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MAIN : ADV/128 /2004-05

a DT. 05.01.2005

Personal Banking FILE M- 2 S- 204
Sub. : Flexi Equated Monthly Instalments (EMI) for Home Loan borrowers.
The Branches were informed through their respective Circle Heads vide our Circular
Letter no.H.O:PBD:1980:2003-04 dated 14.02.2004 about introduction of Variable
EMI for Home Loan borrowers choosing repayment period of 5years, 10 years, 15
years and 20 years. This was in line with graduated EMI offered by other Banks.
Under the present Variable EMI system, the first instalment works out to 85% to 90%
of the regular EMI, depending upon the repayment period. Every year the amount
increases gradually and the last / final instalment works out to 113% to 128% of the
regular EMI, depending upon repayment period.
We have been receiving requests / recommendations from branches / Circle Offices
for variable EMI as available in the market.
We find that other banks now offer flexi EMI with either one of the following methods:
EMI amount undergoes change in three stages
Low EMI is quoted for first two years and thereafter at the prevailing floating rate
they fix loan instalments (principal + interest).
In order to be more competitive in the market, it has now been decided to offer the
Flexi EMI by dividing the entire repayment period into three parts:
1. Low EMI Period (LEMI)
2. Normal EMI (NEMI)
3. High EMI (HEMI)
The Low EMI period is the integer part of 1/3 of total period of loan, in years.
The Normal EMI period is the integer part of 1/2 of the balance period.
The High EMI period is the remaining period.
For easy understanding, the information is given in the form of a Table for 20 year
repayment period.
Repayment Period LEMI NEMI HEMI
in years
10 3 3 4
11 3 4 4
12 4 4 4
13 4 4 5
14 4 5 5
15 5 5 5
16 5 5 6
17 5 6 6
18 6 6 6
19 6 6 7
20 6 7 7

D:\Circular Issue Cell\Circulars\Circulars 2004-05\word files\M2 Advances\Adv.128.doc

It has also been decided that the Flexi EMI offer will be made available (both for
existing and fresh accounts), only for repayment period of 10 years and above. This
is applicable both for floating rate and fixed rate Optees. In respect of existing
accounts, Flexi EMI can be offered only if the remaining repayment period is ten
years and above. Further we can consider for full years only and not for part of a
year. Other Banks also offer Flexi EMI for longer repayment periods of 10 year and
above only.

We have given in the Annexure, the Charts for Flexi EMI for borrowers choosing
repayment period of 10 years, 15 years and 20 years ( for current interest rates of
7.75% and 8% respectively ). For any other repayment period in full years i.e. 11
years, 12 years etc. ( i.e. other than the specific blocks of 10, 15 and 20 years),
Ready Reckoner Charts shall be made available in due course, once the software is
vetted by H.O CPPD. This Chart will be for interest rates ranging from 6% to 12% for
every gap of 0.25% ( interest compounded quarterly and recoverable on monthly

Meanwhile, branches are advised to offer FLEXI EMI for deserving Home Loan
borrowers who choose this option. Branches are advised to exercise due diligence
and take judicious decision while sanctioning Home Loan with this option, after fully
satisfying that there are enough supportive material to ensure that the repayment
capacity of the Applicants will improve definitely, as per the plan chosen. The future
estimated / prospective increase in income in tune with the Flexi EMI chosen should
be indicated in the application form and appraisal. (Under the income criteria i.e. both
source as well as quantum).

We are confident that branches will take advantage of this added feature to Home
Loan Product and scout for more business from people with high Networth and cash
flow, to meet their commitment without any difficulty.

PR Balasubramanian
Deputy General Manager (PB)