BANKING SECTOR IN INDIA

The Indian banking has come from a long way from being a sleepy business institution to a highly
proactive and dynamic entity. This transformation has been largely brought about by the large
dose of liberalization and economic reforms that allowed banks to explore new business
opportunities rather than generating revenues from conventional streams (i.e. borrowing and
lending). The stalwarts of India's financial community nodded their heads sagaciously when Prime
Minister Manmohan Singh said in a speech: "If there is one aspect in which we can
confidentially assert that India is ahead of China, it is in the robustness and soundness of our
banking system." Indian banks have been rated higher than Chinese banks by international rating
agency Standard & Poor's.

The competition heated up with the entry of private and foreign banks.deregulation and
globalization resulted in increased competition that refined the traditional way of doing business.
They have realized the importance of a customer centric approach, brand building and IT
enabled solutions. In the fierce battle for market share and mind share, the most potent weapon is
a strong, well recognized and trusted brand name. Brands attract and convince people that they will
get what is promised. Banking today has transformed into a technology intensive and customer
friendly model with a focus on convenience. The companies have redoubled their efforts to woo
the customers and establish themselves firmly in the market. It is no longer an option for a
company to provide good customer service, it is expected.

Reforms are continuing as part of the overall structural reforms aimed at improving the
productivity and efficiency of the economy. The sector is set to witness the emergence of financial
supermarkets in the form of universal banks providing a suite of services from retail to corporate
banking and industrial lending to investment banking. The financial services market has become a
battle ground with the marketers with the latest and the most sophisticated weapons.

Currently overall, banking in India is considered as fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the private sector
and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets-as compared to other banks in
comparable economies in its region.

The Indian banking industry is currently in a transition phase. On the one hand, the public sector
banks, which are the mainstay of the Indian banking system, are in the process of consolidating
their position by capitalizing on the strength of their huge networks and customer bases. On the
other, the private sector banks are venturing into a whole new game of mergers and acquisitions to
expand their bases. The use of technology has placed Indian banks at par with their global peers. It
has also changed the way banking is done in India. ‘Anywhere banking’ and ‘Anytime banking’
have become a reality. The financial sector now operates in a more competitive environment than
before and intermediates relatively large volume of international financial flows.
The introduction of Basel II norms from 2009 and the fair level playing field that will be available
to foreign banks from 2010 will further enhance the solidarity of the Indian banking sector and
open new avenues for consolidation and the increased competition will ensure that in the end the
Customer is the king.

STRUCTURE OF INDIAN BANKING SECTOR

The Reserve Bank of India act as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The
nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking
arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223
banks are in the public sector and 51 are in the private sector. The private sector bank grid also
includes 24 foreign banks that have started their operations here. Under the ambit of the
nationalized banks come the specialized banking institutions. These co-operatives, rural banks
focus on areas of agriculture, rural development etc.,

The Reserve Bank of India is an autonomous body, with minimal pressure from the government.
The stated policy of the Bank on the Indian Rupee is to manage volatility-without any stated
exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its
services sector, the demand for banking services-especially retail banking, mortgages and
investment services are expected to be strong. M&As, takeovers, asset sales and much more action
(as it is unravelling in China) will happen on this front in India.

With the credibility of the Indian banking system on a high, a number of Indian banks are now
leveraging it to expand overseas. State Bank of India, the country’s largest bank has acquired 76
per cent stake in a Kenyan bank, Giro Commercial Bank, for US$ 7 million. Canara Bank is
helping Chinese banks recover their huge non-performing assets (NPA).

To meet the challenges of going global, the Indian banking sector is implementing internationally
followed prudential accounting norms for classification of assets, income recognition and loan loss
provisioning. The scope of disclosure and transparency has also been raised in accordance with
international practices. India has complied with almost all the Core Principles of Effective Banking
Supervision of the Basel Committee. Some Indian banks are also presenting their accounts as per
the U.S. GAAP. The roadmap for adoption of Basel II is under formulation.
 Credit Tree Of A Bank

Bank

Small & Medium Sector

Corporate loans Retail loans
lending

term loans home loans term loans

working capital financing car loans
equipment financing personal loans
education loans

the retail segment of the bank forms a major part of its portfolio. All the banks try their best to
penetrate further int o the market to enhance their profitability. With the rise in disposable incomes
in the past few years, there is a huge scope for banks to actually give more credit to the people.
Housing loans constitute a major part of the lending in the retail segment. Banks like ICICI and
HDFC have two third of their retail segment in the housing loans.
 Importance Of Bank Credit In A Nation’s Progress

A healthy and sound banking sector is considered as one of the pillars of economic progress. Bank
credit gives impetus to the process of economic development. It helps all the sectors of the
economy namely- manufacturing, services, small and medium enterprises, rural sector, and
agriculture. Budding entrepreneurs, distressed farmers, big corporates, local shopkeepers and
sometimes even the government look towards the banks when it comes to financing needs.bank
credit pushes up the spending capacity of the public by making loans easily available and this
gives a boost to the aggregate demand which in turn leads to a rise in national income This can be
explained with the help of an example:

Maruti Udyog Ltd

Dealer in cars e.g. Rana

Motors

Final Consumer

We can take the example of a car manufacturer say Maruti Udyog Ltd. MUL will depend on bank
for financing its working capital needs, expansion policy etc. so bank plays an important role in the
manufacturing of cars. Once manufactured, these cars will move to a dealer. There is always a
possibility of that dealer having taken a loan from a bank for setting up his showroom. When the
customer comes to buy a car, the bank also provides loan to that customer for purchasing the car.

So the above example clearly illustrates how a bank helps in creating value in the economy by
advancing loans and circulating money, there are many such examples which will establish the
importance of banks in an economy.
 Types Of Loans
There are two types of loans available when you go for taking a loan:

Fixed rate loan

Fixed rate home loans are loans available with a fixed rate of interest for a given period of
time. They are subject to review after a fixed period of time which is generally three years.

Floating rate loan

Floating rate home loans are linked to the prevailing market rate of interest. Floating rate
loans are therefore subject to change at periodical intervals. Typically, a floating rate is
brought up for review once every quarter. However, the time period can differ across
different policies.

Usually, fixed rate loan have a higher rate of interest than the floating rate of interest. This is
because the bank can not hedge his position with respect to a fixed rate loan in case the rate of
interest rises, whereas floating rate loans are linked to market rate of interest. So, they charge a
lower rate of interest in this case.

Current Trends In The Retail Loan Segment

 In the last year the RBI has exercised considerable control over the interest rates. RBI has
raised CRR and SLR twice which has led to hardening of interest rates in the retail and
corporate sector. Most of the banks have raised their rate of interest on loans from 100 to 200
basis points.

 The rising interest rates have slowed down the growth in the retail segment . it has led to
increase in EMIs for most of the loans. In some cases EMIs have risen as much as Rs 2000.

 one of the reasons for RBI taking stringent measures is because there is a fear of retail
bubble in the real estate market due to easily availability of home loans. RBI has taken a
series of measures, ranging from raising its key policy rates to risk weightage on loans
extended to retail sector, to moderate the credit growth of banks. RBI has been
uncomfortable with banks' excessive lending to retail segment, especially the housing sector.

 With increased competition from foreign banks from 2010, the banking sector will see lot of
consolidation through Mergers and acquisitions. The competition will heat up further and the
banks would be vying for market share in the retail segment loans.
 CAR LOANS
Almost all the banks- whether public or private offer car loans/loans on two wheelers/loans on
consumer durables. different banks lend on different rates and terms and conditions. To obtain a
loan, a customer first of all has to fill an application form provided by the bank which contains
details regarding the amount of loan required, repayment capacity of the customer etc. The bank
then processes the application form and decides whether the loan should be approved or not and
how much amount should be lent. The amount that is finally lent depends upon the repayment
capacity of the customer.

Appraisal of Loans

1. The loan is given upto a maximum of 85% of the value of the car. Sometimes the loan may
be for the amount of the purchase but this depends upon the policies adopted by different
banks
2. Minimum age for taking a car loan is 21 years and the maximum age is either 60 years or
the retirement age, whichever is earlier

3. While giving the loan, the banker takes into account the repayment capacity of the
applicant. The amount of loan granted depends upon the repayment capacity only. In
arriving at the repayment capacity, the bank takes into account the annual income of the
applicant, his assets and liabilities.
The assets include:
 Savings in banks
 Accumulated EPF/GPF
 Units of UTI/Mf
 National savings certificates/LIC Policies
 Shares and Debentures
 Immovable Property
 Other assets
The liabilities may include:
 Outstanding loan from bank
 Outstanding loan from employer/relatives etc
 Outstanding loan from co-operative society

In case the applicant has any outstanding loan from any of the above mentioned sources, this will
affect his repayment capacity.

Clubbing of incomes

In case of an applicant where more than one person is working, their incomes can be clubbed
together to decide the repayment capacity of the applicant.
 Suppose an individual’s loan eligibility, based on his income, works out to approximately Rs
1,000,000 for a given set of criteria. But the individual wants a loan worth Rs 2,000,000. Assume
that this individual’s spouse too is earning a similar annual income. In such a case, the individual
can club his spouse’s income alongwith his own income and then opt for a home loan. The
eligibility in this case, will be calculated on the clubbed income of both husband and wife- thereby
enhancing the individual’s eligibility to the extent of the spouse’s income. In our example, the
eligibility will now stand doubled at Rs 2,000,000 from Rs 1,000,000 earlier.

4. The loan is secured by these two things:

a. Primary security: the asset itself is the primary security. In case of car loans, it is
known as Hypothecation of vehicle. The registration card of the vehicle will
contain the condition that the vehicle has been hypothecated to a bank.

b. Collateral Security: the collateral security may be any of the following:

 Third party guarantee of spouse
 Third party guarantee of any other person
 Pledge of securities etc.


5. Documents required:
o Statement of bank accounts for the last 16 months
o Signature of identification from bankers of borrowers/guarantor
o A copy of voter ID card/passport/pan ID card
o Proof of residence
o Latest salary slip showing all deductions and TDS certificate in case of
salaried persons
o Copy of Income tax Returns for last two financial years
o Proof of official address for non-salaried persons

6. Disbursement

The entire loan is disbursed at one time.

7. Processing Fee

The processing fee varies between 0.5%-2% depending upon different banks. Sometimes there
is a complete waiver of processing fee under special schemes.

8. Pre-Payment charges
Usually, public sector banks don’t charge anything on the pre-payment of loans but private
bank charge a penalty on the pre-payment of loans. The penalty is usually charged as a fixed
percentage on the amount of principal outstanding.
 HOME LOANS

DOCUMENTS REQUIRED

1. SALARIED CUSTOMERS

 Application form with photograph.

 Identity and residence proof.
 Latest salary- slip
 If income is fixed then two latest salary slips.
 If income is variable then four latest salary slips.
 Form 16.
 Bank statements of the last six months.
 Processing fee cheque.

SELF EMPLOYED PROFESSIONAL

 Application form with photograph.

 Identity proof.
 Official and residential address proof.
 Educational qualifications certificate and proof of business existence.
 Balance sheet and profit & loss a/c for the last three years.
 Bank statements of the last six months.
 Processing fees cheque.
 Income tax return for the last three years of self and business.
 CA certification on the accounts of the company.
2. SELF EMPLOYED NON PROFESSIONAL

 Application form with photograph.

 Identity proof.
 Official and residential address proof.
 Educational qualifications certificate proof of business existence.
 Business profile
 Income tax return of the last three years of self and business along with
computation of income.
 Balance sheet and profit & loss a/c of the last three years.
 Bank statements of the last six months of self and business
 Processing fee cheque.

 If a company
i. List of directors and shareholding pattern
ii. Annual return of the company
iii. Memorandum/Articles of association

 If partnership firm
i. Partnership deed
ii. Audit report of the concern.
 Sanction letters of all the term loans along with their repayment schedule.
 Guidelines For Analysis

Age Norms
 Minimum age of the applicant must be 21 years.
 Maximum age of the applicant must be either 65 years or the age of retirement.

Income Norms
 For salaried income must be greater than Rs. 9000 per month.
 For self employed professionals gross income must be greater than Rs. 60000 per annum.
 For self employed non professionals gross income must be greater than
 Rs. 60000 per annum (in retail) and
 Rs. 100000 per annum (in non retail)

Loan Tenure
 For salaried customers 20 years
 For self employed professional 20 years
 For self employed non professional 15 years

Loan Amount
 Minimum loan amount 1 lacs
 Maximum loan amount 300 lacs

Fixed Obligation To Income Ratio (FOIR)

 For salaried
o Income between- 9000-25000, FOIR is taken as 50%
o Income >25000, FOIR is taken as 55%

 For self employed non professional

 o FOIR ranges between 55% to 100%

 For self employed professional

o FOIR ranges between 55% to 100%
o LTV depends upon the profile of the applicant.

Rate Of Interest

There are two types of rates :-

1. Adjustable Rate Home Loan

The rate of interest is not fixed in this ARHL. It is decided on the basis of convenience of the
applicant and his flow of income. The amount of EMI keeps varying from period to period.
The various varieties of ARHL includes:-
• FLIP
• Stepped increase
• SURF

2. Fixed rate home loan

The rate of interest is fixed in this FRHL. The EMI is fixed and the applicant is required to pay
the same amount in every period.

Bank Statements

 Bank statements are analyzed for cheque bounces, minimum balance charges and stop
payments.
 Minimum number of cheque bounces permitted is two.
 Minimum number of stop payments permitted is three.
 The statements are also checked to track the repayment track of the existing loans.
Other than the above mentioned norms the following norms are also kept into consideration while
checking the credentials of the customer and checking for his eligibility :-

→ Number of dependents must not be more than five.

→ Property must be within geographical limits.
→ Additional security may include any personal guarantee or collateral security. Personal
guarantee becomes compulsory in the absence of any co-borrower or if the loan is of a
huge amount.
→ Maximum number of co-borrowers permitted is three.
→ The applicant must not be of a negative profile.
Process
Checking the credentials of the applicant through a field investigation and telephone
verification. The risk of default associated with the client is also verified.

Listing out the documents necessary which are not given by the applicant though
essential to determine his/her eligibility for the loan and to ensure the credibility of
the applicant.

Calculating the eligibility of the applicant i.e. the amount of loan which can be given
to them. The eligibility of an applicant depends upon:
The gross income of the individual
Age of the individual
Age at maturity of the loan
Number of dependents
Assets and liabilities of the applicant
Stability of income
Continuity of occupation
Repayment record of existing loans
Repayment capacity of the applicant

Analysis of the bank statements to check the number of cheque bounces and the
number of atop payment charges. Bank statements are also used to track the regular
debits from the accounts by way EMI on loans. This is done to have an overall view
of the repayment track record of the applicant

In case of self employed professionals and self employed non professionals the
financial statements are also analyzed to track the growth rate of profits and sales.
Ratio analysis is done to analyze prospects of the firm/company/concern.

Information about the company is also acquired from the debtors, creditors and
clients.
 Disbursement Of Loan

The process of disbursement begins after the loan has been sanctioned in favor of the applicant.
After sanctioning of the loan -
• Loan is called upon for disbursal when required.
• A representative visits the customer and collects legal documents, loan documents and
PDC’s.
• All the legal documents are checked by a lawyer.
• A site engineer visits the property to verify the stage of construction and analyse the market
value of the loan.
• Lastly a disbursement cheque is prepared which is delivered to the client.

The process of disbursal can broadly be classified into three stages:

1. Credit Appraisal
It contains all the terms of sanction i.e. the amount sanctioned, the tenure of the loan, the
rate of interest, the type of interest, type of EMI, credit appraisal memo detailing out the
eligibility of the applicant.

2. Technical Appraisal
It details out the market value of the property, the stage of construction, the total area of the
property.

3. Legal Appraisal
It contains all the legal documents relating to
• Loan agreement
• Declaration
• Promissory note
• Power of attorney
 Fundamentals
1. All properties originate from authorities like:
a. Individuals
b. Societies
c. Builders
d. Pseudo authorities

2. Properties can be purchased from only two sources

a. Primary market: direct purchase
b. Secondary market: resale

Major Documents

Direct allotment of authority flats

Pre-Disbursal Documents:

ü Original Allotment Letter

ü Original Receipts of Payment
ü Original Mortgage Permission /Intimation letter (in DDA Flat allotment only -letter duly
acknowledged by DDA submitted by borrower with DDA to record charge of ICICI Home
Finance on the property.
ü Original letter from borrower to ICICI

Post Disbursal Documents:

ü Letter of Possession /Possession slip

ü Original lease Deed/Conveyance Deed as and when executed
Direct allotment of Society Flat

Pre-Disbursal Documents:

ü Original Share Certificate

ü Original Allotment Letter (If applicable)
ü Original receipts of payment made to society
ü Original Mortgage Permission
ü Original letter from borrower to ICICI

Post Disbursal Documents:

ü Original lease Deed/Conveyance Deed as and when executed

ü Original Possession Letter

Direct Booking from Builder (Developer) Flat:

Pre-Disbursal Documents

ü Original stamped agreement to sell (Flat Buyers Agreement A Copy)

ü Original Allotment Letter (if applicable)
ü Original Mortgage permission from Builder /Developer
ü Original receipts of payment made to the developer
ü Copy of demand letter (if applicable)
ü Original Tripartite /Cash down letter

Post Disbursal Documents

 ü Original conveyance deed in favor of Borrower
ü Possession Letter

HOME PURCHASE –SELF CONSTRUCTION / IMPROVEMENT

Freehold Property (Original)

ü Current sale deed
ü All previous sale deed
ü Any other document in title chain through which any person has acquired title.Viz.General
power of attorney, Agreement to sell, Allotment Letter, Gift deed, etc.
ü Empanelled lawyers title confirmation report.

Leasehold Property (Original):

ü Lease deed
ü Transfer Memorandum Order
ü Transfer Deed (if applicable)
ü Mortgage Permission
ü Any other document in title chain through which any person has acquired title.Viz.General
power of attorney, Agreement to sell, Allotment Letter, Gift deed, etc
ü Empanelled lawyers title confirmation report

HOME PURCHASE –RESALE CASE

Freehold Property

Pre Disbursal Documents:

ü Original Agreement to sell and purchase or declaration form Purchaser /Borrower

ü Original Agreement for Fixtures and Fittings of Cost Estimate (if applicable)
ü Copy of sanction Plan, if applicable
 ü Empanelled lawyers title confirmation report
Post Disbursal Documents:

ü Original Sale deed /Conveyance deed in favor of borrower

ü All previous sale deeds
ü All other previous ownership documents –Allotment letter, Receipts, general Power of
Attorney, Agreement to sell etc.
ü Mortgage Intimation Letter (if applicable)

Leasehold Property:

Pre Disbursal Documents:

ü Agreement to sale
ü Agreement for fixtures and fittings /Cost Estimate (if applicable)
ü Transfer memorandum order
ü Empanelled Lawyers Title confirmation report
ü Letter from the purchaser to NOIDA/Greater Noida for recording charge of ICICI on the
property duly acknowledged by the authority concerned

Post Disbursal Documents:

ü Original permission to mortgage from Noida in favor of the Bank

ü Original Allotment Letter
ü Original Possession Letter
ü Original Receipts of Payment
ü Original Lease deed
ü Original Transfer Deed- if applicable
The entire loan amount may not be disbursed in one go. It can be disbursed in parts on the basis of
stage of construction and the demand of the borrower. The documents required in case of
subsequent disbursal include:
• Original receipt of previous amount disbursed from the builder
• Acknowledgement receipt of the amount previously disbursed from the customer.
• Previous disbursal memo detailing out the amount disbursed till date.

REPAYMENT OF LOAN

Repayment of loans shall be done as follows:

On part disbursement: pre EMI interest shall be paid until final disbursement
On full disbursement: equated monthly installments have to be paid including both interest and
principal.

Repayment of the above can be made through :-

1. Post Dated Cheques: they are collected in lots of 36 PDCs and 60 PDCs in case of NRIs.
2. Deduction at source: a certificate of deduction at source must be given.

Guidelines For Disbursal

Own Contribution (OC)

ICICI does not fund full 100% of the cost of property. It tends to fund only a part of it i.e. up to
85%. The balance is required to be paid by the customer on his own. Bank will grant loan only
after this OC gap is met by the customer. The customer may be required to pay the amount of own
contribution either entirely in the beginning or partly in the beginning and partly at the time of
possession of the property.

Funding of loan
Home Loan

In case of direct allotment ICICI funds 85% of the market value subject to conditions.
In case of resale ICICI funds
85% of the market value, if cost of property ≥ market value.
If cost of property < market value, 100% of cost of property subject to 80% of market
whichever is lower.

Land Loan
ICICI funds 75% of cost of property subject to 75% of market value whichever is lower.
Here,
• Cost of property (COP) includes = Agreement value
+Stamp duty
+Furniture and fixtures

• Agreement value or white value refers to the cost of property as per the agreement.
• Stamp duty varies from on the basis of location of the property.
• Furniture and Fixtures generally is up to 20% in case of home loans and if it exceeds 20%
and rages from 20% to 50% then such disbursal is termed as Market Value Lending
(MVL).
• Market value refers to the value of the property assessed in the technical.

Technical requirement

Technical report is not required in case of direct allotment.

Two technical reports are required in case of market value lending and land loan. Both these
reports must be from two different agencies and funding is done on the basis of lower of both the
market value assessed.

PROCESS OF DISBURSAL
1. Verifying the documents submitted by the applicant.
2. Checking matches of the said property by filling a property dedup.
3. Preparing the following documents are prepared by disbursal executive:

Disbursal request form:

DRF is a form which details out the total loan amount, the amount disbursed till date along
with the current demand for disbursal.

Disbursal memo:
A disbursal memo points out all the loan details including :-
Type of loan
Amount of loan
Processing fees charged
Amount of loan disbursed till date
Details of the property
Mode of payment chosen by the applicant,
Cost of the property,
Market value of the property as estimated by the technical agency

POP sheet
It details out the list of documents required at the time of disbursement, the documents
received and verified, the documents to be demanded at OTC and post disbursal.

OTC
OTC stands for Over The Counter. It lists out the documents which are demanded at the
time the cheque is handed over to the customer.
 PERSONAL LOANS
Often in our life needs outweigh our means. So in order to fulfill these needs substantial funds may
be required. Such funds are provided by different banks (both public and private) in the form of
Personal loan schemes at different rate of interest and terms and conditions.

PURPOSE

This loan is granted for any legitimate purpose such as:-

• Expenses for domestic or foreign travel;
• Medical treatment of self or a family member;
• Meeting any financial liability such as marriage of son/daughter;
• Defraying educational expenses of wards;
• Meeting margins for purchase of assets;
• Any other purpose or personal reasons.

PROCESS

Personal loans are provided by almost all the banks (public or private) at different rate of interest
and terms and conditions. A customer can obtain a personal loan through the following steps:-

1. First of all the customer needs to fill an application form provided by the bank which
contains details regarding –
• The amount of loan required
• The purpose for which the loan is required
• The monthly/annual income of the person
• The length of his service
• Whether any house is owned by him and other assets owned
• Other liabilities in brief, etc.

2. Certain essential documents listed by the bank should be submitted by the customer along
with the application form.

3. The bank then processes the application form and decides whether the loan should be
approved or not.

4. The bank then calculates the eligibility of the applicant i.e. the amount of loan which can
be given to him. The eligibility of the applicant depends upon:-
• The gross income of the individual
• Age of the individual
• Assets and liabilities of the applicant
• Repayment capacity of the applicant
 Appraisal Of Loans
ELIGIBILITY:

The following persons are eligible to apply for Personal Loan:-

1. SALARIED INDIVIDUALS: The eligibility criteria according to the type of customer is

given below:-

Eligibility Minimum Maximum

Amount (INR) Rs 50,000 Rs 7,50,000
Repayment
12 months 48 months
Months
Age 23 yrs 58 yrs (At end of loan)
Requirement Current residence : Either owned or 6 months
Current job : 6 months
Bank account : 6 months
Phone ownership : Required
Total work : 24 months
experience
Net salary : Rs 8,000 per month or 6,500 per month for relationship
customers

2. DOCTORS / DENTIST:
Eligibility Minimum Maximum
Amount (INR) Rs 50,000 Rs 10,00,000
Repayment Months 12 months 60 months
Age 25 yrs 65 yrs (At end of loan)
Requirements Current residence : Either owned or 12 months
Total medicine practice : 24 months
Bank account : 6 months
Phone ownership : Required
Total work experience : 24 months
Minimum required : Rs 90,000 per year

3. PROFESSIONALS:

Eligibility Minimum Maximum

Amount (INR) Rs 50,000 Rs 5,00,000
Repayment Months 12 months 36 months
Age 25 yrs 65 yrs (At end of loan)
Requirements Current residence : Either owned or 24 months
Current business : 36 months
Total business experience : 60 months
Bank Account : 24 months
Phone ownership : Required
Minimum Income : Rs 90,000 per year
Profit making business : Last 2 yrs
Property ownership/ repayment track : Required

4. PROPRIETORS AND PARTNERS:

Eligibility Minimum Maximum

Amount (INR) Rs 50,000 Rs 5,00,000
Repayment Months 12 months 36 months
Age 25 yrs 65 yrs (At end of loan)
Requirements Current residence : Either owned or 24 months
Current business : 36 months
Total business experience : 60 months
Bank Account : 24 months
Phone ownership : Required
Minimum Income : Rs 1, 20,000 per year
Minimum Turnover : Service - 5 lacs per year
Manufacturing - 20 lacs per year
Trader – 25 lacs per year
Property ownership : Required
Repayment track : Required

Repayment Capacity
The bank grants the loan to the applicant depending upon his repayment capacity. The amount of
loan to be given also depends upon the repayment capacity of the applicant. In order to determine
the repayment capacity of an applicant, the bank takes into account the annual income of the
applicant, hid assets and liabilities.

The assets include:-

• Property (other than house)
• Bank / Post Office deposits
• National Saving Certificates
• LIC Policy
• Gold Shares, Debentures
• Units of UTI / Mutual Funds
• Other assets

The liabilities include:-

• Outstanding loan from friends / relatives, etc.
• Outstanding loan from employers
• Outstanding loan from Banks / F.I.s

DOCUMENTS REQUIRED:

1. Latest Passport size Photograph – Self and Spouse.

2. Age proof.

3. Copy of Passport or Voters ID card or Driving Licence for proof of Identity.

 4. Verification of signature from the bank where salary is credited by the employers.

5. Copy of Ration card / Telephone bill / Passport / Voters I – card for proof of residence.

6. Proof of official address.

7. Current employment proof and employment continuity proof.

8. Latest monthly salary slip showing deductions – of Self and Spouse.

9. Latest Form 16 from employer (for employees) – of Self and Spouse.

10. Copy of IT return for last two years, duly acknowledged by ITO with computation of
income, for Professionals.

11. Last six months Bank Statement of the account where salary is credited by employers.

12. Relieving letter of Pensioner from the employer.

13. Credit card statement or repayment track record.

14. Proof of Professional Qualification: Copy of highest professional degree held.

15. Proof of own property.

SERVICE CHARGES:

• For General Category Customer - Processing fee 2% upfront.

• For Salaried Category - 0.50% and Self Employed (Professionals) - 1% upfront.
• Legal & stamp charges as per actual.
• No advance cheques/charges before sanction of loan.
• No hidden cost to the account of the customer or other administrative charges.

PRE – PAYMENT CHARGES:

2.00% on principal amount outstanding.

SECURITY:

The maximum amount of loan that can be granted without any Collateral security:-

• In case of Salaried Category individuals – up to Rs 1 lakh

• In case of Self Employed (Professionals) & General Category Customer – up to Rs 50,000.
The maximum amount of loan that is granted with Collateral security is Rs 5 lakh for all
categories.

Collateral security –
We need collateral security such as LIC Policy, NSC, KVP, IVP, landed property etc. in case the
loan amount is more than Rs. 50,000.
Rs.1 lacs depending upon different income groups.

SANCTION OF PERSONAL LOAN:

Within 24 hours of submission of the complete set of documents.

COMPARISON OF PERSONAL LOANS

ELIGIBILITY:

LENDER Min. Age Max. Age Min. Income Max. Income

(years) (years) (Rs/mth) (Rs/mth)
Baroda Personal
Computer Loan --- --- 1 ---
Bank Of Baroda Loan to
Pensioners --- 70 1 ---
Baroda Personal Loan --- --- 1 ---
Bank Of Baroda Marriage
Loan 18 60 1 ---
BOB Vaibhav Lakshmi
Loan 21 55 1 ---
Canara Bank Personal
Loan 18 --- --- ---
HDFC Bank Personal
Loans 21 60 1 ---
HDFC Bank Personal
Loans (Professionals) 21 60 1 ---
HDFC Bank Personal
Loans for Self Employed 21 60 1 ---
(Individuals)
HSBC Personal Loan 21 60 1 ---
ICICI Personal Loan 21 --- --- ---
IDBI Personal Loan 23 --- 1 ---
PNB Personal Loan 18 --- 1 ---
SBI Saral Personal Loan --- --- 1 ---

FEES:

LENDER Processing Fees (%) Administrative Fee

(%)
BOB Vaibhav Lakshmi Loan 5.00 0.00
BOB Marriage Loan 0.25 0.00
Baroda Personal Loan 0.00 0.00
BOB Loan to Pensioners 0.00 0.00
Baroda Personal Computer Loan 0.00 0.00
Canara Bank Personal Loan 0.50 0.00
HDFC Bank Personal Loans for Self
Employed (Individuals) 2.00 0.00
HDFC Bank Personal Loans
(Professionals) 2.00 0.00
HDFC Bank Personal Loans 2.00 0.00
HSBC Personal Loan 0.00 0.00
ICICI Personal Loan 2.00 0.00
IDBI Personal Loan 2.25 0.00
PNB Personal Loan 0.00 0.00
SBI Saral Personal Loan 2.00 1.00

INTEREST RATES:

LENDER From To From To Interest

(mths) (mths) (Rs) (Rs) Rate (%)
Baroda Personal Loan 12 48 20,000 2,00,000 13.50
Baroda Personal Computer
Loan 12 60 --- 1,00,000 14.00
BOB Marriage Loan 12 60 --- 2,00,000 13.00
BOB Loan to Pensioners 12 48 --- 1,00,000 13.00
BOB Vaibhav Lakhmi Loan 0 36 20,000 2,00,000 13.00
Canara Bank Personal Loan 0 60 --- 5,00,000 12.00
HDFC Bank Personal Loans for
Self Employed (Individuals) --- 60 --- 15,00,000 12.00
HDFC Bank Personal Loans --- 60 --- 10,00,000 12.00
HDFC Bank Personal Loans
(Professionals) --- 60 --- 10,00,000 12.00
HSBC Personal Loan 0 60 50,000 15,00,000 16.00
ICICI Personal Loan --- --- --- 15,00,000 11.00
IDBI Personal Loan --- --- 50,000 7,50,000 15.00
PNB Personal Loan 12 48 10,000 3,00,000 13.00
SBI Saral Personal Loan --- 48 24,000 --- 14.50

MAXIMUM FINANCING LIMIT:

LENDER Minimum Maximum Maximum Limit Min. Max. Term

Amt. (Rs) Amt. (Rs) Term (mths)
(mths)

Baroda 20,000 2,00,000 Rs 2 lakh subject 0 48

Personal Loan to conditions. The
income of spouse
can be included if
the loan is being
applied for jointly.
Baroda Margin of 25%
Personal 20,000 --- can be availed on 0 48
Computer loan amount.
Loan
BOB Marriage
Loan --- 2,00,000 --- 0 60
BOB Loan to Rs 1 lakh or 10
Pensioners --- 1,00,000 times of last 0 48
monthly pension,
whichever is
lower.
BOB Vaibhav Rs 2 lakh or 10
Lakshmi Loan 20,000 2,00,000 times of net 0 36
monthly salary,
whichever is
lower.
Canara Bank Six months gross
Personal Loan --- 5,00,000 salary. --- 60
HDFC Bank Can take this loan
Personal --- 10,00,000 if you are a 12 48
Loans salaried
individual.
HDFC Bank Can take this loan
Personal --- 15,00,000 if you are self 12 48
Loans for Self employed
Employed
HDFC Bank Can take loan if
Personal Loan --- 10,00,000 you are a salaried 12 48
(Professionals) individual.
HSBC 50,000 15,00,000 --- --- 60
Personal Loan
ICICI If you’ve been an
Personal Loan 20,000 15,00,000 ICICI Bank 12 60
customer for the
past 6 months you
may get privileged
rates.
IDBI Personal 50,000 7,50,000 --- 12 48
Loan
PNB Personal 10,000 3,00,000 --- 0 48
Loan
SBI Saral 24,000 --- 12 times net --- 48
Personal Loan monthly income
for salaried
individuals &
pensioners and 1
year’s net annual
income in case of
others, subject to a
ceiling of Rs 10
lakh in all centres.

UNIQUE FEATURES:

LENDER UNIQUE FEATURES

Baroda Personal Loan This helps you take care of all kinds of expenses at a short
notice. The loan covers medical, marriage, travel expenses
and any other personal use.
Baroda Personal This enables you to finance your dream PC and also provide
Computer Loan for the purchase of legal software. Dual finance provision
for PC (up to Rs 1 lakh) as well as software (up to Rs
20,000)
BOB Marriage Loan This loan is aimed at financing the marriage of any of the
family members. Working women can also avail of this
loan.
BOB Loan to Pensioners This loan is targeted at pensioners. You can also avail of a
Personal accidental death Insurance cover of up to Rs
75,000
BOB Vaibhav Lakshmi This loan is targeted at working women. It can be taken as
Loan an overdraft facility or as term loan without any security.
Canara Bank Personal This loan is granted to meet genuine personal needs. This
Loan scheme is for the benefit of employees of Corporates, PSUs,
Government Departments, Institutions, etc.
HDFC Bank Personal This is a personal loan that can be used in case any sudden
Loans financial need arises.
HDFC Bank Personal This is a loan for Sole proprietors, Partners & Directors in
Loans for Self Employed the Business of Manufacturing, Trading or Services.
(Individuals)
HDFC Bank Personal This loan is for Doctors, Chartered Accountants, Engineers,
Loans (Professionals) MBA Consultants, Architects, Company Secretaries, etc.
HSBC Personal Loan HSBC charges interest on utilized personal loan amount
only. Just estimate the maximum personal loan amount you
need. Interest will be charged only on the amount you
withdraw. Flexibility to choose EMI dates – 1st or 10th of
every month.
ICICI Personal Loan With this loan you can get instant money for a wide range of
your personal needs like renovation of your home, marriage,
holiday, buying a laptop or a home theatre etc.
IDBI Personal Loan This is a personal loan. Salaried individuals and the self
employed too can apply for this loan.
PNB Personal Loan This personal loan from Punjab National Bank is to meet all
types of personal needs.
SBI Saral Personal Loan This loan is for meeting all types of personal needs like
marriage, holiday with family, festival celebrations etc.
CURRENT TRENDS IN THE RETAIL LOAN SEGMENT

 In the last year the RBI has exercised considerable control over the interest rates. RBI has
raised CRR and SLR twice which has led to hardening of interest rates in the retail and
corporate sector. Most of the banks have raised their rate of interest on loans from 100 to 200
basis points.

 The rising interest rates have slowed down the growth in the retail segment . it has led to
increase in EMIs for most of the loans. In some cases EMIs have risen as much as Rs 2000.

 one of the reasons for RBI taking stringent measures is because there is a fear of retail
bubble in the real estate market due to easily availability of home loans. RBI has taken a
series of measures, ranging from raising its key policy rates to risk weightage on loans
extended to retail sector, to moderate the credit growth of banks. RBI has been
uncomfortable with banks' excessive lending to retail segment, especially the housing sector.

 With increased competition from foreign banks from 2010, the banking sector will see lot of
consolidation through Mergers and acquisitions. The competition will heat up further and the
banks would be vying for market share in the retail segment loans.