1

STUDY ON CUSTOMERS PREFERENCE OF DIFFERENT BANKS IN HOME LOAN SECTOR

PROJECT REPORT Submitted in partial fulfillment for the award of the degree requirement of

BACHELOR OF COMMERCE
Submitted by R.REVATHI. REG NO: 111CO129

Under the Guidance of

Dr. TABITHA DURAI, M.COM, M.PHIL., PH.D

Senior Assistant Professor, Department of Commerce MADRAS CHRISTIAN COLLEGE

MARCH 2014

ACKNOWLEDGMENT
Firstly I would like to thank the lord almighty for being with me all the time. Without his will and guidance nothing could have been possible.

I would like to express my sincere gratitude to our Head of the Department Suresh David.

Dr. Charles

My sincere thanks to Mrs. TABITHA DURAI for her guidance, informative discussions, valuable suggestions and support for finishing this project successfully. I am extremely happy to record with deep sense of gratefulness the efforts taken by her for teaching and guiding me throughout the project. Without her guidance this project would not have been possible.

I take this precious opportunity to put on paper my grateful thanks to all those who have helped me to complete this project successfully.

BONAFIDE CERTIFICATE
This is to certify that the project entitled STUDY ON CUSTOMERS PREFERENCE OF DIFFERENT BANKS IN HOME LOAN SECTOR, submitted by R.REVATHI of B.Com, Madras Christian College, Tambaram, is a Bonafide record of Project work done by her under my guidance, in partial fulfillment of the requirement, for the award of degree of Bachelor of Commerce.

Date: Place:

Mrs. TABITHA DURAI (Project Guide)

DECLARATION
I hereby declare that this project entitled STUDY ON CUSTOMERS PREFERENCE OF DIFFERENT BANKS IN HOME LOAN SECTOR submitted for the B.Com Degree is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles.

Date: Place:

R.REVATHI (Student)

CHAPTER NO.

TITLE OF CHAPTER

PAGE NO.

PREFACE

1.

INTRODUCTION TYPES OF HOME LOANS ADVANTAGES OF HOME LOANS DISADVANTAGES OF HOME LOANS DISBURSEMENT OF HOME LOANS 9 10 11 12

RESEARCH METHODOLOGY METHODOLOGY OF THE STUDY OBJECTIVES OF THE STUDY LIMITATIONS OF THE STUDY 24 28 30

2.

COMPANY PROFILE

32

3.

REVIEW OF LITERATURE

57

4.

DATA ANALYSIS AND INTREPRETATION

60

5.

FINDINGS

81

SUGGESTIONS

83

CONCLUSIONS

85

BIBILIOGRAPHY

87

ANNEXURE

89

6 PREFACE Home is a dream of a person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford ones dream. Home is one of the things that everyone one wants to own. Home is a shelter to person where he rests and feels comfortable. Many banks are providing home loans whether commercial banks or financial institutions to the people who want to had a home. The housing sector plays an important role in the economic development of the country. Home loans are especially designed to fulfill this dream with your current income and available savings. Taking a Home loan is a big task in itself and one of the biggest financial decisions. Home loan is the longest debt in our life. At times 10-20 yrs, this makes demands a long term commitment. Each month EMI have to be paid, sometimes you have to prepay some part of home loan, sometimes you need some documents and visit the bank. There are numerous things to be done during taking the home loan and after taking the home loan, hence you should be very clear that which is the best bank for Home Loan. It is very clear that everyone wants to go with the bank which makes your life easy at the time of taking home loan and even after that. So the biggest question on everyones mind is Which is the best bank for Home loan? One must be very clear that there cannot be a single bank or loan institution which is perfect for everything and you will never face an issue with them. Also there is no best bank for Home Loan which has always worked for everyone till date. But overall we can always pick some banks which have been better than others on different parameters. One can say that on a high level Bank A is better than Bank B and this is based on many loan takers experience over the years. So now in this study we will try to understand difference between different banks and how they differ with each other.

INTRODUCTION Every one of us has a dream to own a house in life time. Although home loans are given by almost all the Banks of India, purchasing the home of our dreams is not an easy task. As the salaried population living in India is in larger percentage, like any other country, when one decide to own a house, one cannot afford to pay the entire amount in lump sum. So, the banks in India are offering housing finance with easy installment schemes with relevant interest rates to the buyers, which reduces their burden and allow them to decide to own a house without any hesitant mind. Providing Home Loans in India came to its full boon in the recent years and now it is spread on a huge scale as many banks are coming to offer the Home loans in different special schemes to attract more number of buyers. There are numerous nationalized as well as private banks that offer Real estate Mortgage Home Loans in a hassle free manner in India these days. The process of availing a home is made very easy that almost any middle class; especially salaried class population of India dreams to achieve their own house in their life time. Though lots of attractive and cheap home loans are available in India, one must be very cautious to choose the right one. There are numerous factors one must take into consideration while applying for the right Home loan. For example, one must first see for the first and foremost factor that which top finance companies or Banks offer cheap home loans or loan at a low interest rate. This is too important, since there are number of Banks and finance companies flooded in the market to disturb the good ideas of the buyers, by their attractive marketing or complementary offers. Choosing the right offers means it should satisfy the buyers repayment capacity significantly and the loan should not lead the buyer to trouble or any other dilemma in future.

TYPES OF HOME LOANS: There are different types of home loans tailored to meet your needs. Home Purchase Loans: These are the basic forms of home loans used for purchasing of a new house. Home Improvement Loans: These loans are given for implementing repair works, healing and renovations in a home that has already been purchased. Home Construction Loans: These loans are available for the construction of a new house. Home Extension Loans: These loans are given for expanding or extending an existing home. For example, addition of an extra room etc. Home Conversion Loans: These loans are available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need of pre-payment of the previous loan. Land purchase loans: These loans are available for purchasing land for both construction and investment purposes. Bridge Loans: These loans are designed for people who wish to sell the existing home and purchase another one. The bridge loans help finance the new home, until a buyer is found for the home.

10 ADVANTAGES OF HOME LOANS: The various benefits of home loans arising to the customers are:(i) Attractive interest rates:-

The various banks offer attractive interest rates to boost and help their customers. Many banks provide loans on fixed or floating rates to facilitate consumers as per their needs. (ii) Help in owning a home:-

The home availed by a person with the help of banks, because they provide technical and financial assistance to customers for owning their dream home. (iii) No requirement of guarantor:-

The commercial banks nowadays, liberalize their laws regarding home loans. Some of banks dont even require the guarantor to grant loan to their consumers. The y also make consumers free by relieving him from finding a guarantor to complete the proceedings of availing loan. (iv) Door-Step Services:-

These door- step services are provided from enquiry stage till the final disbursement takes place. Such services are beneficial for customers in present busy life. (v) Loan period:-

There are many banks which provide maximum loan tenures up to 20 to 30 years based on the loan amount and the creating ability of customers. This enables the customers to repay loan amount till a long period. (vi) For accidental death insurance :-

Some banks provide free accidental death insurance with housing loan which is also beneficial for the customers. These benefits or advantages of home loans are responsible for making them so popular among customer that a person who doesnt have their home and want to buy, they do it with home loan. Home loans help such persons in making their dream home.

11 DISADVANTAGES OF HOME LOAN: The main disadvantages of home loans are high lightened as below: (i) Delays in processing :-

Many times, there are huge delays in processing of providing home loans because various formulations to be fulfilled in this process. Due to these delays customers feel mentally as well as financially weak. (ii) Fluctuating interest rates :-

Some banks give home loans at floating rates, which fluctuate at Different intervals due to some reasons. These changes, sometimes, may lead to increase in interest rate which will increase the cost of home loans to the customers. (iii) High Cost:-

The public sector banks charge high processing cost for home loans sanctioning. They are forced to pay serious charges at various stages to fulfill the requirements. Some consumers are not able to pay such charges so such people could not avail the benefits of home loan schemes. (iv) Problems in disbursement:There are many problems in disbursement of home loan amount. There are some delays in disbursement of loan amount to the customers due to legal formalities. This causes problems to the customers.

These are limitations or disadvantages of home loans. But sometimes some banks charges high installments to repay loan amount. Such things also causes problem to customers. These limitations can be removed by providing good services to the customers.

12 DISBURSEMENT OF HOME LOANS Every bank has its own procedure to disburse the loan amount among customers. After choosing your right home, the next step is disbursement of home loans. The loan amount is disbursed after identifying and selecting the property or home that are purchased and the requisite legal documents are submitted. In the disbursement of home loans a clear title and full verification is done to ensure that a person has full rights on his house. (i) Eligibility criteria

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

All Housing Finance Institutions lay down conditions on who can be co-applicants. All coowners to the property need to be co-applicants to the loan necessarily. These institutions do not permit minors to join in as either co-owner or as co-applicants because a minor is not eligible to enter into a contact as per law. They do not permit even friends or relatives who are not blood relatives to take a property jointly. However, Income of co-applicants can be clubbed together to get higher loan eligibility. Income Clubbing of Co-applicants COMBINATION Husband-Wife INCOME Income of husband-wife can be clubbed It can be clubbed if only son is there but not Parent - son if any male sibling exists

13 If they are currently staying together and intend to stay together in the new property, Brother-Brother then only, their income-can be clubbed for above purposes Brother-Sister Sister-Sister Parent-Minor- Child No clubbing-is possible No clubbing is possible No clubbing is possible in this case also

(iii)

General Terms and Conditions

The following are the terms and conditions applicable to the basic home loan product only. These are likely to change on the basis of the variations of the home loan product. Typically, in general home loans, the following conditions are applicable:a) The loan to value ratio (LTV) cannot exceed a particular percentage. This differs from product to product and from one Housing Finance Institutional Bank (HFI/B) to another. The components of the value of the Property calculated here are covered under cost of property b) The maximum tenure of the bank is nominally fixed by HFI/Bs. However, HFIs/Bs do provide for different tenures with different terms and conditions. c) The installment that one pay is normally restricted to about-50-per cent of the monthly-gross income of the candidate. d) The total monthly outflow towards all the loans that have been availed of, including the Current loan is normally restricted to 50% of the gross monthly income. One will be eligible for a loan amount which is the lowest as per one's eligibility. This is calculated as per the LTV norms.

14 e) Most HFI/Bs considers the profile before they judge the repayment capacity. The judgment is based on age, qualifications, number of dependents, employment details, employer credentials, work experience, previous track record of repayment of any loans that have been availed of, occupation, the industry to which the candidate's business relates to, if he/she is self-employed, then the turnover in the last 3-4 years etc. f) Some HFIs/Bs insists on guarantees from other individuals for the repayment of the loan. In such cases, the customer has to arrange for the personal guarantee before the disbursement of the loan takes place. g) The property should be technically clear before the HFIs/Bs disburses the loans amount. Most of institutions and banks have a team of technical experts who visit the site to get a technical report before the disbursement of loan. This is also beneficial to the customer as they check for the technical quality and compliance with local laws. h) The property should be legally clear before one can avail of a disbursement of the loan amount. Housing-Finance Institutions /Banks (HFIs/Bs) take legal clearance from their lawyers before the disbursement of amount. This proves to be beneficial to the customers as a legal expert checks his/her documentation to ensure that he/she get a proper title to the property. i) The disbursement of the loan is as per the progress of construction of the property unless it is a ready property in which case the disbursement will be by one single cheque. EMI or simple interest on the loan amount disbursed to the customer in case of a part disbursement will be payable by the customer on the disbursement. j) The disbursement in most cases will be favoring the builder or the seller or the society or the development authority as the case may be. The disbursement will come in the customer's favor under special circumstances only.

15 k) The repayment of loan can be made either through deduction against salary, postdated cheques, standing instructions or Auto debit instructions to bank. l) The principle is amortized either on annual reducing or monthly reducing basis as the case may be. m) The above terms and conditions are generally true for most Housing finance Institutions/Banks with respect to the general Home Loans. However, the specific terms and conditions vary with respect to special Housing Finance Institutions or Banks. (iv) Charges applicable to home loans The different kinds of charges applicable to home loans are discussed below: a) Processing fees First of all, comes the process fee. This is a charge that is levied by most HFIs/Bs. This has to be paid at the time of submission of the application form. It's normally charged as a percentage of the loan amount sanctioned. Some HFIs also charge a flat fee based on the loan amount instead of a percentage. When a lower amount is sanctioned the excess fees paid at the time of submission of the application is adjusted with the charges, which one make to the HFI/B subsequently. Most HFIs/Bs refund the processing fee if the loan application is rejected. b) Administrative fees :This charge is again, normally, a percentage of the loan amount sanctioned. It is collected by the HFI/B for the maintenance of customer's records, issuing interest certificates, legal charges, technical charges, etc. though the tenure of the loan. It is payable by the customer when he/she accepts the offer letter given by the HFI/B. This payment has to be made before the disbursement. The mode of collection of these fees varies from one HFI/B to another.

16 c) Rate of interest :This is the rate of interest applicable on the loan amount through the tenure of the loan. It is charged on the principal monthly reducing method. Most HFIs/Bs gives an option to select either a fixed rate of interest or a variable rate of interest. d) Legal Charges:Some HFIs/Bs mainly Public Sector Banks levy legal charges that they incur on getting the property documents vetted by their panel of lawyers e) Technical Charges:These charges are also levied by certain Housing Finance Institutions/Banks (HFIs/Bs) to meet their expenses on the technical site visits to the customer's property. This ensures quality of construction and construction within the norms as stipulated by the respective approval authority. f) Stamp duty and registration charges:HFIs that go in for a registered mortgage pass these charges on to the customer. These are rather heavy in certain states depending on the laws laid down by the state where one buys a property. g) Personal Guarantee from Charges :Since the personal guarantee provided by the customer need to be stamped, these charges are also recovered from the customer. They are charged to him by HFIs who demand for Guarantees. h) Cheque Bounce Charges :In case the cheques through which one makes a payment to HFIs get dishonored, some minimum charges are levied by the HFI. The same are recovered from the customer

17 i) Delayed payment charges :HFIs/Bs charge delayed payment charges from the customer if he/she delays the payment of installments beyond the due date j) Additional charges :These are levied as a percentage on the delayed payment charges by most HFIs. They are levied if one fails to pay the dues within the stipulated time after a delay has taken place k) Incidental charge :This is payable in case the HFI/B sends a representative from their organization to collect their outstanding dues. It is normally charged at a flat rate per visit. These charges are levied by most HFIs/Bs. l) Prepayment Charges :This is a penalty charged by HFI/Bs from when one makes either a part prepayment or a full repayment of the loan. This charge is levied only on lump sum payments and not on the EMIs that one pays. This charge is levied on the amount prepaid by one and not on the entire outstanding principal. These charges are gradually being discount. So, these are the charges levied by most Housing Finance Institutions and Banks while granting home loan to the customers. Now, the decision on the repayment capacity shall be talked about as follows.

(v) Judgment regarding repayment capacity on the basis of income To understand how the income of a customer is considered to arrive at his repayment capacity, it is first necessary to classify customers into salaried and self employed individuals.

18 I. The income of the salaried individual is considered in the following manner -

Gross monthly income as it appears on the salary slip Less: Any non regular variable income appearing on the salary slip (including overtime, etc.) Add: 50 per cent of the average variable income of the last six months Add: Any fixed cash/voucher payments for which proof can be submitted Add: 50 per cent of the average variable cash/voucher payments with proof like travelling reimbursement etc Add: HRA receivable if not being received already in the salary slip

The above income calculated for the calculation of eligibility using IIR (Installment to Income Ratio) and FOIR (Fixed obligation to Income Ratio) norms. For calculation of FOIR, the installments of all the loans that one has availed of currently for which repayment is being made is taken into account as well. The lower of the two eligibilities is considered as the maximum repayment capacity.

II.

To consider income of Self- employed individuals we further classify them into Professionals and non-professionals

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

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

19 Average of the net profits of last 2 years as it appears in the profit and loss account (Returns need to be filed for the same. They should be filed regularly before the due date is over). Less: - Any income, which is unusual and non-recurring in nature like sale of some asset, etc which affects profits substantially, Add: - Any expense that is unusual and non-recurring in nature like repairs and maintenance that has not been capitalized and effect profit adversely. Add: - 50 per cent of the average depreciation of the last two years. The above income is calculated for the calculation of eligibility using IIR and FOIR norms.

For calculation of FOIR the installments of all the loans that one has availed of currently for which repayment is being made is taken into account and the eligibility is worked out. The lower of the two eligibilities is considered as the maximum repayment capacity.

(vi) Credit documentation Given below is the exhaustive list of credit documents- that need to be submitted for a general home loan product. The documents vary from one HFI/B to another based on one's employer, qualifications experience etc. the general requirements are as follows: (a) Income Documents: For salaried slips for the last three months appointments letter-salary certificate-retainership agreement, if appointed as a consultant-Form 16 issued by the employer in customer's name income document for self employee - last three years profit and loss account statement duly attested by Chartered Accountants. Last three years Balance Sheets duly attested by Chartered Accountant, last three years Income Tax Returns with computation chart duly filed and certified by the Income Tax authorities

20 (b) Proof of employment: Identify card issued by the employer- Visiting card (c) Employer's details (In case of private limited companies): Profile of employer on employers letterhead (to be signed by a senior person in the organization) comprising Name of promoter/directors Background of promoters/directors Nature of business activity of your employer Number of employees List of branches/factories List of suppliers List of clients/customers Turnover of employer Annual reports of the employer for the last two to three years (d) Proof of age (Anyone of the following) : Passport- Voter's ID card-PAN card-Ration card-Employer's identity card-School leaving certificate-Birth certificate. (e) Proof of residence (Anyone of the following) Ration card-Passport- PAN card-Rent agreement, if the customer is staying currently on rentBank Pass book-Allotment letter from the company if he/she is residing in company quarters (f ) Proof of name change (If applicable) : A copy of the official gazette A copy of a newspaper advertisement publicizing the name change-Marriage certificates

21 (g ) Proof if investment (If required) : Bank statement for the last six months of all operating and salary accounts - Bank statements for the last six months of all current accounts, if self-employed-any other photocopies of investments held, if required by the HFC.

(vii)

Legal documentation

Legal Documentation the typical legal documents that need to be submitted to the HFC arc discussed here. Given below is a list of legal property documents that need to be submitted to the HFC for mortgage of the property. The name and the list of documents vary from state to state and also depend on the type of property being financed. A broad outline of the documents required is given below.

a) Acceptance copy of the offer letter issued by the HFC/B. b) Title documents of the property that include -sale agreement duly Registered- Own contribution receipts - Allotment letter-Registration receipt-Land documents indicating ownership, if applicable- Possession letter-Lease agreement, if applicable (Property bought from a development authority) - Mortgage deed if the HFC opts for a registered mortgage c) No Objection Certificate from the developer, society or development authority as applicable. d) Personal Guarantees, if applicable. e) In case of alternator additional security, documents for the same depending upon the security details. f) Post dated cheques for the EMIs

22 g) The above documents are only indicative in nature and do not cover the entire list. It may, also be noted that in a resale case, the previous chain of agreement also need to be taken.

(viii)

The tax benefits that are applicable to housing loans for individuals:

Currently Tax Benefits to individuals are available only for the Home Loans and Home Extension Loans products. The benefits available are covered under these sections.

Property Insurance: Is it compulsory to insure the property? Some HFIs insist on a mortgage redemption life insurance policy. In this case the customer gets a benefit of an interest rate reduction. Though the HFI may not insist, it is better to go in for property insurance to safeguard the asset against any sort of damage or loss. The customer can select the tenure for the property insurance. The insurance premium is changed up front. Most insurance companies provide for huge discounts on the rate of premium for larger tenures. The premium charged currently is seventy-seven for every lakh of property for a year. So a customer has to fulfill various conditions to be eligible for availing home loan from a Housing Finance Institution/Bank After fulfilling these conditions, a customer can avail loan at low interest rate i.e. fixed rate floating rate. A decision on whether one should go in for a fixed-rate loan or a floating-rate loan now is a function of two factors i.e. One's perception of where interest rates in the economy are headed and one' capacity to ride the interest rate changes. A floating-rate loan let one take advantage of further falls in interest rates but one stand to lose if interest rate, rise again. However this decision is based on the perception of the consumer.

23

24

RESEARCH METHODOLOGY Definition of research:

Research means a Search for Knowledge. Research is a systematic and objective investigation of a subject or a problem, in order to discover relevant information or principal. According to Clifford Woody research comprises, defining and redefining problems, formulating hypothesis or suggested solution; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusion to determine whether or suit the formulated hypothesis. Research can either be exploratory or descriptive. Exploratory research seeks to extend the boundaries of knowledge in a given area and with no necessary immediate application to existing problem. Descriptive research on the other hand, attempts to use existing knowledge as an aid to the solution of some give problem/set of problems.

Research Design
A research design is purely and simply the framework or plan for a study that guides the collection and analysis of data. C.R.KOTHARI. It is a blueprint that is followed in completing the study. This study is basically descriptive in nature. The study mainly relies on the interrogation or respondents and data available by necessary sources. Thus descriptive research only suits the purpose appropriately.

SOURCE OF DATA The data collected for the survey may of two types: Primary data Secondary data

25

PRIMARY DATA Data that has been collected from first-hand-experience is known as primary data. Primary data has not been published yet and is more reliable, authentic and objective. Primary data has not been changed or altered by human beings; therefore its validity is greater than secondary data. The primary data was collected from the customers.

Population:
The population for this project includes customers in Chennai city.

Sampling Frame:
The sample used for this project was selected by the researcher from the whole population of customers in Chennai city.

Sample Size:
The sample size taken for this project is 100, taken from the whole population of customers who have availed loan in Chennai city.

Sampling Method:
The sampling method adopted in this project is random sampling .

Period of the research

The research period is from February 1st to March 20th of 2014.

Instrument Used
The main source of data was collected through primary data, which were collected through questionnaires with open and closed ended questions. A questionnaire is prepared with open ended questions for the purpose and is used to find the customers preference for different banks in home loan sector.

26

Project Steps:
Step 1: This is the phase where primary data was collected by means of judgmental and convenience sampling. Research Instrument : The questionnaire was used here as the main source of data collection from the customers. Due to the busy schedule of the above mentioned, the researchers noted down the responses of the respondents and got their authorization at the end of the interview. Step 2: In this phase survey by means of questionnaire was conducted. As the research is concerned with the customers preferenc e for different banks in home loan sector, the sampling in the survey was judgmental and convenience sampling. It was based on samples residing in Chennai. Step 3: The data collected were scrutinized, transformed into tables and finally were converted and analyzed with the help of graphs, statistical tools and illustrations.

SECONDARY DATA
Secondary data sources are collected from internal sources as well as external sources. The secondary sources include: o News paper, articles o News channels o Different educational TV channels o Internet

27

28

OBJECTIVES OF THE STUDY

1. To know the customers awareness about home loan products and Services. 2. To make comparative study of Disbursement of home loans by commercial banks. 3. To know the preference of customers between private sector banks and public sector banks. 4. To find out the proportion of different types of loans availed by the consumers Purchase/extension/construction. 5. To know which type of interest rate is preferred by more number of customers Flexible/fixed. 6. To study the problems faced by customers in obtaining the home loans. 7. To help the banks, know the areas for improvement from the view of customers.

29

30

LIMITATIONS OF THE STUDY

1. The study focuses only on the customers in the Chennai city. 2. In the survey many people may not have responded in a proper manner. 3. The data is collected from a sample, the size of which is limited to only 100 customers and 4 Banks. 4. The time frame for the research is only three months. 5. Lack of awareness among the respondents. 6. Few respondents are not cooperative enough owing to their busy Schedule. 7. The study has revealed based on only the samples response

31

32

While researching on this topic, the first thing which came to my mind was all banks are same, everyone has bad experience will all kind of banks, whether PSU or private. But we have to understand that while some people can have bad experience with some banks, there is positive experience too and we have to see things from a very high level and not judge a bank just based on handful of bad experiences.

Public Sector Banks Vs Private Sector Banks Private Banks are very fast and friendly at the time of disbursing the home loan, they will treat the customers like a king only till the loan is disbursed. As they are extremely Private companies

aggressive in marketing of home loans, a lot of people fall for it.

presentation and the way they approach the customers is good but only till you are not a home loan customer. On the other hand, PSU banks are not that great at the start of home loan , their rules are very strict and stringent and they still operate in the sarkari style, however once the loan process is complete and things start, there after life is much easier compared to private banks. The overall handling is much professional and as per the process. On the interest rates increase and reduction side, its seen that private companies are first to raise the interest rates after the rate increase from RBI is announced, but private banks hide somewhere when there is a time for reducing the interest rates. However PSU banks are more transparent on this front and much less annoying than Private Banks. For my study, I have taken two Public Sector Banks and two Private Sector Banks, from which the customers preference towards different banks will be generalized. The survey and analysis will be in such a way to find out the preference of customers between Public Sector Banks and Private Sector Banks.

33 HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of RBIs liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of HDFC Bank Limited, with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is Indias premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities.

34 BUSINESS FOCUS HDFC Banks mission is to be a World Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the banks risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Banks business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership, People and Sustainability.

CAPITAL STRUCTURE As on 31st December, 2013 the authorized share capital of the Bank is Rs. 550 crores. The paidup capital as on the said date is Rs 478,91,87,090/- ( 2394593545 ) equity shares of Rs. 2/each). The HDFC Group holds 22.69 % of the Bank's equity and about 17.00 % of the equity is held by the ADS / GDR Depositories (in respect of the bank's American Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 34.92 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has 4,35,340 shareholders.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

DISTRIBUTION NETWORK HDFC Bank is headquartered in Mumbai. As of December 31, 2013, the Banks distribution network was at 3,336 branches in 2,104 cities. All branches are linked on an online real-time basis. Customers in over 1397 locations are also serviced through Telephone Banking. The

35 Banks expansion plans take into account the need to have a presence in all major industrial and commercial centers, where its corporate customers are located, as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing / settlement bank to various leading stock exchanges, the Bank has branches in centers where the NSE / BSE have a strong and active member base. The Bank also has a network of 11,473ATMs across India. HDFC Banks ATM network can be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.

TECHNOLOGY HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the banks branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. In terms of core banking software, the Corporate Banking business is supported by Flex cube, while the Retail Banking business by Fin ware, both from i-flex Solutions Ltd. The systems are open, scalable and web-enabled. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

36 PRODUCTS OFFERED BY HDFC

PRODUCTS Accounts and Deposits

TYPES Savings accounts, Salary accounts, Current accounts, accounts Safe deposits lockers, Rural

Loans

Personal loans, Business loans, Loans for professionals, Home loans, Car loans, Two wheeler loans, Gold loans, Loans against assets, Educational loans, Government

sponsored programs, Rural loans, SmartdraftOverdraft against salary Cards Credit cards, Debit cards, Prepaid cards, Credit card reward programs Demat Investments 2 in 1 account , 3 in 1 account Distribution of financial products, Investment products Insurance Life insurance, Health insurance, Motor insurance, Travel insurance, Home insurance Forex Travel solutions, Remittance products, Other Forex services, Forex help Premium Banking Imperia banking, Preferred banking, Classic banking Private Banking -

37 Home loans HDFC HDFC Bank brings HDFC home loans to customers doorstep. Over 3 decades of exclusive experience, a dedicated team of experts and a complete package to meet all the housing finance needs, HDFC Home Loans, help the customers realize their dream.

The HDFC Advantage

Pioneer of Housing Finance in India with over 35 years of lending experience. For over 3 decades, shared the hopes and joys of 4.4 million customers who have been nurturing the dream of home ownership

Most experienced and empowered personnel to ensure smooth & easy processing. Transparent dealing. All charges mentioned upfront while giving you the loan quote. No hidden charges.

Counseling and advisory services for acquiring a property. Loan approval even before a property is selected. Loan from any HDFC office for purchase of home anywhere in India. Flexible loan repayment options. Free & safe document storage.

Adjustable rate home loan Loan under Adjustable Rate is linked to HDFC's Retail Prime Lending Rate (RPLR). The rate on your loan will be revised every three months from the date of first disbursement, if there is a change in RPLR, the interest rate on your loan may change. However, the EMI on the home loan disbursed will not change*. If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.

38 Salaried and Self-employed professionals:

Loan slabs Less than and equal to Rs.30 lakhs Above Rs.30 lakhs Applicable Variable rates (%) 10.50% to 11.00% 10.75% to 11.25%

(With effect from 1st December, 2013 RPLR 16.75%)

Self-employed non-professionals: Loan Slabs Less than and equal to Rs 30 lakhs Rs 30.01 lakhs to Rs 3.00 Cr. Rs 3.01 Cr. to Rs 5.00 Cr. Rs 5.01 Cr. And above Applicable variable rates(%) 10.50% to 11.00% 10.75% to 11.25% 11.00 % to 11.50% 11.25% to 11.75%

The above rates are subject to change without notice. The Interest Rate for Rural Housing Finance with rural income will be 50 basis points higher than the Home loan rates on respective slabs.

39 SWOT ANALYSIS OF HDFC

STRENGTHS 1. One of the leading new age private sector bank 2. HDFC Bank has over 1700 branches and over 5000 ATMs, in 780 cities in India 3. Existing CBS across its branches 4. Huge employee base i.e. more than 51000 employees 5. Large collaborations with corporate for employee salary accounts OPPORTUNITIES 1.Mobile banking, Internet banking 2.Venturing into rural areas 3.Providing more complex products to the ever increasing demands of the industry

WEAKNESS 1.Rural penetration is low 2.Lesser no. of branches when compared with its competitors

THREATS 1.Competitors 2.New banking licenses 3.Foreign banks that offer complex products

40 AXIS BANK

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporate, MSME, Agriculture and Retail Businesses.

Axis Bank is one of the first new generation private sector banks to have begun operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India), Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC), National Insurance Company Limited, The New India Assurance Company Limited , The Oriental Insurance Company Limited and United India Assurance Company Limited. The shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003.

41

VISION 2015 To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and smart use of technology.

CORE VALUES Customer centricity Ethics Transparency Team work Ownership

CAPITAL STRUCTURE The Bank has authorized share capital of Rs.850 crores, comprising 850,000,000 equity shares of Rs.10/- each. As on 30th September, 2013 the Bank has issued, subscribed and paidup equity capital of Rs. 469.19 crores, constituting 46,91,89,786 equity shares of Rs.10/each. The Banks shares are listed on the National Stock Exchange and Bombay Stock Exchange. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE).

DISTRIBUTION NETWORK The Bank has a network of 1947 domestic branches (including extension counters) and 11,245 ATMs across the country, as on 31st March 2013. The Banks overseas network consists of 4 branches in Singapore, Hong Kong, DIFC Dubai, Colombo and 3 Representative offices at Shanghai, Dubai and Abu Dhabi.

42 CORPORATE SOCIAL RESPONSIBILITY (CSR)

Axis Bank has set up a Trust the Axis Bank Foundation (ABF) to channel its philanthropic initiatives. The Foundation has committed itself to participate in various socially relevant endeavors with special focus on poverty alleviation, providing sustainable livelihoods, education of the underprivileged, healthcare, sanitation, etc. The Bank contributes up to one per cent of its net profit annually to the Foundation under its CSR initiatives. The Foundation aims to provide one million sustainable livelihoods to the underprivileged in some of the most backward regions of the country in the next five years, with 60% of the beneficiaries being women. The Foundation nurtures / supports NGOs working in the areas of education health and development of underprivileged and special children. The Foundation also supports various projects to impart vocational training to the underprivileged youth. The Foundation supports the Lifeline Foundation for providing high level trauma care and rural medical relief in the states of Maharashtra, Kerala, Gujarat and Rajasthan. The Foundation also supports projects in skill development, water harvesting and low-cost agricultural practices to enhance farm yield.

43 PRODUCTS OF AXIS BANK PRODUCTS TYPES Savings accounts, Salary accounts, Current Accounts accounts, Inaam personal accounts
Fixed deposits, Tax Saver Fixed deposits, Deposits Recurring deposits, Encash 24

Personal loans, Home loans, Car loans, Gold loans, Loan against property, Educational Loans loans, Loan against Shares and Loan against Security Cards eDGE Loyalty Rewards Programs Credit cards, Debit cards, Savings account, Credit card and Debit card Gold Mohurs, Silver Mohurs, Mutual Funds, Demat Account, Online Investing with Investments AxisDirect, IPOSmart, 8% Saving Bonds, Inflation Index Bonds, Public Provident Funds Life insurance, Health insurance, Motor Insurance insurance, Travel insurance, Home insurance, Business Guard Multi currency Forex card, ISIC Forex card, India Travel card, Outward Remittances, Forex Foreign Currency Travelers Cheques, Foreign Currency Cash, Travel Currency Card

44 HOME LOANS AXIS BANK Axis Bank offers affordable and flexible housing loans that can turn the dream of owning a home into reality. If rising real estate prices have pushed the house you coveted beyond your budget, Axis Banks unmatched home loans will put it within reach. The attractive interest rates and minimal processing fees make AXIS Banks home finance products a first choice. In addition, features such as flexible tenures, transparent processing and quick service have made the products stand out among the best home loans in India. The Bank has products to suit every budget, taste and need. Whether Self-employed or salaried, want a floating or fixed rate, Axis Bank will offer a loan that is just right for the customer. THE AXIS ADVANTAGE Axis Bank housing loans are designed for todays home-hunter. Attractive housing finance rates: AXIS Bank offers attractive interest rates that make housing loans affordable and easier on the customers pocket every month. Flexible rates: Choice between fixed and floating rate options depends on the interest of the customers. Balance transfer facility: Transfer of home loan is possible without any hassles. Doorstep service: Doorstep services are provided, perfect for those leading busy lives. Nil prepayment charges: No prepayment charges for those who want to pay off early (only for floating interest rate Home Loans)

INTEREST RATES
Less than and equal to 25 lakhs Above 25 lakhs 10.25% p.a 10.75% p.a

45 SWOT ANALYSIS OF AXIS BANK

STRENGTHS 1. The bank has a good image among urban population 2. The bank is registering a good growth 3. A huge portfolio of product and services 4. Decent penetration in the rural areas 5. One of the largest private sector financer in India for Agriculture loans wiz Retail Agri & Corporate Agri OPPORTUNITIES 1. Expansion in rural areas 2. Going to foreign markets and exploring the new economies

WEAKNESS 1. Lesser no. of branches compared to its competitors 2. Image of the bank still under the shadow of the UTI debacle

THREATS 1. New banking licenses issued by the Reserve Bank Of India 2. Foreign banks 3. Competitors

46 STATE BANK OF INDIA

State Bank of India (SBI) is a multinational banking and financial services company based in India. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra. State Bank of India is one of the Big Four banks of India, along with ICICI Bank, Punjab National Bank and Bank of Baroda. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banksBank of Calcutta and Bank of Bombayto form the Imperial Bank of India, which in turn became the State Bank of India. Government of India owned the Imperial Bank of India in 1955, with Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India.

47 MISSION STATEMENT OF SBI To retain the banks position as the premier Indian Financial Services. It also aims to be a group with world class standards and significant global business commitments to excellence in customer, shareholder and employee satisfaction so as to play a leading role in expanding and diversifying financial services while continuing emphasis on its development banking role. VISION OF SBI To be a Premier Indian Financial Services group with global perspective, world class standard of efficiency and professionalism and also its core institutional values. To retain its position in the country as a pioneer in developing countries. It also aims to maximize its shareholders value through highly sustained earnings per share. To become an institution with a culture of mutual care and commitment. It also focuses on a pleasant working environment to have continuous learning opportunities. CAPITAL STRUCTURE The Bank has authorized share capital of Rs.5,000 crores. The issued capital amounts to Rs.684.1 crores comprising 684033971equity shares of Rs.10/- each for the period of 20122013. The shares of the bank are listed in Bombay Stock Exchange and National Stock Exchange. DISTRIBUTION NETWORK The corporate center of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India.

48 SBI provides easy access to money to its customers through more than 8500 ATMs in India. The Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which includes the ATMs of State Bank of India as well as the Associate Banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc.

PRODUCTS AND SERVICES OFFERED BY SBI

PRODUCTS
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

SERVICES

SBI Term Deposits SBI Recurring Deposits Loan Against Mortgage Of Property Loan Against Shares & Debentures SBI Housing Loan SBI Car Loan SBI Loan For Pensioners SBI Educational Loan Rent Plus Scheme Medi-Plus Scheme

Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT E-Pay E-Rail SBI Vishwa Yatra Foreign Travel Card

Broking Services Gift Cheques

49 SBI HOME LOANS "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 come to customers on the solid foundation of trust and transparency built in the tradition of State Bank of India. SBI HOME LOANS UNIQUE ADVANTAGE 1. Package of exclusive benefits. 2. Low interest rates. Further SBI charges interest on daily reducing balance. 3. Low processing charges. 4. NO hidden costs or administrative charges. 5. No prepayment penalties. It will enable the customers to reduce their interest burden and optimally utilize the surplus funds by prepaying the loan. 6. Over 15,350 branches nationwide, one can get his home loan account parked at a branch nearest to his present or proposed residence. INTEREST RATES Interest will be charged at the rates prescribed by the Bank from time to time. For Women borrowers (with effect from 20-12-2013) Up to Rs.75.00 lakhs Above Rs.75.00 lakhs 10.10% p.a. 10.25% p.a.

50 For other borrowers (with effect from 20-12-2013) Up to Rs.75.00 lakhs Above Rs.75.00 lakhs 10.15% p.a. 10.30% p.a.

No fixed rate option will be available in any limit brackets.

SWOT ANALYSIS OF SBI

STRENGTHS

WEAKNESS 1. Huge amount of staff

1. The biggest bank in the country 2. Expected to experience high level of 2. Has a separate act for itself. Thus, a attrition due to retirement of its top special privilege. management 3. Biggest branch network in the country 3. Still carries the image of the old Govt. 4. First public sector to move to CBS sector bank OPPORTUNITIES 1. Pool in talent to replace the going top management to serve the next generation 2. Make better use of its CRM 3. Expansion into rural areas THREATS 1. Consolidation among private banks 2. New bank licenses by RBI 3. Foreign banks that have sophisticated products

51 LIC HOUSING FINANCE LIMITED

LIC Housing Finance Ltd. operates as a housing Finance company in India. The company was incorporated in June 19, 1989 and went public by the year 1994. LIC Housing Finance provides long term finance to individuals for purchase, construction, repair and renovation of houses and flats while also providing financing for existing property for business and gives loans to professionals for purchasing or construction of Clinic, Nursing Homes and Office space. The company has its registered office located in Mumbai. VISION To be the best Housing Finance Company in the country. MISSION Provide secured housing finance at affordable cost, maximizing shareholders value with higher customer sensitivity.

52 CAPITAL STRUCTURE

LIC Housing Finance Ltd. is one of the largest Housing Finance company in India. Incorporated on 19th June 1989 under the Companies Act, 1956, the company was promoted by LIC of India and went public in the year 1994. The Company launched its maiden GDR issue in 2004. The Authorized Capital of the Company is Rs.1500 Million (Rs.150 Crores) and its paid up Capital is Rs.850 Millions (Rs.85 Crores). The Company is recognized by National Housing Bank and listed on the National Stock Exchange (NSE) & Bombay Stock Exchange Limited (BSE) and its shares are traded only in Demat format. The GDR's are listed on the Luxembourg Stock Exchange.

DISTRIBUTION NETWORK The Company possesses one of the industry's most extensive marketing network in India : Registered and Corporate Office at Mumbai, 7 Regional Offices, 13 Back Offices and 190 marketing units across India. In addition the company has appointed over 1241 Direct Sales Agents (DSAs), 6535 Home Loan Agents (HLAs) and 782 Customer Relationship Associates CRAs) to extend its marketing reach. Back Offices spread across the country conduct the credit appraisal and administrative functions. The Company has set up a Representative Office in Dubai and Kuwait to cater to the NonResident Indians in the GLCC countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. Today the Company has a proud group of over 10,00,000 prudent house owners who have enjoyed the Company's financial assistance.

53 PRODUCTS OF LIC HOUSING FINANCE LIMITED

LOANS Home loans Corporate loans Loans to builders/developers Loans to professionals

DEPOSITS Deposits under Cumulative and Non-

Cumulative options.

New Home Loan product FREEDOM LIC Housing Finance announced the launch of a new home loan product Freedom on May 4, 2011. It is a floating rate product. In this product, customers are also provided with a onetime option within one year of obtaining the loan to convert to a fixed rate for the next 5 years, subject to terms & conditions.

HOME LOANS

LIC Housing Finance Ltd. promoted by Life Insurance Corporation of India, is one of the largest Housing Finance Company in India. LIC Housing Finance is mainly engaged in the business of providing long term home loans to individuals for purchase, construction or repair and renovation of new / existing residential properties. One of the most popular products of LIC Housing Finance is "Griha Prakash", which is designed for individuals to provide finance for purchase or construction or repair and renovation of new / existing residential properties. LIC Housing finance does not normally give home loans for property which is older than 35 years. Home Loan from LIC Housing Finance is available for maximum of 85% for property costing below Rs. 20 lakhs and 80% for above Rs. 20 lakhs.

54 The home loan from LIC Housing Finance Company for amount exceeding Rs. 1.5 crores is sanctioned on a case to case basis depending on the merits of the application. The amount of loan includes stamp-duty and registration charges. LIC home loan can be repaid by way of Equated Monthly Installment (EMI) within tenure of 240 months i.e. 20 years. For professional NRIs, the maximum tenure available is 15 years vis-a-vis 10 years for nonprofessional NRIs.

BENEFITS OF LIC HOUSING FINANCE LIMITED

1. 2. 3. 4. 5. 6. 7.

Attractive interest rates Hassle free procedures Easy documentation No hidden costs Customized products to suit your needs 209 Offices across India and 2 Offices in Middle East Well trained professionals providing doorstep service

INTEREST RATES

NAME OF THE PLAN LIC-HF 2 Years Fixed LIC-HF Bhaghya Lakshmi

RATE 10.35% 10.10%

The institution offers different rates for different plans which are floating, fixed and semifixed or semi-floating.

55 SWOT ANALYSIS OF LIC HOUSING FINANCE LIMITED

STRENGTHS 1. Largest state-owned life insurance company in India, and also the country's largest investor 2. Has over 2000 branches across all parts of India and more than 10,00,000 agents. 3. With Largest fund base it is the biggest investor in India 4. Has over 115,000 employees across India 5. According to The Brand Trust Report, LIC is the 8th most trusted brand of India 6. LIC has subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited, LIC Nomura Mutual Fund, LIC(Nepal)Ltd, LIC(Lanka)Ltd, LIC(International)BSC(C) OPPORTUNITIES 1. Use of Technology to provide effective services to cater to urban population. 2. Government Schemes implementation

WEAKNESS 1. It has an image of a Government agency and hence lacks innovation 2. Being a Government agency, red tape and bureaucracy causes problems 3. Managing a huge workforce during economic crisis meant overburdened due to salaries

THREATS 1. Economic crisis 2. Entry of new NBFCs in the sector 3. Varying Government policies

56

57 Department of Banking operations and development, RBI: Bombay observed that the rapid expansion of banks activities since 1970 called for a phase of consolidations to improve the quality of banks operational efficiency, productivity and customer services.

Banking Commission (1972) reviewed bank operating methods and procedures and made recommendations for improving and modernizing these, particularly relating to customers services, credit procedure and internal control systems. It observed that present methods of working out branch profitability are not appropriate and an integrated costing and financial reporting system is needed.

Varde and Singh (1979) in a study "profitability of commercial banks" over 15 years gave consideration to two types of factors that effects interest rates levels i.e. internal factors (including operational and managerial efficiency of individual basis) and external factors.

Kulkarni (1979) in his study Development responsibility and profitability of banks stated that while considering banks costs and profits, social benefits arising out of it cannot be ignored. He suggested that while meeting social responsibility banks should try to make developmental business as successful as possible.

Fanning (1982), while examining bank productivity of British banks observed that although the productivity of the UK clearing banks is improving, they are still heavily over manned as compared with similar banks elsewhere.

Ojha (1987) in his paper "Modern international caparison of productivity and Profitability of Public sector banks of India" making Comparison on the basis of per employee indicators and

58 taking examples of state bank group and Punjab National bank noted that Indian banks are the lowest in all accounts. However such international comparison will not be fair for numbers of reasons.

Narasimham Committee (1991) points out that although the banking system in our country has made rapid progress during the last two decades, there is decline in productivity and efficiency and erosion of profitability. The committee strongly makes indications of liberalizing, deregulating economy to make Indian baking system more competitive and efficient.

Haavio, Kauppi (2000) stated that countries where a large proportion of the population lives in owner occupied housing are experiencing higher unemployment rates. Than countries where the majority of people live in private rental housing, which might suggest that rental housing enhances labour mobility. In this paper, they develop a simple inter temporal two region model that allow us to compare owner occupied housing markets to rental markets and to analyze how these alternative arrangements allocate people in space and time. announced that it will offer loans for Rs. 2-10 lakh at 12.5 percent the lowest rate offered by any housing finance provider, big brother SBI has taken the rate war in the home loans category to new heights. This is because, apart from the low rate, the interest on these loans is calculated on principal, which is reduced every month unlike other housing finance companies which calculate interest on annually reducing basis.

Dr. Rangarajan C. (2001) said that the financial system of India built a vast network of financial institutions and markets over times and the sector is dominated by banking sector which accounts for about two-third of the assets of organized financial sector.

59 Vandell, Kerry D (2008) analyses the sharp rise and then suddenly drop down home prices from the period 1998- 2008. changes in prices are for the reasons as such economic fundamentals , the problem was not subprime lending per se, but the Feds dramatic reductions, then increases in interest rates during the early- mid-2000 , the housing boom was concentrated in those markets with significant supply-side restrictions, which tend to be more price-volatile; he problem was not in the excess supply of credit in aggregate, or the increase in subprime per se, but rather in the increased or reduced presence of certain other mortgage products.

Manish Chauhan (2012) In his study of comparison between different banks, the result revealed that SBI is preferred by most of the customers. The interest rates and other charges of SBI are more affordable to customers. Though there are positive and negative experiences with different banks, SBI stands ahead in the market.

After going through various projects and books, I have come to know that there is a growth of home loans after 2001, which is effected by various steps taken by Government. The various studies focused on the development of the sector as a whole and how customers started preferring home loans, where as my study is to find out the preference of customers between Private Sector Banks and Public Sector Banks and to find out who leads the market.

References: Kulkarni (1979), Development responsibility and profitability of banks Journal of Economic Perspectives, Volume 9 No 1 , pp. 26-32.

60 Fanning (1982), The Demand for Home Mortgage Debt Journal of Urban Economics, Volume 11 No 2, November, pp. 770-774 Dr. Rangarajan (2001), A Simple Error Correction Model of House Price. Journal of Housing Economics Vol. 4, No. 3,pp 27 34 Vandell, Kerry.D (2008), Subprime lending and housing bubble: tail wag

dog?International Journal of Bank Marketing, vol. 21, no. 2, pp. 53-7

61

62 OCCUPATION OF RESPONDENTS PARTICULARS Professional Self-employed Salaried Others TOTAL NO. OF RESPONDENTS 37 31 28 4 100 PERCENTAGE 37 31 28 4 100

OCCUPATIONAL STATUS OF RESPONDENTS

4 28 37 Professional Self-employed Salaried Others 31

Interpretation The sample taken constitutes only the customers who have availed home loan from different banks. Of the 100 customers, 37% was Professional people, 31% were self-employed and 28% were salaried people. This shows that home loans has gained importance amongst all categories of people as there is no much difference between the components. It indicates the development of the sector.

63 INCOME GROUP OF RESPONDENTS PARTICULARS Below 2 lakhs 2 to 4 lakhs 4 to 6 lakhs Above 6 lakhs TOTAL NO. OF RESPONDENTS 42 35 15 8 100 PERCENTAGE 42 35 15 8 100

INCOME GROUP OF RESPONDENTS

8

15 42 Below 2 lakhs 2 to 4 lakhs 4 to 6 lakhs Above 6 lakhs

35

Interpretation From the above chart, it is evident that people who have income below 2 lakhs avail home loan to the maximum constituting 42% of the total respondents. Respondents who have income between 2 to 4 lakhs constitute 35 % and the higher income group constitutes only a smaller portion.

64 KNOWLEDGE OF HOME LOAN PRODUCTS PARTICULARS HDFC AXIS SBI LIC Housing Finance Ltd. Others TOTAL NO. OF RESPONDENTS 28 8 40 18 6 100 `PERCENTAGE 28 8 40 18 6 100

AWARENESS OF HOME LOAN PRODUCTS

6 28 18 HDFC AXIS SBI LIC HFL 8 Others

40

Interpretation The above chart shows that the home loan products of SBI is more popular among the respondents constituting 40% and 28% of respondents are aware of HDFC products and the remaining people are aware of LIC HFL, AXIS and others.

65 CUSTOMERS PREFERENCE OF DIFFERENT BANKS PARTICULARS HDFC AXIS SBI LIC Housing Finance Ltd. Others TOTAL NO. OF RESPONDENTS 26 10 38 20 6 100 `PERCENTAGE 26 10 38 20 6 100

CUSTOMER'S PREFERENCE OF DIFFERENT BANKS

1.2

20

26

HDFC AXIS SBI LIC HFL

10 38

Others

Interpretation Most of the customers preferred SBI for home loans (38%), 26% of customers preferred HDFC, 20% preferred LIC HFL. It may be noted that the pattern resembles the awareness pattern. So it is clear the products of other banks have to be promoted.

66 REASONS FOR GETTING THE HOME FINANCED PARTICULARS Non-availability of funds Reluctant to pay cash in one go Tax benefits Others TOTAL NO. OF RESPONDENTS 36 35 24 5 100 PERCENTAGE 36 35 24 5 100

REASONS FOR GETTING THE HOME FINANCED

24

36 Non-availability of funds Reluctant to pay cash in one go Tax benefits Others

35

Interpretation The chart shows that people avail home loans because of non-availability of funds (36%) and at the same time, they do not want to let all the money go out of their pocket at a single point of time (35%). These 2 factors have an equal role to play in influencing people to get home loans. 24% of respondents avail home loans to get tax benefits.

67 SOURCES OF INFORMATION PARTICULARS Newspapers/ Hoardings Television Words of mouth Others TOTAL NO. OF RESPONDENTS 36 36 20 8 100 PERCENTAGE 36 36 20 8 100

SOURCES OF INFORMATION
8

20

36 Newspapers/ Hoardings Television Words of mouth Others 36

Interpretation Newspapers, Hoardings (36%) and Television (36%) play a major role in making people aware of the home loan products and services of different banks. However, some people (20%) believe that references made by the known persons are safe.

68 FACTORS INFLUENCING THE CHOICE OF RESPONDENTS

PARTICULARS NO. OF RESPONDENTS PERCENTAGE

Interest rates Flexible repayment period Services provided Others

TOTAL

53 26 14 7
100

53 32 9 6
100

FACTORS INFLUENCING THE CHOICE OF RESPONDENTS

6 9

Interest rates Flexible repayment period 53 32 Services provided Others

Interpretation 53% of respondents select the Housing Financial Institutions or Banks on the basis of interest rates, 32% of respondents consider flexibility in repayment period as a factor for selecting the bank. It also indicates that the services provided by the banks do not play a vital role in influencing people to select a particular bank.

69 TYPES OF HOME LOAN AVAILED PARTICULARS Home purchase loan Home extension loan Home improvement loan Home construction loan TOTAL NO. OF RESPONDENTS 53 13 11 23 100 PERCENTAGE 53 13 11 23 100

TYPES OF HOME LOAN AVAILED

23 Home purchase loan Home extension loan 11 53 Home improvement loan Home construction loan

13

Interpretation It is clear from the above chart that most of the people availed loans for purchase of homes (53%). This is because of the growing real estate business and increasing number of apartments. 23% of respondents avail loans for construction of house. Home extension and improvement loans do not contribute much to growth of the sector.

70 OPINION OF HOME LOAN PROCEDURE PARTICULARS Complex Average Simple Cant say TOTAL NO. OF RESPONDENTS 43 24 11 22 100 PERCENTAGE 43 24 11 22 100

OPINION OF HOME LOAN PROCEDURE

22 Complex Average 11 Simple Can't say

43

24

Interpretation Many people (43%) do consider the procedure of home loan as complex. It is because of too many charges and documents are required in the process, arranging for which becomes difficult. 24% of respondents consider the process as average and 22% as simple.

71 TYPES OF INTEREST RATES PREFERRED

PARTICULARS Floating Fixed Adjustable TOTAL NO. OF RESPONDENTS 48 47 5 100 PERCENTAGE 48 47 5 100

TYPES OF INTEREST RATES PREFERRED

48 47

Floating Fixed Adjustable

Interpretation As there are only two types of interest rates available, people have to select between these two. People give equal importance to both types of interest rates. 47% of respondents prefer fixed rates and 48% of respondents prefer floating rates.

72 OPINION ON PROCESSING FEES

PARTICULARS Affordable Reasonable Expensive No idea TOTAL NO. OF RESPONDENTS 32 25 36 7 100 PERCENTAGE 32 25 36 7 100

OPINION ON PROCESSING FEES

7 32 Affordable Reasonable 36 Expensive No idea

25

Interpretation Processing fees is collected on the basis of slab or a percentage of loan amount. It is collected by the banks to verify the documents and other works they do for sanctioning the loan. 32% of respondents feel the processing fees as affordable and 36% of respondents feel processing fees charged by the banks are expensive.

73 UNNECESSARY CHARGES
PARTICULARS Administrative charges Legal charges Cheque bounce charges Others TOTAL NO. OF RESPONDENTS 28 34 26 12 100 PERCENTAGE 28 34 26 12 100

UNNECESSARY CHARGES
12 28 Administrative charges 26 Legal charges Cheque bounce charges Others

34

Interpretation Banks collect many charges in the process of sanctioning loan. 34% of respondents consider legal charges as unnecessary charges collected by the bank. 28% consider administrative charges and 26% consider cheque bouncing charges as unnecessary charges.

74 RANGE OF HOME LOAN AMOUNT

PARTICULARS Below 1,000,000 1,000,000 to 2,000,000 2,000,000 to 3,000,000 Above 3,000,000 TOTAL NO. OF RESPONDENTS 17 38 27 18 100 PERCENTAGE 17 38 27 18 100

RANGE OF HOME LOAN AMOUNT

18

17

Below 1,000,000 1,000,000 to 2,000,000 2,000,000 to 3,000,000 27 38 Above 3,000,000

Interpretation As majority of respondents availed home loans for purchase or construction of homes, the loan amount of 38% of respondents fall in the range of Rs.1,000,000 to Rs.2,000,000. The loan amount of 27% of respondents fall in the range of Rs,2,000,000 to 3,000,000.

75 HOME LOAN SANCTION PERIOD

PARTICULARS 0 to 10 days 10 to 20 days 20 to 30 days Above 30 days TOTAL NO. OF RESPONDENTS 9 28 37 26 100 PERCENTAGE 9 28 37 26 100

HOME LOAN SANCTION PERIOD

9 26 0 to 10 days 28 10 to 20 days 20 to 30 days Above 30 days

37

Interpretation 37% of respondents got their loan sanctioned in 20 to 30 days i.e. a month. 28% got their loan sanctioned within 20 days. For 26% of respondents it took more than 30 days to get their home loan sanctioned. Very few people got their loan sanctioned within 10 days.

76 TENURE OF HOME LOAN

PARTICULARS 1 to 5 years 6 to 15 years 16 to 25 years Above 25 years TOTAL NO. OF RESPONDENTS 13 29 37 21 100 PERCENTAGE 13 29 37 21 100

TENURE OF HOME LOAN

13 21 1 to 5 years 6 to 15 years 29 16 to 25 years Above 25 years

37

Interpretation The home loan tenure of majority of people (37%) is somewhere between 16 to 25 years. For 29% of people it falls between 6 to 15 years. And 21% of people have their tenure even above 25 years. From the chart it is evident that the customers are enabled to pay the lowest installment possible by spreading the principal and interest over many years.

77 OPINION ABOUT THE SERVICES

PARTICULARS Professionally managed Customer care Query handling Socially responsible Reliable and transparent TOTAL NO. OF RESPONDENTS 25 29 21 13 12 100 PERCENTAGE 25 29 21 13 12 100

OPINION ABOUT THE SERVICES

12 25 Professionally managed 13 Customer care Query handling Socially responsible 21 29 Reliable and transparent

Interpretation The chart shows that the banks provide all types of services and different sets of customers are satisfied of different services provided by the banks. 25% of respondents feel the services are professionally managed, 29% feel the banks are customer friendly, 21% feel that the banks handle the queries of customers effectively and the remaining feel the banks are socially responsible, reliable and transparent.

78 PROBLEMS FACED BY THE CUSTOMERS

PARTICULARS Lack of knowledge Procedural delays Non-Cooperation Others TOTAL NO. OF RESPONDENTS 42 24 28 6 100 PERCENTAGE 42 24 28 6 100

PROBLEMS FACED BY THE CUSTOMERS

28

42

Lack of knowledge Procedural delays Non-Cooperation Others

24

Interpretation The customers face various difficulties in the process of availing loan. 42% feel that lack of knowledge about the procedure and documents as a major problem. 24% consider the procedural delay as a problem and 28% feel there is no co-operation. The chart clearly shows where the institutions have to concentrate to improve their market share.

79 PROBLEMS AFTER SANCTION OF LOAN

PARTICULARS Desired loan not sanctioned Interest rate dilemma Others TOTAL NO. OF RESPONDENTS 57 34 9 100 PERCENTAGE 57 34 9 100

PROBLEMS AFTER SANCTION OF LOAN

Desired loan not sanctioned 34 57 Interest rate dilemma Others

Interpretation The chart shows the problems faced by the customers after sanction of home loan. 57% of respondents did not get the desired amount of loan and 34% feel there is dilemma in interest rates. Even after the loans are sanctioned, the customers have to be taken care of. Because they may switch over to other banks.

80 REASON FOR TRANSFER OF HOME LOAN ACCOUNT

PARTICULARS Lower interest rate Higher provision for top up Availability of longer tenure of loan Others TOTAL 4 100 4 100 NO. OF RESPONDENTS 40 32 24 PERCENTAGE 40 32 24

REASON FOR TRANSFER OF HOME LOAN

4 Lower interest rate 24 40 Higher provision for top up Availability of longer tenure of loan Others 32

Interpretation 32% of respondents say that higher provision of top-up will the reason if they are about to transfer their home loan account to another bank, 40% will transfer for lower interest rates and 24% will transfer for reasons of longer tenure of loan. These are the areas to improve, if the institute has to be competitive.

81

82 FINDINGS Home loans are availed by all categories of people (professionals 37%, self employed 31% and salaried people 28%), indicating the growth of the home loan sector. Rise in income level i.e. 35% of respondents have their income in the range of 2 to 4 lakhs, had contributed much to the growth of home loan market. Most of the customers availed loan for purchase (53%) or construction (23%) compared to improvement and extension loans. It is also found that majority of people prefer floating interest (48%) as they can save money and even though it rises, it is not for the entire tenure of the loan. SBI (38%) is found to be the best bank for home loan even though it follows Sarkari culture and strict in overall process. It is found that though HDFC (26%) has established itself, the experiences of people were mixed. LIC HFL (20%) is found to be a best option after HDFC. It reduces the interest rates for its customers having insurance or investment policies. It is found that the public sector banks are good post-loan and not friendly at the time of taking loan. The major problems faced by the customers are different charges collected by the bank at various stages (34% consider legal charges, 28% administrative charges and 26% cheque bounce charges as unnecessary). It is found that most of the customers are aware of the products and services of their banks only i.e. the banks from which they availed loan. The customer does not have proper knowledge about different home loan products so they face problem in making a good deal i.e. Out of 40% of respondents who were aware of SBI products, 38% availed home loan from SBI itself. Because of knowledge of

83 different products of different banks, the customers are not able to make a proper decision. The banks do not take into account the paying capacity of customers. So some customers (57%) are not able to get amount of loan needed by them.

84

85

SUGGESTIONS The home loan procedure and documentation must be made simpler to attract more customers as 43% of respondents feel the procedure is complex. The various charges collected by banks must be reduced to the extent possible as this is the major problem faced by customers (34% consider legal charges, 28% administrative charges and 26% cheque bounce charges as unnecessary).. Awareness of people about the home loan products and services of different banks must be increased by promotional activities like opening branches in rural areas. The services of the private banks post-loan must be improved as they lack in it and at the same time public sector banks are to improve their services at the time of taking loan. Customers must be intimated about the changing interest rates time to time as 53% of respondents select the bank based on interest rates. It is important to keep an eye on the competitors to avoid customers switching over to other banks as people tend to transfer their home loan account if lower interest rates (40%), longer tenure of loan (24%), etc are available. Awareness campaigns must be conducted in rural areas, to make customers feel that home loans are something within their reach. Rules and Regulations must be liberalized such that lower income groups are facilitated by home loans (eligibility test).

86

87

CONCLUSION After doing a lot of research and studying the materials available on internet, newspapers, magazines and journals, I conclude that people prefer SBI for home loans. However, HDFC occupies the second position. Although private banks are effective in modern banking business and technology, people prefer Government banks for loans. Especially older persons are more dependent on government banks. It is true that the preference of younger population is changing and they prefer private banks more because of services and facilities provided by private banks. The interest rate is lower in Government banks but services are not up to the mark at the time of taking loan. The appearance of banks also becomes very important for the present generation and private banks takes complete efforts on this, which is lacking in Government banks. The scope of my study is limited to the Chennai city and I have compared the public sector banks with private sector banks on some common factors like services provided, interest rates, complexity of procedures, etc. because of the limited time. Areas like eligibility test, details of documents required are given less importance in the study.

88

89

BLIOGRAPHY Websites: http://profit.ndtv.com/news/your-money/article-home-loans-fixed-vs-floating-rates-whichone-to-choose-323701 http://getahead.rediff.com/report/2009/sep/29/money-eight-things0first-time-home-loanborrowers-must-know.htm http://www.jagoinvestor.com/2012/05/best-bank-home-loan-india.html http://www.deal4loans.com/loans/home-loan/best-home-loan-bank-housing-loan-banks/ http://www.equitymaster.com/research-it/sector-info/bank/Banking-Sector-AnalysisReport.asp http://www.hdfc.com/loans/home-loan.asp http://www.mbaskool.com/brandguide/banking-and-financial-services/1019-life-insurancecorporation-of-india-lic.html http://www.lichfl.com/lichousing/index_new.asp http://www.sbi.co.in/ http://www.axisbank.com/home-loan-launch/index.html http://www.scribd.com/search-documents?query=banks+and+loans

Magazines: http://articles.economictimes.indiatimes.com/2013-08-21/personalfinance/41433161_1_home-loan-private-banks-public-sector-banks http://businesstoday.intoday.in/story/all-you-need-to-know-before-taking-a-homeloan/1/197997.html

90

91

QUESTIONAIRE Hello sir/Madam, I, Revathi, here to conduct a research on the topic CUSTOMERS PREFERENCE OF DIFFERENT BANKS IN HOME LOAN SECTOR. Please give your honest opinion and be understood that this information collected will be purely confidential and not to be shared for any purpose other than research. Personal Details:
Name Age Address

1. Occupation: o Professional o Self-employed o Salaried o Others

2. Which income group do you belong? o Below 2 lakhs o 2 to 4 lakhs o 4 to 6 lakhs o Above 6 lakhs

3. Are you aware of the home loan products of any of the following banks? o HDFC o AXIS o SBI o LIC Housing Finance ltd. o others,________

4. From which bank have you got your home financed? o HDFC o AXIS o SBI o LIC Housing Finance ltd o Others,__________

92 5. Reasons for getting the home financed: o Non-availability of funds o Reluctant to pay cash in one go o Tax benefit o Others, __________

6. How did you come to know about the specific financial institution? o Newspapers/Hoardings o Television o Word of mouth o Others,_________

7. On what basis, did you select the specific financial institution? o Interest rates o Flexible repayment period o Services provided o Others,_________

8. Which type of home loan have you availed? o Home purchase loan o Home extension loan o Home improvement loan o Home construction loan o Others,________

9. What is your opinion regarding the home loan procedure? o Complex o Average o Simple o Cant say

10. What type of interest rates have you preferred? o Floating o Fixed o Adjustable o Others

11. What is your opinion about the processing fee charged by your bank? o Affordable o Expensive o Reasonable o No idea

93 12. According to you, which of the following is an unnecessary fee charged by the banks? o Administrative charges o Legal charges o Cheque bounce charges o Others,_________

13. Your loan amount falls in the range of: o Below 10,00,000 o 10,00,000 to 20,00,000 o 20,00,000 to 30,00,000 o Above 30,00,000

14. Period for getting your loan sanctioned? o 0 to 10 days o 10 to 20 days o 20 to 30 days o Above 30 days

15. What is the tenure of your home loan? o 1 to 5 years o 6 to 15 years o 16 to 25 years o Above 25 years

16. What is your opinion about the services provided by your bank? o Professionally managed o Customer care o Query handling o Socially responsible o Reliable and transparent

17. What problems do you face in getting home loans? o Lack of knowledge o Procedural delays o Non co-operation o Others,_________

18. Did you face any difficulty after sanction of loan? o Desired loan not sanctioned o Interest rate dilemma o Others,________

94 19. If you are willing to transfer your loan account to another bank, what will be the reason? o Lower interest rate o Higher provision for top-up o Availability of longer tenure of loan o Others,_________

20. Suggestions to improve home loan schemes: o _____________________________________________________________ o _____________________________________________________________