable in up to 25 years

4th

year

onwards BPLR - 2.75% i.e. 9.00 %

(Floating) Tenure First 3 years (Fixed) 4th Loans above 5 lakhs and up to 30 lakhs Tenure First 3 years (Fixed) 4th year onwards Repayable in more than 10 and up to 25 years 8.50% BPLR - 2.50% i.e. 9.25 % year onwards Repayable in up to 10 years 8.50% BPLR - 2.75% i.e. 9.00 %

(Floating)

(Floating) Tenure First 3 years (Fixed) 4th Loans lakhs above year onwards

Repayable in up to 10 years 8.50% BPLR - 2.50% i.e. 9.25 % Repayable in more than 10 and up to 25 years 8.50% BPLR - 2.25% i.e. 9.50 %

30 (Floating) Tenure First 3 years (Fixed) 4th year onwards

lakhs and up to 50

(Floating) Loans lakhs above 50 Tenure First 3 years (Floating) 4th 43 year onwards

Repayable in up to 10 years BPLR - 2.50% i.e. 9.25 % BPLR - 1.75% i.e. 10.00 %

(Floating) Tenure First 3 years (Floating) 4th year onwards Repayable in more than 10 and up to 25 years BPLR - 2.50% i.e. 9.25 % BPLR - 1.50% i.e. 10.25 %

(Floating)

Power Home: Fair Practice Code for Lenders

As directed by the Reserve Bank of India, vide circular. The Bank has adopted modified Fair Practice Code for lenders as approved by the Board of Directors. The salient features of the same are:

Applications for Loan In the loan application form, the Bank shall provide comprehensive information including information about fees and charges if any payable for processing and amount of such fees refundable in case of non acceptance of application,

44

prepayment options and other matter which affects the interest of the borrowers, of all categories of loans, irrespective of the amount of loan sought by them. Processing The Bank shall provide acknowledgement for receipt of all loan applications indicating the time frame within which the application will be disposed of. The Bank shall verify the loan application and if additional details / documents are required, these will be sought from the applicant. For all categories of loans and irrespective of any threshold limits, the Bank will be expected to process the application without delay. In case the application is turned down, the Bank will convey in writing to the applicant the reasons for rejection within one month.

Loan Appraisal and Terms and Conditions

The sanctioning authority will be expected to ensure proper assessment of the credit application as per the extant instructions and credit policy of the bank. The availability of adequate margin and security will not be a substitute for due diligence on the creditworthiness of the customer.

All the terms and conditions and other caveats will be duly communicated by an authorized official of the Bank to the customer in writing.

The acceptance of the customer will be obtained on the sanction letter with the customer's signature under the caption "I/WE ACCEPT ALL THE TERMS AND CONDITIONS WHICH HAVE BEEN READ AND UNDERSTOOD BY ME/US".

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A copy of the loan agreement along with all the enclosures quoted in the loan agreement will be furnished to the customer at the time of issue of the sanction letter.

The sanction letter / loan agreement will clearly state that the credit facilities will be extended solely at the discretion of the Bank and that drawings under the following circumstances will be solely at the discretion of the Bank. Drawings beyond the drawing power / sanctioned limits. Honoring of cheques issued for the purpose other than specifically stipulated in the sanction. Drawings in an account once it is classified as NPA. No drawings will be allowed in case of non-compliance of the terms and conditions by the borrower. Meeting further requirements of the borrower on account of growth in business will be subject to proper review of the credit limits.

Disbursement of loans including changes in terms & conditions The disbursement will be done immediately on compliance of all the terms and conditions of the sanction by the borrower and the branches need not refer to the sanctioning authority for disbursement. Any changes in the terms and conditions of the sanction such as interest and charges will be notified to the borrower before effecting the changes. Any changes in interest rate and charges will be effected only prospectively after giving due notice to the borrower.

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Post disbursement supervision The post disbursement supervision, such as submission of periodical reports and periodic inspection, will be stipulated at the time of issue of the sanction letter. The sanction letter would also mention whether the Bank or the borrower will bear the cost of inspection. The Bank will issue notices to the borrowers in advance in case the Bank decides to recall the advance / accelerate the payment / accelerate the performance under the loan agreement. Or seek additional securities. The Bank shall release all securities on receiving payment of loan. However, the Bank may decide to exercise the right to set off any legitimate right or lien for any other claim against borrower. In case the Bank decides to retain the security, the borrower will be notified about the remaining claims and the documents under which the Bank is entitled to retain the security till the relevant claim is paid / settled.

Others The Bank will not interference in the affairs of the borrowers except where provided for in the terms and conditions of the loan sanction documents, such as periodic inspection, scrutiny of books of accounts, verification of stocks and book debts, and scrutiny of QIS statements. In case any information not disclosed earlier by the borrower has come to the notice of the Bank, the Bank will have the right to elicit the necessary information from the borrower and initiate action to protect its interest. While, the Bank may participate in credit-linked schemes framed for weaker sections of the society, the Bank shall not discriminate on grounds of sex, caste and religion in the matter of lending. 47

In the matter of recovery of loans, the Bank shall not resort to undue harassment such as persistently bothering the borrowers at odd hours and use of muscle power.

In the case of receipt of request for transfer of borrowed account, either from the borrower or from other banks / FIs which propose to take over the loan, the Banks' consent or objection, if any, shall be conveyed within 21 days from the date of receipt of request.

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Grievance Redressal

Though the sanction of the loans will be at the sole discretion of the Bank, borrowers will have an opportunity to appeal against the decision of the Bank's functionaries. Any such grievance received from the borrower will be heard and disposed of by the next higher authority. For this purpose the following review structure is available to the borrower, Grievance against decision of Branch Head VP / AVP Zonal Head Reviewing Authority Zonal Head Zonal Head President (Credit) for related advances. Corporate Credit & Retail Loans (under Executive Director Retail Banking) All others Chairman and CEO

corporate

advances and

President (Merchant Banking) for capital-market advances Senior Vice President (Retail Banking) for retail

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Operation Flow of Home loans in Union Bank

Details: Login of Files: Details related to customer is stored in Excel Sheet.

Field Investigation: Income Documents of customer is verified.

Credit Appraisal Sheet: At this stage preparation of loan eligibility and calculation of EMI take place.

Calculation of Eligibility % IIR Income to installment rates FOIR Fixed obligation installment rate

Salaried

Self Employed

Self

Employed

(professional) If 45% net salary If net income is 8000 If net income is to9999 7500 to9999

is7500 to9999

If net salary is If net salary is 10000 If net salary is 50% 10000 to 19999 to 19999 10000 to 19999

If net salary is If net salary is 20000 If net salary is 55% 20000 above. above. 20000 above.

For Example

50

Salary (pm) = 10,000 Then, applicable FOIR = 10,000 * 45% = 4,500/969 = 4.64 lacs Now, a max. limit of loan to be provided is 4.64 lacs * For Self Employed 2 years average of Net Profit is considered.

In Calculation of Net Salary case of salaried person we calculate the average of the six months pay slip.(If Net Salary is variable) In case of self employed we use the following formula-

Net income = net profit +depreciation (up to 150% of NP) + 50% of income From other sources +100% rental income + 20 % of Agriculture income (if cont for last 3 years)

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EMI Calculation

P * r/12 (1 + r/12) n * 12 EMI = (1 + r/12) n *12 1 Here: P = Principal Amount R = Rate of interest N = No. of years Amortization For Example - 1, 00,000 @ 10% for 20 years Interest = 1, 00,000 * 10 % = 10,000 Interest per month = 10,000 / 12 = 900 Rs. Principal amount = EMI Interest = 969 900 = 69 Rs. Loan Kit Signature: Loan agreement is signed by customer and PDCs is taken from customer.

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Features Offered By Other Banks SBI

Unique features: The most preferred home loan provider. The latest offer is an interest rate concession on GREEN HOMES in accordance with SBI's commitment to Environment protection. Having a vast variety of products to suite every kind of customer. Minimum age limit 18 yrs & 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. 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 maximize gains (see SBI MaxGain in the following sections). Option to club income of your spouse and children to compute eligible loan amount. Provision to club depreciation, 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 covers 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.

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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.

Package of exclusive benefits: 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.

ICICI

Some of the special offers we have are: ICICI Bank Home Loanoffers hassle free home loans with the best deal. The loan tenure is maximum upto 25 years. They offer multiple benefits on the process, faster loan with simplified taken. documentation. Simplified Documentation The loan application process is easier and loan approval Door Step Service They personally deliver your Home Loan at your doorstep. Attractive Interest Rates offers you a wide range of home loan rates to choose from Attractive loan interest rates Home loan amounts suited to your needs 54

Home Loan tenure upto 25 years Simplified Documentation Doorstep Delivery of home loan papers Sanction approval without having selected a property. Free Personal Accident Insurance (Terms & Conditions) options for your home loan at attractive premium

Insurance

No matter what the requirement, we have an appropriate plan for you, though most of our home loan plans are for salaried/self-employed Resident Indians. Get the best deals ever, and finance the perfect home, only from ICICI Bank.

LIC Housing Finance

Special Features: LIC Housing Finance offers home loans for construction/purchase of house/flat and also for renovation of existing flat/house. While LIC Griha Prakash and are for purchase, construction of properties and extension of residential units, LIC Griha Sudhar Loan facilitates repairs/renovation of properties. Minimum age requirement is 21 years as on the date of sanction.

Loan amount from Rs. 1 Lakh onwards Low interest rates No hidden costs Easy application & quick approvals Largest Network Tax Benefit

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A financially strong and stable company we have already sanctioned loans to over 5 lakh applicants. With a network of more than 100 offices in the country we are always accessible to you, wherever you may be.

HDFC Over 3 decades of exclusive experience, a dedicated team of experts and a complete package to meet all your housing finance needs. Their home loan is available for individuals to purchase (fresh / resale) or construct houses. Application can be made individually or jointly. HDFC finances up to 85% maximum of the cost of the property (Agreement value + Stamp duty + Registration charges) based on the repayment capacity of the customer. Home Loan - Home loans for individuals to purchase (fresh / resale) or construct houses. Application can be made individually or jointly. HDFC finances up to 85% maximum of the cost of the property (Agreement value + Stamp duty + Registration charges). Home Improvement Loan - HIL facilitates internal and external repairs and other structural improvements like painting, waterproofing, plumbing and electric works, tiling and flooring, grills and aluminum windows. HDFC finances up to 85% of the cost of renovation (100% for existing customers). Home Extension Loan - HEL facilitates the extension of an existing dwelling unit. All the terms are the same as applicable to Home Loan. Land Purchase Loan - Be it land for a dream house, or just an investment for the future, HDFC Land Purchase Loan is a convenient loan facility to purchase land. 56

HDFC finances up to 70% of the cost of the land (Conditions Apply). Repayment of the loan can be done over a maximum period of 10 years. Choose from Fixed Rate or Floating Rate with options to structure your loan as Partly Fixed or Partly Floating. Flexible repayment options to suit your individual needs. Loan cover Term Assurance Plan - HDFC Standard Life Insurance Company Ltd. offers an insurance plan*, which is designed to ensure that life's uncertainties do not affect your family's interests and your precious home. LCTAP provides a lump-sum payment on the unfortunate demise of the life assured. This pure risk plan is designed in a way that the cover decreases as you repay your home loan making it a low cost premium insurance plan. *Insurance is the subject matter of solicitation. Automated Repayment of Home loan EMI - You can give us standing instructions to repay your Home Loan EMIs directly from your HDFC Bank Savings Account, thus, saving you the trouble of procuring, signing and tracking post-dated cheques. HDFC also offers In-house scrutiny of Property documents for your complete peace of mind. Customer privileges - If you are an existing HDFC Home Loan customer, you can avail of other loans (such as Personal Loans, Car Loans, Two-wheeler Loans and Loan against securities) at lower interest rates.

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IDBI Advantages of IDBI Ultra Flexible Home Loans: Helps you realise your long cherished dream of owning your home through hassle free and customer friendly home loans. The tenor of a home loan can be up to 25 years for a resident individual whereas for NRIs the maximum tenure is 15 years subject to maximum age of 60 years at maturity. Loan can be applied for a maximum of 90% of the property value subject to credit discretion

Maximum Funding Flexibility of choosing between Floating or Fixed interest rate Attractive rate of interest EMI on daily reducing balance Personalized doorstep service Simple documentation Legal and technical assistance Balance transfer facility Reassessment and adjustment of applicant's loan eligibility in case of change of income and residence status

Special insurance cover for you You can avail of a special insurance cover on your home loan for a small premium. Features Tenure of a home loan can be up to 25 years for a resident individual whereas for NRIs the maximum tenure is 15 years subject to maximum age of 60 years at maturity.

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Loan can be applied for a maximum of 90% of the property value subject to credit discretion. Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of the title deeds or such collateral security as may be necessary. Title to the property should be clear and free from encumbrance, i.e., without any pending legal litigation adversely affecting the ownership of the property.

Other parameters considered include an account of your age, income, number of dependents, financial stability and co-applicants income.

Home Loan With Life Insurance You can include your spouse/parents/children as co-applicant if you require higher eligibility subject to maximum of three applicants. The maximum possible tenure for a Resident Indian is 25 years if employed and 15 years if self employed. While the same for an NRI is 15 years. In the event of your opting to pre-pay the home loan with us, a nominal fee of 2% is payable in case, it is transferred to another bank or housing finance company. However, no charges are applicable if you prepay from your own sources after 6 months of commencement of EMI.

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Research Methodology

a) Title of the Study Comparative analysis of home loan and its operation b) Duration of the Project Duration of Project is 45 days c) Objective of Study The foremost objective of this study is by making comparison between different financial institutions. I wanted to come out with a fine essence for the success behind organization. The objective of making comparative analysis with different financial institution is to find out the major competitors in home loan sector. d) Type of Research This project is more of an exploratory research with more of qualitative analysis than quantitative. The data collection method for this project begins with finding a sample of the population. The population for this project was the various places in Jaipur. (Johari Bazar,Bapu Nagar, Janta Store, M I Road, Tonk Road, Malviya Nagar and Jhotwara Industrial Area) and at the Union bank of India at Jagatpura branch in JAIPUR. The research methodology adopted was both Primary and Secondary. Primary data was collected to study the investment psyche of a person, their practice on saving, investment options available and the need of financial planners to manage individuals wealth.

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Questionnaire was designed to ascertain the investors behavior as well as to depict the future prospects and growth momentum of the wealth management industry. e) Sample Size and method of selecting sample Data Collection Methods & Instruments The instrument for data collection was a structured questionnaire targeted towards people who do investments. This questionnaire was designed to know the investment psyche of a person while investing in the financial products. The mode of communication was informal & friendly conversation, which does not limit discussion within a well-defined boundary. Data Collection Sources i) Primary Research Research was done to get a detail overview of the wealth management industry and study the need for financial planner in the current scenario. Questionnaire was designed to study the investment psyche of a person, their practice on saving, different investment options available and the need of financial planners to manage individuals wealth. This project is mainly based on first hand observation in the market, the way financial planning functions, scope of financial planning and the need of a certified financial planner. ii) Questionnaire Design A structured questionnaire was designed covering both open and close ended questions, to study the perception of people regarding investment avenues and the concept of financial planner. {Specimen of the questionnaire is attached in ANNEXURE A}. iii) Secondary Research Various sources of information were collected for attaining clarity on the prospects of wealth management industry and the various financial planners in the market. The source 61

also includes basic investment objectives and the various types of investment avenues open to an individual. However the following sources were considered for information gathering: Companies websites Articles and reports available on the web News papers like Economics Times and Investment Insurance Magazines Various other sources mentioned in the references, in ANNEXURE B

iv) Population considered for research Sample Details 100 people belonging to different fields, who do investment, were asked to fill the questionnaire, on the basis of which an attempt is made to study the prospects of Financial Planning in the market. The sample unit consists of those people who are trading in secondary markets, mutual funds, initial public offer, insurance, debt instruments as they can give the accurate information about financial planning. A sampling frame has been developed so that everyone in the target population has an equal chance of being sampled. f) Scope of Study There exist a potential growth in the wealth management industry and thus this project authenticates the feasibility of financial planners in the market. Expanding needs and proliferation of financial products are making it difficult for individuals to invest without planning. Most are aware that planning is critical; yet dont have the time or the expertise to develop a plan & therefore the role of Financial Planner comes in picture. 62

g) Limitation of the Study The scope of the research was limited to top 7 wealth management companies, namely SBI , ICICI, UTI Bank, HSBC Bank, HDFC Bank

The sample area was primarily in Jaipur. (Johari Bazar, M I Road, Tonk Road, Malviya Nagar and Jhotwara Industrial Area) and at the Union Bank of India branch Jagatpura.

The sample size comprised of 100 respondents from different fields and income group, and their responses are presumed to represent the wealth management market.

The score allotted by the different respondents on different parameter might not be with the same yardstick, as individuals are subjective in nature as well as the environment round them differs, which play a critical role in building up a perception.

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DATA ANALYSIS AND INTERPRETATION

HOW IS BEHAVIOUR OF STAFF? OCCUPATION SERVICE STUDENT RETIRED BUSINESS HOUSE HOLD TOTAL GOOD 6 4 2 4 2 18 SATISFACTORY 4 2 0 2 1 9 VERY GOOD 1 1 2 3 0 7 UNATIS FACTORY 2 1 0 2 1 6 TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

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GOOD SATISFACTOR Y VERY GOOD UNSATISFACT ORY

TABLE DO YOU FIND OUT STAFF CO-OPERATVE/COURTEOUS? OCCUPATION SERVICE STUDENT RETIRED BUSINESS HOUSE HOLD TOTAL YES 5 3 2 8 2 20 NO 8 5 2 3 2 20 TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

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yes no

TABLE WHETHER FACILITY OF LOCKER IS UPTO THE MARK? OCCUPATION SERVICE STUDENT RETIRED BUSINESS HOUSE HOLD TOTAL YES 10 6 3 9 3 31 NO 3 2 1 2 1 9 TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

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yes no

TABLE MANAGER & STAFF RECEPTIVE TO YOUR PROBLEMS? OCCUPATION SERVICE STUDENT RETIRED BUSINESS HOUSE HOLD TOTAL YES 9 3 3 6 3 24 NO 4 5 1 5 1 16 TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

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yes no

TABLE HOW MUCH TIME IS TAKEN IN OPENING OF AN ACCOUNT? OCCUPATION SERVICE STUDENT RETIRED BUSINESS HOUSE HOLD TOTAL 15 MINUTES 6 2 2 5 3 18 30 MINUTES 5 4 2 3 1 15 HOUR 2 2 0 2 0 6 1 2 HOURS/ TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

MORE 0 0 0 1 0 1

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15 minutes 30 minutes 1 hour 2 hours/more

TABLE DO YOU WANY TO AVAIL OUR CREDIT FACILITIES? OCCUPATIO N SERVICE STUDENT RETIRED BUSINESS HOUSEHOLD TOTAL PERSONAL LOAN 1 1 4 2 2 10 CONSUMER OTHERS LOAN 1 4 0 5 0 10 6 1 0 0 0 7 HOUSING CAR LOAN 2 1 0 2 2 7 LOAN 3 1 0 2 0 6 TOTAL 13 8 4 11 4 40 %AGE 32.5 20.0 10.0 27.5 10.0 100

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personal loan consumer loan others housing loan car loan

Facts and Findings


Mortgage Market Growth. As Indias housing market continues to grow and mature, it will be important to monitor the market. During the rapid expansion of the mortgage market from about 2003 to 2008, many commercial banks eased their lending standards as they pursued heightened demand in the market spurred by low interest rates and rising personal incomes. With demand outpacing housing supply, property prices in urban areas doubled in some neighborhoods. Prices were also bolstered by some speculative activity in the market in from mid-2005 to about early 2008. Thus, some commercial banks pursued aggressive growth strategies, offering loans as high as 100% of the cost of the property. 70

Retail Asset Products - While working on the project I found out and analysis that Retail advances of UNIONBANK grew from Rs. 8,928 crores as at end March'07 to Rs. 13,592 crores as at end March'08, a growth of 52% yoy. Retail Advances account for 23% of the total Advances of the Bank as at end March'08. The Bank has set up Retail Asset Centers (RACs) at 70 towns and cities for focused retail lending.

SWOT ANALAYSIS

STRENGHTS: Worldwide brand name of UBI as credible and trustworthy Outstanding relationship management with customers. Automated operations due to highly computerized network personal financial review are the strongest tool with UBI, which facilitates the customers in doing their risk prolifiling and investing their money accordingly. This PRF is provided free of cost ion UBI. 71

It enjoys a good share of NRI business due to greater services to NRIs provided worldwide. A product know as GLOBAL PREMIER of UBI, according to which if you have preimer account in UBI in India or in any country you will be recognized globally as the premier customer of the bank, and for this you do not have to maintain average quarterly balance of Rs.25 lakh separately to other countries as well.

Withdrawal limit (Rs 1 lakh) provided by the bank is highest. Bank provides the facility of doorstep banking to all customer.

WEAKNESS Less number of branches in Rajasthan. Only few ATM in Jaipur which is located at the branch only. Lots of hidden charges especially in case of credit card facility, cash credit limit is also less. Minimum amount to open a fixed deposit is Rs10,000 which is comparatively higher.

OPPORTUNITIES: Being a world class bank and having a good reputation, the goodwill can be cashed upon with the growing economy of India. Rapid growth of jaipur city is another prime opportunity and moreover new industry in and around has sprung up. Jaipur has great business and export of precious and semi precious and gems , jewellery and handicrafts, UBI has good opportunity to provide for better banking at the national as well as international level. The bank should focus on common customers for wealth management as they have more day to day spare money. 72

Superior segment demarcation and co-ordination will be beneficial.

THREATS:

All the public sector bank has started to redefine their services in order to attract customers attention. Stringent norms by reserve bank of India at any time in near future can be threat to foreign banks as their activities could be adversely affected. The entry of other foreign banks can take away some of the business. Many bank also coming up with ATMs which will act as a major threat. The presence of other private sector bank and foreign bank in jaipur and because of intense competition they are coming with the better products and services. The cash credit limit provided by other nationalized bank is major thearts. There is a myth surrounding the people that foreign bank are not trustworthy and hence, do not rely on such banks. Special permission is required to open for the accounts of various segments like politicians, exporters and jewelers.

Conclusion
Finance for real estate is now easily available in India. The property boom is not restricted to the national capital region but it has even transcended to satellite towns and remote semi-urban areas in and around the national capital. The number of transactions in the real estate sector has increased a number of times, making it profitable for the banks and other lending institutions to offer more finance opportunities to the buyers. In India, the most of the borrowers in home loan segment fall in the first time buyer category. It means that they are either tenants or living with their parents in their ancestral house. As the salaried-class is spreading and emerging stronger than ever, more and 73

more people are becoming capable of buying house. Their need to get finance from banks is being taken care of by all the major players in the market. Banks like UBI, ICICI, SBI, LIC, HDFC and all the nationalized banks are offering home loans at attractive rates. The housing finance industry is getting increasingly commoditized. Competition within the sector is ensuring that players offer consumers flexibility and features to choose from. Features such as adjustable rate plans, lower processing fees, monthly rest, low interest rates, low EMI, lower margin money, no pre-payment penalty have become common across the industry. There is a growing trend among Banks and HFCs to include the cost of registration, stamp duty, society charges and other associated costs while sanctioning loans to differentiate and make the home loans products more attractive. This has resulted in further lowering the threshold limit for buying a house for differentiation of their home loan products, companies are also resorting to offering of free add-ons such as life insurance, credit cards and consumer loans at reduced rates for furnishing the house.

Recommendations and Suggestions


Commercial Viability of Underserved Segments: One of the most important lessons that can be learned from the Project is that mortgages for customers in the Low-Middle Income segments can be commercially viable. This borrower segment can be more risky, but, if underwritten and priced appropriately, the risks can be adequately contained. New Marketing Strategies:

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Comparative advertising should be done to aware the consumers with the benefits provided by the bank. Proper branding of Retail Asset Center should be made for a large market capitalization and growth. Payment System: If facility of direct account transfer should be offered, then it will make payment System easier for customer whose accounts are in other banks. Funding Of Sources: At present Axis Bank is providing 6.31% appox. retail advances of total deposits. If increase in the percentage ratio 8-10%, then it will allow more finances of short term loans to the customers which will assist the bank to increase their income sources. Others: Minimum limit of home Loans amount should be decreased to attract the small home loan sector (construction, repair etc.). Provide finances up to 85% of the cost of renovation (100% for existing customers).

APPENDIX

Name of respondent: ..................................................... Address: .......................................................................... Phone no.: ....................................................................... Personal Details: 75

Age group[ ] 21-30 [ ] 41-50 Occupation[ ] Service [ ] Professional Income/Salary monthly[ ] Less than 10,000 [ ] 15,000-20,000 (1) Do you have your own house? [ ] Yes Are you aware about home loan? [ ] Yes [ ] No [ ] no [ ] 10,000-15,000 [ ] 20,000 and above [ ] Business [ ] Other [ ] 31-40 [ ] 50 and above

Have you taken home loan? [ ] Yes [ ] No

Are you satisfied about current home loan services? [ ] Very good [ ] Average [ ] Good [ ] Ba

From which bank have you taken home loan? [ ] SBI Bank [ ] PNB Bank [ ] Union Bank of India [ ] ICICI Bank [ ] BOB Bank [ ] HDFC Bank [ ] The bank of Rajasthan

Do you know properly about the terms & conditions of home loan services? 76

[ ] Yes

[ ] No

(7) In which ground do you prefer in loan? [ ] Interest [ ]EMI Are you know about product & services offered by Union Bank of India related home loan? [ ] Society

Would you like to recommend your friends and relatives about UBI home loan? [ ] Yes [ ] No

Bibliography
Net Sites: www.unionbank.com 77

www.emkayshare.com www.indiaground.com/home_loans www.in.ibtimes.com/articles/20070806 www.niftindia.com/unionbanklist.html www.indiahousing.com www.indiaearnings.moneycontrol.com/sub_india/compnews.php?autono=330584 www.equitymaster.com/DETAIL.ASP?story=2&date

Releases:. Annual Performance Report.

News Paper and Magazines: Business World April June Editions. 4Ps of Marketing April June Editions. Economic Times April June Editions

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