Final Housing Finance (SBI)

A PROJECT ON
HOUSING FINANCE
WITH REFERENCE TO SBI
PREPARED BY
AMIT C. BAKALKAR.
T.Y.B.COM. (BANKING AND INSURANCE) GUIDE PROF. MRS. MUGDHA KESKAR.
SUBMITTED TO UNIVERSITY OF MUMBAI

VIDYA PRASARAK MANDALS K.G JOSHI COLLEGE OF ARTS AND N.G. BEDEKAR COLLEGE OF COMMERCE THANE
2010-2011 (VTH SEMISTER)
DECLARATION
Researcher Amit C. Bakalkar student of Joshi Bedekar College studying in T.Y.B.Com (Banking & Insurance) Semester V (2010-2011) hereby declare that I have completed the project on Housing Finance with reference to SBI successfully in the current academic year. The information submitted is true and original to the best of my knowledge.
Place: __________ Date: ___________ Signature of Student
ACKNOWLEDGEMENT
Acknowledgement is not a mere formality or ritual but a genuine opportunity to express the indebtedness to all those without whos active support and encouragement this project wouldnt have been possible. Hence, it gives me immense gratification to place on records my profound gratitude sincere appreciation to each and every one of those who have helped me in this endeavour. Firstly I would like to thank the Staff of the SBI Branch for allowing me to do my project there and providing valuable help in collecting the data. I extend my sincere thanks to PROF. MUGDHA KESKAR for her continuous guidance, cooperation and valuable suggestions to initiate and carry out the study.
Date. BAKALKAR AMIT CHANDRAKANT.
INDEX
RESEARCH METHODOLOGY ABSTRACT..................................................................................................... 1 OBJECTIVES OF THE STUDY.................................................................... 3 NEED OF THE STUDY.................................................................................4 SCOPE OF THE STUDY............................................................................... 4 DESIGN OF STUDY...................................................................................... 5 TOOLS AND TECHNOLOGIES USED....................................................... 7 LIMITATIONS OF THE STUDY.................................................................. 8
CHAPTER 1
1. INTRODUCTION TO HOUSING FINANCE HOUSING 1.1. INTRODUCTION....................................................................................9 1.2. HOME LOAN INDUSTRY IN INDIA....................................................14 1.3. INDIA'S MORTGAGE MARKET SCORES OVER WEST................... 19
CHAPTER 2
2. COMPANY PROFILE 2.1. INTRODUCTION....................................................................................21 2.2. ROOTS.................................................................................................... 23 2.3. ASSOCIATE BANKS............................................................................. 24 2.4. BRANCHES.... 25 BRANCHES.... ... OFFICES.. .... 2.5. FOREIGN OFFICES.... 25 2.6. ATM SERVICES.................................................................................... 25 2.7. GROUP COMPANIES.......................................................................... 26 2.8. PRODUCTS AND SERVICES............................................................... 27 PERFORMANCE 2.9. PERFORMANCE 28 2.10. ORGANIZATION.................................................................................. 28 2.11. THE BANK STANDS FOR BEST PRACTICES................................ 29 HOLDERS......................... ................... 2.12. SHARE HOLDERS......................... 29 2.13. UNIQUE FEATURES OF SBI HOME LOAN PRODUCTS............... 30
4
CHAPTER 3
3. HOME LOAN PRODUCTS OFFERED BY SBI 3.1. SBI EASY HOME LOAN........................................................................ 32 3.2. SBI ADVANTAGE HOME LOAN.......................................................... 34 3.3. HOME LOAN PRODUCT VARIANTS.................................................. 36 3.4. HOME LOAN TOP-UP PRODUCTS..................................................... 43 3.5. RELATED HOME LOAN PRODUCTS................................................. 45
CHAPTER 5
4. TERMS AND NORMS 4.1. ELIGIBILITY.......................................................................................... 47 4.2. DOCUMENTS......................................................................................... 49 4.3. PURPOSE................................................................................................ 56 4.4. QUANTUM OF LOAN............................................................................ 59 4.5. EQUATED MONTHLY INSTALLMENT CALCULATION................ 60 4.6. MONETARY CEILINGS........................................................................ 65 4.7. TOTAL PROJECT COST....................................................................... 66 4.8. MARGIN................................................................................................. 66 4.9. SECURITIZATION................................................................................ 67 4.10. FEES OR CHARGES........................................................................... 67 4.11. RATE OF INTEREST.......................................................................... 69 4.12. MORATORIUM..................................................................................... 70 4.13. GUARANTOR....................................................................................... 71 4.14. TAX BENEFITS.................................................................................... 72 4.15. PACKAGE OF EXCLUSIVE BENEFITS............................................ 72 4.16. INSURANCE COVER.......................................................................... 73 4.17. VALUATION POLICIES...................................................................... 75
CHAPTER 5
5. SYSTEMS AND PROCEDURES 5.1. STAFF INVLOVED AND THEIR ROLES............................................ 76 5.2. PROMOTION AND DISTRIBUTION OF THE PRODUCTS............... 77 5.3. PROCESS UNDERTAKEN.................................................................... 79
CHAPTER 6
6. PERFORMANCE EVALUATION 6.1. COMPETITORS...................................................................................... 91 6.2. STRENGTHS AND WEAKNESSES......................................................91 6.3. SIZE OF HOME LOAN.......................................................................... 92 6.4. SHARE OF HOME LOANS IN TOTAL ADVANCES.......................... 93 6.5. QUALITY OF ASSETS......................................................................... 94 6.6. NATURE OF COMPLAINTS COLLECTED FROM ONLINE CONSUMER FORUMS................................................................... 6.7. AWARDS AND REWARDS............................................................. 95 96
CHAPTER 7
7. RECOMMENDATIONS & CONCLUSIONS
APPENDIX
QUESTIONNAIRE TO THE BANK OFFICIAL QUESTIONNAIRE TO CUSTOMERS
BIBLIOGRAPHY
LIST OF DIAGRAMS Diagram No. 1.1 1.2 1.3 1.4 2.1 3.1 4.1 6.1 6.2 6.3 6.4 Name of Diagram Housing in India Demographics in Housing Housing Finance Timeline Improved Affordability Shareholders of SBI Home Loan Products Offered by SBI Home EMI Calculator Size of home loan Share of home loan Quality of Assets Customer complaints Page No. 14 15 15 16 29 31 60 92 93 94 95
LIST OF TABLES
Table No. 1.1 2.1 3..1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 5.1 6.1 6.2 6.3 6.4 6.5 6.6 Name of the Table Major home loan providers Best Practices in SBI loan amount in SBI easy home loan loan amount in SBI advantage home loan Margin of bank on loan amount Eligibility Criteria & Documentation Criteria for Loan Amount EMI calculation in the flat rate system EMI calculation in Reduced balanced system Monetary ceilings Criteria of margin amount Securitization Processing fee amounts Rate of interests of SBI Easy Home Loan Rate of interests of SBI Advantage home loan Valuation policies. Systems and procedures in lending process Competitors Strengths and weaknesses Size of home loan Share of Home Loans Quality of assets. Customer complaints Page No. 18 28 33 35 37 48 59 61 62 65 66 67 67 69 70 75 76 91 91 92 93 94 95
RESEARCH METHODOLOGY
ABSTRACT
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 providing home loans, whether commercial banks or financial institutions, to the people who want to have a home. Many banks are providing home loans at cheapest rate to attract consumers towards them. The more customer friendly attitude of these banks, currently offer to consumers cheapest loan over homes. In view of acute housing shortage in the country, and keeping in mind the social economic role of commercial banks in the present times, The ICICI Bank and Standard chartered bank has become the first player in this sector to announce a housing loan for a 20 years period. No doubt it will enhance the end cost of the home but it will facilitate people to plan their house over longer duration now, it has been made easy for a person to buy that dream house which he dreamt of long ago. A home loan is a loan taken for buying or constructing a home or to make improvements to a residential property. Individual can get a loan from banks and registered housing finance companies. The Home loan sector in India is the pivotal role player in the growth of the real estate scenario in India. With tax incentives given
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to the housing finance sector in the annual budget of 2001, transactions related to buying and selling of residential properties increased considerably and was much higher as compared to previous years. Since the new class of buyers are relatively younger set of customers who are more aware about legal documentation and approvals, buyers are now more 'end-users' rather than investors; the property market in India undergoes transformation to align itself with global standards with an increased emphasis on quality & cost control and documentation methods. In the current economy of India, the real estate sector has the maximum propensity to generate income and demand for materials, equipment and services. It can be said that housing finance companies were formed for co-existing with buyer's requirements of housing loans for investing in properties. Home loans are made available by financial institutions to both Indian and NRI customers at floating and fixed rate of interest and also at attractive EMI options.
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OBJECTIVES OF THE STUDY Identification Of The Problem

To study and learn the various systems and procedures used by the bank in lending to housing sector. To identify the problems faced by the bank in attracting more customers to use its home loan products. To identify the problems faced by the bank at various stages of undertaking the home loans. To understand and identify difficulties in the home loan asset management practices of the bank. To study the valuation of collateral security method followed by the bank while lending the home loans.
Offer A Solution To The Problem

To suggest better alternative organizational and operational practices. To enhance its capacity to tap potential market in the home loan sector. To reduce credit risk To enhance the recovery system in the bank giving the home loans. .
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NEED FOR THE STUDY

It has been felt very useful in future To study the roles of the staff and the decision making processes in lending to the home loan borrowers. To learn and comprehend thoroughly the systems and Procedures used in financing the segment. To analyze the issues relating to various financial aspects of lending. To calculate the risk involved and how the risk and uncertainty to be assessed and managed by the bank while lending the home loans. To study the valuation of collateral security method followed by bank while lending the home loans.
SCOPE OF THE STUDY

The present study is confined to Home loan products offered by the domestic operations of State Bank of India. The study is also confined to the internal functional and operational aspects of the lending process. The data and the information could be collected here has been taken from the record books maintained by the branch and from the oral communication with the branch manager
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RESEARCH DESIGN
The study done is exploratory in nature. The branch of the bank was selected by convenience and for the sake of access to the qualitative information. For the latest information and focus, the study is confined to the systems and procedures in lending and the time period as said above.
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SOURCES OF DATA
The data and the information presented here have been collected mainly from two kinds of resources: Primary sources Direct and oral interaction with the Bank officials, particularly, the branch manager via a Questionnaire, a copy of which is made available in the APPENDIX. The Record books maintained at the branch office. Secondary sources Several secondary resources have been referred for collecting first hand information and literature on the subject that includes: The Training and Guidance Material supplied to the staff of the Branch. Online Annual Reports by Consultancy and Research companies. Online Content of the Banks Website. The material supplied by the Faculty Guide. Several websites on personal loans and Daily News Papers like Economic Times of India and Business Standard. The details of which have been presented in Bibliography.
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TOOLS AND TECHNOLOGIES USED

1.6.1. Statistical techniques: Percentages. Averages and Tools like Tables, Bar Charts and Pie charts
1.6.2. Hardware and Software Technologies: Home PC with Internet access MS Word and Excel-2007. World Wide Web or Internet
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LIMITATIONS OF THE STUDY

Some of the limitations of the project that were encountered during the study are:
In case of interaction with the representative of a particular bank it happens many a time that the representative cannot disclose all the data because of certain reasons like banks privacy policy etc. thus getting clear picture about the service provided is not possible. Due to paucity of time, only important factors have been analyzed and discussed. To collect the data from banks was quite difficult due to noncooperation of banks. This proved to be major limitation of the study. To access such a large number of customers was difficult because of non-cooperative attitude of respondents. Lack of data was also the other limitation of the study as some of banks do not have proper data on topic. Generally the data on the websites of the banks are not fully disclosed i.e. other than the charges mentioned on the website there are many hidden charges which increases the cost like service charge etc Ignorance and reluctant attitude of customers was also a major limitation in this study. I have tried a lot to overcome the above mentioned limitations as far as possible.
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CHAPTER -1
INTRODUCTION TO HOUSING FINANCE
1.1. INTRODUCTION
The realty boom in India has given a new dimension to the finance sector in India - both in Home Loans and Home Insurance segments. This has not only given a competitive edge to the finance companies to provide attractive options to customers but has also contributed to the increased investments in the real estate sector. This has resulted in 13 new institutions foraying into the housing finance business in the last three years. Home loans work like any other debt. That is, loans are simply specific money that borrow from a bank, a private lender, or some other type of lender. Afterwards, borrowers must repay our debts with interest. However, unlike other types of loans, home loans are different in several respects. Owning a piece of land or property is a lifetime dream for every individual. There are many home loans provider in the market. There are different type of home loan i.e. Home Purchase Loans Home Improvement Loans Home Construction Loans Home Extension Loans Home Equity Loans Land Purchase Loans Bridge Loans
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Home purchase loans: These are the basic forms of home loans used for purchasing of a new home. With about a million home lenders and mortgage brokers it's becoming a tough challenge as the days are progressing. But at the same time, when the sites are coming up with all the latest tools and relevant information for us, and with all such conveniences, obtaining a home purchase loan or mortgage has become really pretty simple. However, at the same time though, borrower may be flummoxed to look so many attractive rates and offers in the market, not to forget the hidden costs associated with each of them. loan: Home improvement loan Home improvement loans are used to finance improvements and add on to the existing set of credentials of beauty on borrowers owned house, recently purchased property or rented accommodation. Home improvement loans are used to maintain or enhance the value of his house. In general it includes: repairs, remodeling, energyrelated items (permanent in nature), repairs, a new kitchen, a new bathroom, terrace, an extension or general property improvements. Luxury items and fireplaces are generally not eligible, though. Many improvements in landscape and even swimming pools are nowadays considered to be a part of home improvement.
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Home construction loan: Home construction loans are used to finance for the construction of our newly acquired home or if a person is planning to build a home. The factors include in calculations for house building costs are as follows. Design of the house Construction cost Financing Cost Buildable site All the above mentioned costs will help the Bank to determine the amount need to borrow. For example, besides calculating the construction costs, Bank may also be required to consider the total expenditures to develop the site in order to build. Each site is unique requiring different expenditures so this specific rupee amount will vary from site location to site location. Payment: Payment: Before the house starts getting build, Bank will be required to pay a deposit to purchaser builder as well as paying a deposit for the land if he is buying land. As work progresses he will need to make payments to the builder. Certain loans can be structured for progress payments to be made during construction. Home extension loans are used by customers to get loans from the banks to extend their houses, by adding more rooms, kitchens, wash rooms, terraces, or any other rooms for his growing family. It may also be used to enclose open balcony/terrace space, or constructing a Pujaghar.
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Maximum Amount of Home Extension Loans: Banks generally offers about 70-85% of the total amount of home extension as loan. The amount of loan sanctioned also depends on a number of factors such as the age of the applicant at the time of loan, tenure of the loan, repayment capacity of the borrower; his/her credit history etc. Home equity loan: Home equity loans helps customer to encash the market value of the commodity by taking a loan by mortgaging the property. So, Home equity loans are availed by customers, who wish to mortgage his/her property to the bank for taking some loan for some other purpose. Then, it's up to the bank's discretion to consider the market value of the property and accordingly decide how much to pay to the customer. Both the residential as well as non residential property can be considered for the approval of the loan, provided the mortgager is a licensed title holder and the land is free from any kind of dispute. Home equity loans don't restrict one to use the loan money in specific investments. It might also be used in marriage, higher education, medical expenses, etc. However it should not be used in any illegal or speculation purposes. loan: Land purchase loan Land Purchase loans are used by customers who wish to purchase a plot of land for commercial or residential purpose.
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Bridge loans Bridge 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. Bridge loans are used by customers as an effective vehicle to capitalize on a purchase opportunity. It can be considered as a short term financing scheme which is generally expected to be paid back, within the range of 6-36 months.
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1.2. HOME LOAN INDUSTRY IN INDIA .

After going through previous studies of Home loans in India researcher came to conclude the following indicated in different forms:
Diagram 1.1: Housing in India .1:
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Diagram 1.2: Demographics in Housing 1.2:
Diagram 1.3: Housing Finance Timeline 1.3:
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Diagram 1.4: Improved Affordability 1.4
MARKET FEATURES
Loan Features o Mostly floating rate o Max. LTV = 85% (65% for HDFC) o Avg. Size: approx. USD 35,000 Aggressive marketing and distribution Role of direct selling agents Cross-selling of products Growth in Tier II and Tier III cities Rapid growth in non-residential real residential estate sector, particularly in lT/lTES sectors
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SOURCES OF FUNDING FOR HOUSING FINANCE

Housing finance accorded priority sector lending status Key funding sources: o o o o Term loans from banks/financial institutions Bond market Retail/wholesale deposits Loans from multilateral agencies
Financial institutions are now disallowed from accessing the External Commercial Borrowing Market Need for long-term funding sources-insurance, p insurance, provident and pension funds Securitisation market still at nascent stage
ISSUES IN AFFORDABLE HOUSING

Urban areas have created job opportunities, but not provided Housing Costs sufficient affordable housing, leading to proliferation of slums Artificial scarcity of land legal constraints: o urban Land (Ceiling & Regulation) Act o Rent control high transaction costs stamp duty, registration Lack of reliable data Slum rehabilitation programmes politically sensitive
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Major Home Loan Providers

State Bank of India, Corporation Bank, Punjab National Banks & Public Sector Housing Finance Companies Bank, Central Bank, Dena Bank, Allahabad Bank, Bank of Maharashtra, Bank of Baroda Housing Finance, Can Find Homes, GIC Housing Finance, LIC Housing Finance, PNB Housing Finance, SBI Home Finance, Centbank Home Finance, HUDCO, LIC, etc
Financial Institutions
HDFC, ICICI Ltd, Citibank, HSBC, Standard CharteredGrindlays, IDBI Bank, etc
1.1 .1: Table 1.1: major home loan providers (Source: Researchers methodology)
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1.3. INDIA'S MORTGAGE MARKET SCORES OVER WEST

1. In India, the borrower contributes a higher share of his own funds (24-46% of house value) at the time of purchasing a house. 2. The loan installments too eat away a smaller portion of the borrowers income.
3. The installment to income ratio-ranged between 34% and 40%, in India is lower than some countries in the West. 4. This is based on an analysis by rating agency Fitch of the home loan asset pool that it rates. 5. This is because borrowers property prices. 6. The extent of second houses purchased is also limited and most borrowers stick to their repurchase schedules. 7. The Diagrams computed by Fitch based on the asset pool that it rates implies that on an average, the borrower funds up to 30% of the house value through his own capital 8. This among other things increases the borrowers willingness to repay. 9. Some bankers say the black money component is also high in the Indian realty market, resulting in higher borrower equity. income has kept pace with rise in
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10. Another notable factor is that delinquencies have remained range-bound in the last 33 months, according to residential mortgage index launched by the ratings firm. 11. The index which tracks home loans that have not repaid for over 90 days has moved in a narrow range between 0.90% and 1.07%.
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CHAPTER -2
COMPANY PROFILE
2.1. INTRODUCTION
State Bank of India (SBI) has history of more than 200 years of existence. The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when these banks were
amalgamated to form the Imperial Bank of India, on 27 January 1921. An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, 1951. in 1951 The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular,
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the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank. The All India Rural Credit Survey Committee proposed the takeover of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries. The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned economic development. Today, State Bank of India (SBI) has spread its arms around the world and has a network of branches spanning all time zones. SBI's International Banking Group delivers the full range of cross-border finance solutions through its four wings - the Domestic division, the
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Foreign
Offices
division,
the
Foreign
Department
and
the
International Services division. priorities: In recent years the bank has focused on three priorities 1. computerizing its operations and 2. Changing the attitude of its employees (through an ambitious program aptly named 'Parivartan' which means change) as a large number of employees are very rude to customers.
2.2 ROOTS:
The State Bank of India traces its roots to the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The government amalgamated Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras on 27 January 1921, and named the reorganized banking entity the Imperial Bank of India. All these Presidency banks had been incorporated as joint stock companies, and were the result of the royal charters. The Imperial Bank of India continued as a joint stock company. Until the establishment of a central bank in India the Imperial Bank and its early predecessors served as India's central bank, at least in terms of issuing the currency. The State Bank of India Act 1955, enacted by the Parliament of India, authorized the Reserve Bank of India, which is the central banking organization of India, to acquire a controlling interest in the Imperial Bank of India, which was renamed the State Bank of India on 30 April 1955.
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2.3 ASSOCIATE BANKS:

There are seven other associate banks that fall under SBI. They all use the "State Bank of" name followed by the regional headquarters' name. These were originally banks belonging to princely states before the government nationalized them in 1959. In tune with the first Five Year Plan, emphasizing the development of rural India, the government integrated these banks with the State Bank of India to expand its rural outreach. The State Bank group refers to the seven associates and the parent bank. All the banks use the same logo of a blue keyhole. Currently, the group is merging all the associate banks into SBI, which will create a "mega bank", and one hopes, streamline operations and unlock value.
State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT)
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2.4. BRANCHES
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.
2.5. FOREIGN OFFICES:

State Bank of India is present in 32 countries, where it has 84 offices serving the international needs of the bank's foreign customers, and in some cases conducts retail operations. The focus of these offices is India-related business.
2.6. ATM SERVICES

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. Account holder may also transact money through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus) card.
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2.7 GROUP COMPANIES:

SBI Capital Markets Ltd SBI Mutual Fund (A Trust) SBI Factors and Commercial Services Ltd SBI DFHI Ltd SBI Cards and Payment Services Pvt Ltd SBI Life Insurance Co. Ltd - Bancassurance (Life Insurance) SBI Funds Management Pvt Ltd SBI Canada
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2.8. PRODUCTS AND SERVICES 2.8.1. Personal Banking

1) SBI Term Deposits SBI Loan For Pensioners 2) SBI Recurring Deposits Loan Against Mortgage Of Property 3) SBI Housing Loan Against Shares & Debentures 4) SBI Car Loan Rent Plus Scheme 5) SBI Educational Loan Medi-Plus Scheme
2.8.2. Other Services

6) Agriculture/Rural Banking 7) NRI Services 8) Demat Services 9) Corporate Banking 10) Internet Banking 11) Mobile Banking 12) International Banking 13) Safe Deposit Locker 14) RBIEFT 15) E-Pay 16) E-Rail 17) SBI Vishwa Yatra Foreign Travel Card 18) Broking Services 19) Gift Cheques. Etc.
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2.9. PERFORMANCE:
SBI Bank India had Total Profit of Rs.119,49,82,91,000 for the financial year 2009 -2010, Which has increased approximately 8.69% as compared to last years Balance sheet.
2.10. ORGANIZATION:
State Bank of India is headed by Mr. Shri O. P. Bhatt, Chairman.
2.11 THE BANK STANDS FOR BEST PRACTICES AS IT CLAIMS ITSELF AS UNDER: Best practices followed in SBI
People dealing with Customer Place Price Prepayment charges Costs hidden in fine print Transparency
End to End service by Permanent employees of SBI who are accountable to Customer/Account holder. SBI branch of borrowers choice will service his loan account.
Customer can always meet our employees face to face.

Complete transparency. Interest charged on the daily reducing balance. No penalty for prepayments made, out of bonafide savings or windfall gains for which evidence is produced. No hidden costs Complete transparency. All the features of our product, including interest rates, are in the public domain.
2.1 Table 2.1: Best Practices in SBI (Source: Researchers methodology)
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2.12 SHARE HOLDERS:
Share holdings As on 31st March 2010

11%
10% 12%
5% 0%
62%
Promoters MFs/UTI Banks/Fis Insurance Co. FIIs
Diagram 2.1: Shareholders of SBI
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2.13. UNIQUE FEATURES OF SBI HOME LOAN PRODUCTS:

Provision for on the spot "In principle" approval. Loan sanctioned within 6 days of submission of required documents. Option to avail Home Loan as a Term Loan or as an Overdraft facility to save on interest and maximise gains. Option to club income of borrowers spouse and children to compute eligible loan amount. Provision to club depreciation, expected rent accruals from property proposed to compute eligible loan amount. Provision to finance cost of furnishing and consumer durables as part of project cost. Repayment permitted upto 70 years of age. Free personal accident insurance covers upto Rs.40 Lac. Optional Group Insurance from SBI Life at concessional premium (Upfront premium).
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CHAPTER - 3
HOME LOAN PRODUCTS OFFERED BY SBI
Diagram 3.1: Home Loan Products Offered by SBI
(Source: Researchers methodology)
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3.1. SBI EASY HOME LOAN

For loan amount up to Rs.50 Lacs SBI Easy is available up to 30th June 2010 Getting Ones dream home has become easier with SBI Easy Home Loan. With low interest rates for home loan under Rs. 50 lakhs category, SBI Easy ensures that he is not burdened with high interest for ones home loan. Plus with over 12000 SBI branches nationwide borrower can get his Home Loan account parked at a branch nearest to borrowers present or proposed residence.
Interest Rate:
Interest rate during the first year (i.e. till first anniversary date from the date of first disbursement) is fixed at 8% p.a .a. Interest rate during next two years is fixed at 9% p. a Interest rate after three years may be Fixed or Floating as per the borrowers choice made at the time of sanction. If floating rate option is chosen, then the rate will be 2.5% below SBAR. If fixed rate option is chosen, then the rate will be 0.75% below SBAR prevailing on the third anniversary date from the date of first disbursement, and shall have a reset frequency of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to force-majeure clause. (SBAR = 11.75% p.a.)
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Processing Fee:
The revised processing fee structure (including service tax) from 9th November 2009 is as under:
Loan Amount
Upto Rs.5 Lac Above Rs.5 Lac and upto Rs.10 Lac Above Rs.10 Lac and upto Rs.20 Lac Above Rs.20 Lac and upto Rs.50 Lac
Processing Fee(Revised)
Rs.1000/Rs.2000/Rs.5000/Rs.7,000/-
3.1: Table 3.1: loan amount in SBI easy home loan
(Source: www.sbi.co.in)
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3.2. SBI ADVANTAGE HOME LOAN

For loan amount above Rs.50 lacs SBI Advantage is available up to 31st September 2010 SBI Advantage Home Loan with competitive rates of interest is available for home loans above Rs.50 lakhs. Plus with over 12000 SBI branches nationwide one can get his Home Loan account parked at a branch nearest to borrowers present or proposed residence.
Interest Rate:
Interest rate during the first year (i.e. till first anniversary date from the date of first disbursement) is fixed at 8% p.a. Interest rate during next two years is fixed at 9% p. a Interest rate after three years may be Fixed or Floating as per the borrowers choice made at the time of sanction. If floating rate option is chosen, then the rate will be 1.75% below SBAR. If fixed rate option is chosen, then the rate will be 0.75% below SBAR prevailing on the third anniversary date from the date of first disbursement, and shall have a reset frequency of 5 years from the third anniversary date of the loan. Fixed interest rate shall be subject to force-major clause.
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Processing Fee
The revised processing fee structure (including service tax) from 9th November 2009 is as under:
Loan Amount Above Rs.50 Lac and up toRs.1 Cr
Processing Fee(Revised) Rs.8,000/-
Above Rs.1 Cr and up toRs.5 Cr
Rs.10,000/-
Above Rs.5 Cr
Rs.20,000/-
3.2: Table 3.2: loan amount in SBI advantage home loan
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3.3. HOME LOAN PRODUCT VARIANTS i) SBI Max Gain

Home Loan as an Overdraft An innovative and customer-friendly product to enable the borrower to earn optimal yield on his savings and minimize interest burden on Home Loans, with no extra cost. The loan is granted as an Overdraft facility with the added flexibility for him to operate his Home Loan Account like borrowers SB or Current Account. The product serves to minimize borrowers interest cost by enabling an individual to park his surplus funds in SBI-Max gain (with the benefit to withdraw the surplus funds whenever his require), specially in the wake of low yields from other deposit/ investment avenues. Minimum Loan Amount: Rs.5 lacs
ii) SBI Freedom

A revolutionary product designed for customers who are on the lookout for a source of finance for a property they want to invest in without mortgaging the same. All Borrowers have to do is pledge any financial security that borrower has and he will get a Home Loan for his dream home.
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A must-take for those who do not want to pay stamp duty for mortgage of their property or go through the hassles of creation of mortgage. Borrower also has an option to take the loan by way of mortgage of the property and pledge financial securities in lieu of margin money. Repayment is highly customized, giving borrower the option to repay through regular EMIs or through maturity proceeds of the securities pledged.
ii) SBI Realty

Home Loans for purchase of land for the purchase of plot of land for the purchase of construction of a dwelling unit A unique product if borrower is on the lookout for a loan to purchase a plot of land for house construction. The loan is available for a maximum amount of Rs.1 crore* and with a comfortable repayment period of up to 15 years.
Loan Amount Less than < Rs. 75 Lacs Rs.75Lacs Rs.1 Crore >Rs.1 Crore Margin 20% of Project Cost 25% of Project Cost 25% for Loan amount up to Rs.1 Crore + 50% for loan in excess of Rs.1 crore e.g. For e.g If project cost is 2.5 crores the margin would be calculated as 25% of cost of property at loan amount Rs.1 Crore + 50% of rest of the project cost, i.e. 25% of Rs.1.33 Cores + 50% of Rs.1.17 crores = Rs.88.75 Lacs
3.3: Table 3.3: Margin of bank on loan amount. (Source: www.sbi.co.in)
Customers are also eligible to avail another Housing Loan for construction of house on the plot financed above with the benefit of
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running both the loans concurrently. (House construction should commence within 2 years from the date of availment of SBI-Realty Housing Loan)
iv) SBI Flexi

Home Loans with a combination of Fixed and Floating Interest. RATES Home Loans with an option to choose a combination of floating interest rate and fixed interest rate, in a pre determined ratio. Minimum Loan Amount Rs.5.00 lacs. A customized product designed to enable borrowers to hedge their Home Loan against unfavourable movement in interest rates. The product gives the borrower, a onetime irrevocable option to choose one of the three customized combinations of fixed and floating interest rates and also to choose the order in which the fixed and floating rate will be availed.
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v) NRI Home Loans

Home Loan to Non Resident Indians (NRIs) and persons of Indian origin (holding a foreign passport) Eligibility Individual(s) over 18years of age with a steady source of income who Are Non Resident Indians (NRIs) holding a valid Indian passport. Are persons of Indian origin (PIOs) holding a foreign passport. Minimum employment tenure in India/abroad not less than 2 years. Loan Amount The loan amount is to be determined on the basis of repayment capacity taking into account income, age, assets and liabilities, qualifications, stability of occupation, and employment prospects on return. The loan amount is subject to the following: Minimum: Rs. 3 lacs Maximum: Maximum permissible loan amount would be determined by EMI/NMI ratio criteria as applicable to regular Home Loans scheme for Resident Indian customers, which is 40% for Net Annual Income (NAI) upto Rs.2 Lac, 50% for NAI above Rs..2 Lac and upto Rs.5 Lac, 55% for NAI above Rs.5 Lacs.
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vi) SBI Optima

Innovative and value added products extended to existing Home loan borrowers with a satisfactory repayment record of 3 years and whose loan is Standard Asset, with a view to reinforce the customer loyalty and to maintain long term relationship with the borrowers. In case of take-over of Home Loans from other Banks/HFCs, the borrower should have fulfilled the above conditions with the present Bank/HFC.
vii) SBI Tribal Plus

Special Home Loan scheme for hilly/tribal areas. 'SBI-Tribal Plus' Home Loans, a Special Scheme designed for Hill/Tribal areas for extending financial assistance to individuals in such areas to: a) Purchase or construction of a new house / flat (without mortgage of land) b) Purchase of an existing (old) house / flat which is not more than 10 years old (In such cases, valuation report from our empanelled valuer and a certificate on the condition of the house to be given by a structural engineer or Govt. approved architect should be taken); c) Repair /Renovation/extension of an existing house or flat.
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viii) Gram Niwas

Home Loans to farming and poorest of the poor in rural areas. The Scheme covers all rural and semi-urban centers. Rural Area for the purpose of the Scheme is the area comprised in any village including the area comprised in any town, the population of which does not exceed 50000 as per 2001 census. The scheme seeks to provide home loans to farming and poorest of the poor in rural areas for the purpose of purchase or construction of a house, repairs and renovation, purchase of plot for the purpose of construction of a house/shed etc.
ix) Sahyog Niwas

Rural home loans to self help groups The Sahyog Niwas scheme has been instituted to finance the self help groups with a good track of payment record for 2 years, for on lending to members for housing in rural areas, covering the following purposes. 1) For the purchase or construction of a house exclusively or including the housing needs of activities carried by them. (Dairy shed, tailoring shed/shop, grocery stores etc.) 2) For the renovation or repair of an existing house / shed 3) For the purchase of a plot of land for the purpose of house construction. 4) For the extension of existing house / work space to existing house / shed.
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x) SBI Happy Home Loans

Home loans at 8% p.a. The SBI Happy Home Loans scheme enables the genuine needy buyers to buy dwelling units by freezing interest rate at 8% p.a. for a period of one year from the date of disbursement on new Home Loans including SBI Special Home Loans scheme.
xi) SBI Green Home Loan

State Bank of India has adopted a Green Banking Policy with an objective of contributing towards the fight against the adverse climate change. One of the initiatives approved by the Board for this purpose is incentivizing customers who go in for Green Projects, i.e. those projects which reduce Carbon Emissions and promote Renewable Energy. Green Housing or Green Home is one of the types of projects identified for this purpose. At present State Bank of India is the only Bank in the country supporting the cause of Green Buildings by offering a 5% concession in margin, 0.25% concession in interest rate and waiver of processing fees, on the existing home loan products to customers who go in for Green Projects.
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3.4. HOME LOAN TOP-UP PRODUCTS

i)
SBI Home Line

SBI Home Line Special Personal Loans come with inbuilt
provision to sanction personal loans to home loans borrowers with a satisfactory repayment record of 3 years. The rate of interest charged on these personal loans is only 50 bps above the Home Loan interest rate applicable to the repayment tenure opted by the borrower (floating rates only), prevailing as on the date of sanction of SBIHome Line Special Personal Loans.
ii) SBI Home Plus

SBI Home plus is scheme is launched for granting personal loans to the banks home loans customers against the security of their house property. All home loans customers with a satisfactory repayment record of at least one year and who maintain a Savings bank or current account with us. The loan can be used for any purpose, viz. extension/repair of house, purchase of car/ consumer durables, education / medical expenses of family members, personal expenses, etc. There will be no need to obtain documentary evidence for the end-use of funds. However a certificate from the customer in the application to the effect that the loan will not be used for speculative purposes would be obtained.
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iii) SBI Life style Loan

Loans to meet life style needs of Home Loans customers. State Bank Of India launched the SBI Life Style Loans to help home loan customers meet any short term expenditure, (Vacation travel, purchase of Gold, Lifestyle goods) except speculative investments, which adds comfort to the life style of the borrower with satisfactory repayment record. SBI has tie up with various reputed travel houses, lifestyle product companies for discounts to our customers.
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3.5. RELATED HOME LOAN PRODUCTS i) Earnest Money Deposit (EMD) Scheme
Many Government agencies, like Urban Development Authorities and Housing Boards, periodically come out with schemes for sale of plots/houses, wherein applicants have to submit 10-20% of the cost of plot/house as Earnest Money Deposit (EMD) and allotments are made by draw of lots. The SBI EMD scheme is designed for financing against earnest money for allotment of a house/plot. Individuals above 21 years of age and with a steady source of income are eligible to avail loans under this scheme. Salient Features of the Scheme: No minimum income criteria. Margin waived in all cases. Eligible for 100% of application money, subject to maximum loan amount of Rs.10 Lacs. Waiver of security in all cases irrespective of the loan amount. The above mentioned features of the scheme are applicable subject to the following conditions:
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ii) SBI Reverse Mortgage Loan

Loans for welfare of senior citizens in India. SBI Reverse Mortgage Loan Enables house-owning Senior Citizens having inadequate income to meet their financial needs for renovation/repairs to house, medical & other personal purposes. There is no compulsion for the borrower to repay a RML during his or her lifetime or till such time he or she continues to stay in the house. The borrower continues to retain ownership of the house. Also, the borrower will have the option to prepay the loan at any time during the loan tenure and there will be no pre-payment penalty.
7) OTHER SCHEMES:
The bank offers loans schemes known as 'Prashasan Plus', 'Teacher Plus' and 'Oil Plus' to Government Employees, Teachers and employees of public sector oil companies etc at concessional rates. These plus schemes offer concessional interest rate of 0.25% below
the applicable interest rates on Home Loans to niche client groups like Government Employees, Teachers, employees of public sector oil companies and so on
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CHAPTER - 4
TERMS AND NORMS
4.1. ELIGIBILITY
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. coConditions regarding co-applicants: All Housing Finance Institutions lay down conditions on who can be co-applicants. All co-owners of the property need to be coapplicants 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. Given below is a Table that throws light on acceptable relationship of a co-applicant for clubbing of income. Minimum age: 18 years as on the date of sanction
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Maximum age: limit for a Home Loan borrower is fixed at 70 years, i.e. the age by which the loan should be fully repaid, subject to availability of sufficient, regular and continuous source of income for servicing the loan repayment. Eligibility Criteria & Documentation required for Individuals: Salaried Age Income 21years to 60years Rs.1,20,000 (p.a.) Self employed 21years to 70years Rs.2,00,000 (p.a.) 5,00,000 - 2,00,00000 5years-20years 3years 1) Application form with photograph. 2) Identity & residence proof. 3) Education qualifications certificate & proof of business existence. 4) Business profile, 5) Last 3 years profit/loss & balance sheet 6) Last 6 months bank statements 7) Processing fee cheque
4.1: Table 4.1: Eligibility Criteria & Documentation
Loan Amount Offered 5,00,000 - 1,00,00000 Tenure Current Experience 5years-20years 2years
1) Application form with 2) Photograph. 3) Identity & residence
proof.
4) Last 3 months salary
slip Documentation
5) Form 16. 6) Last 6 months bank
salaried.
7) credit statements. 8) Processing fee
cheque.
(Source: Researchers methodology) 56
4.2. DOCUMENTS (1) ADVOCATE Check List: (Prepare separate set)

Copies of Mother deed/parent document link deeds, allotment letter, Khatha certificate/endorsement, up to date encumbrance & tax paid receipts. (In case of flats, if the project is already approved by SBI panel advocate then this is not required). Copies of Agreement for sale, Construction Agreement ORIGINAL Sub Registrar certified copy of the Sale Deed(for takeover loans ) ORIGINAL of updated encumbrance certificate. Copy of Plan sanction. Copies of latest Khata certificate, Khata extract etc. Upto date Tax paid receipts (Form-16). Copies of Sanction letter of other bank/institution & Letter of original documents held in their custody ( applicable In case of takeover loans from other banks/institutions)
(2) ENGINEER Check List:

(Kindly take the Engineer Telephone NOC from the bank to coordinate with him for inspection of borrowers property) Photo copy of Sale Deed. Plan Sanction Copy. Interior Estimate, if any, for approval by Engineer.
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(3) Builders/Sellers Check List

Allotment Letter & detail split up cost of the project. In case of completed projects, a letter from the builder stating that the property is ready for registration. Letter from the builder/seller the property is not mortgaged to any bank/ financial institution. If mortgaged then an NOC from the concerned bank/institution. Advance Receipt / Paid Receipts from Builder/Seller, If any. Due diligence on Builders and Seller KYC Norms : Proof of Identity (PAN copy) & Residence proof (Telephone/electricity bill - both self attested and originals verified & attested by the bank) along with the duly filled in KYC form (form to collect from the bank)
(4) Other Bank/Institution Check List ( In case of Takeover Loans)

Sanction Letter of the other bank/institution. Loan account statement from the date of sanction till date. Pre-closure letter inclusive of penalty from the other
bank/institution. Letter of original documents held in their custody. Receipts for the total amount of the project issued by builder/seller to the purchaser/bank/institution.
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(5) PERSONAL DOCUMENTS Check List

(From the Applicant / Co- applicant and Guarantor, if any) SELF ATTESTED COPIES OF DOCUMENTS Sl.No.1 to 6: 1. Proof of Identity (passport/pan card) 2. Proof of Residence (telephone/electricity bill/ company letter) 3. Salary Slip - last 3 months. (Attested by the employer) 4. Salary account bank statement - last 6 months (bank attested) 5. Form 16 for the last two years. 6. Income Tax Saral copy for the last two years. 7. Photograph - 2 nos. 8. Application Form 9. Company Profile details of company
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(6) Check list by the Purpose Confirmation of Income

If borrower is a salaried person, please provide two recent consecutive pay slips or a copy of borrowers employment contract or a letter from his employer. If borrower is self-employed, please provide copies of borrowers last two Financial Accounts as prepared by his accountant. Appointment Letter Salary Certificate Retainer ship Agreement, if appointed as a consultant FORM 16 issued by the employer in borrowers name. Last three years income tax returns duly filed and certified by the Income Tax Authorities Similar Document -separately for each co-applicant.
Employment Proof
Identity card issued by borrowers employer Visiting card
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Age Proof
Passport Voter's ID card PAN card Ration card Employer's Identity card School leaving certificate Birth certificate
Residence Proof
Ration card Passport PAN card Rent agreement, if borrowers is staying currently on rent Bank Pass book Allotment letter from borrowers company if borrowers is residing in company quarters.
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Name Change Proof (If Applicable) a. A copy of the official gazette b. A copy of a newspaper advertisement publicizing the name change c. Marriage certificate
Investment Proof (If Applicable)

a. Bank statement for the last six months of all operating and salary accounts b. Bank statements for the last six months of all current accounts, if self-employed. c. Any other photocopies of investments held, if required by the Bank
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Property Title Proof

Original Sale agreement with Builder/Developer duly
registered, Registration receipt Tripartite agreement from builder/developer Land documents indicating ownership, e.g.- Photocopies of title deeds, if applicable A certificate by the legal advisor of the builder to the effect that the builder has a good reputation and it is free from encumbrance and other charges. A certificate from builder's Chartered Accountant certifying that the builder has not mortgaged the property anywhere else. Certified true copy of approved plan. Copies of receipts of payments made to builder/developer. Allotment letter Possession letter Lease agreement, if applicable (Property bought from a development authority) Mortgage deed if the Bank opts for a registered mortgage. No Objection Certificate from the developer, society or development authority as applicable Personal Guarantees, if applicable.
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In case of alternate or additional security, documents for the same depending upon the security details. For self-construction: Approved plans and clearance certificates along with estimates Post dated cheques for the EMIs.
Confirmation of Rental Income

Copy of the existing tenancy agreement, or a rental appraisal, from a local real estate agent signed by branch manager, or rental manager.
Deposit or Investments
Evidence of borrowers deposit or investment funds, i.e. a bank statement or term deposit receipt. For low equity loans (5-19% deposit), copy of his savings account statements over the last six months.
Sale and Purchase Agreement

If borrower is planning to buy a property, please provide a copy of the successful sale and purchase agreement signed by both borrower and the vendor. If borrowers is planning to sell or have already sold his existing property, please provide a copy of that property's sales and purchase agreement.
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New Customer to the banks of India

If borrowers is refinancing from another bank please provide copies of his loan statements covering the last six months. Please provide copies of borrowers account statements covering the last six months from his current bank. Please provide copies of borrowers identification and if borrower has arrived in the country within the last 5 years, please provide a copy of his passport.
GOVERNMENT VALUATION AND RATING

System A copy of the latest Government or Ratings Valuation is to be provided. Depending on the age and value indicated in conjunction with the amount required to borrow, the Bank may require a Registered Valuation and borrowers Banker will advise borrower.
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4.3. PURPOSE
The bank offers home loans for purchase and/or construction of house property as well as plot loans.
It offers loans for:

Purchase/ Construction of new House/ Flat Purchase of an existing House/ Flat Purchase of a plot of land for construction of House Extension/ repair/ renovation/ alteration of an existing House/ Flat Purchase of Furnishings and Consumer Durables as a part of the project cost Takeover of an existing loan from other Banks/ Housing Finance Companies
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4.4. QUANTUM OF LOAN

Actual loan amount will be determined taking into consideration such factors as applicants income and repaying capacity, age, assets and liabilities, cost of the proposed house/flat etc. Applicants aged between 18 and 45 years, can get 60 times Net Monthly Income (NMI) or 5 times Net Annual Income (NAI) and for applicants aged over 45 years of age, it is 48 times NMI or 4 times NAI. This will be subject to a maximum EMI/NMI ratio as under: Net Annual Income Up to Rs.2 lacs Above Rs.2 lacs to Rs. 5 lacs Above Rs. 5 lacs EMI/NMI Ratio 40% 50% 55%
4.2: Table 4.2: Criteria for Loan Amount
Increase up to 5% in the EMI/NMI ratio may be permitted by the sanctioning authority, depending on the availability of disposable surplus income after meeting expenditure towards maintenance of family.
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4.5. EQUATED MONTHLY INSTALLMENT CALCULAT .5. CALCULATION:

The staff at the selected Branch did not want to reveal the actual method adopted by SBI as they used to have a computer software Application for the purpose that looks just as below:
Diagram 4.1: Home EMI Calculator 4.1:
However, the actual calculation model for EMI could be as model follows: From various resources, it is found that: 1. The EMI break up, for SBI is: 68% - Principal Component and 32% - Interest Component can 2. The way EMI is calculated can be broadly categorized under two heads: Flat rate system and Reducing balance system.
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The flat rate system:

The rate of interest on the loan amount is calculated over the full duration of the loan, the principal and the interest is divided over the number of installments and the value arrived is borrowers EMI. Let us understand this better:
4.3: Table 4.3: EMI calculation in the flat rate system
A flat rate loan is the most expensive as in this case the interest is calculated on the entire loan amount and no principal deduction is taken into account. Thus the effective rate of interest works out to be much higher.
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REDUCING BALANCE SYSTEM:

The interest is charged on the outstanding balance of the loan, which goes on reducing. Hence the cost of the same loan amount on an annual reducing balance method works out to 29% and 35% on a monthly reducing balance method. Again in case of reducing system, there are three types: EMI Table - Monthly reducing balance method
4.4: Table 4.4: EMI calculation in Reduced balanced system
Daily reducing balance method (Used by SBI)

Here, there is immediate reduction in principal thereby reducing the interest calculated on it. If borrower has taken a loan of Rs.1, 00,000/- at 21% interest for 3 years and he pay Rs.3, 760/- on Jan 10, the lender will consider total outstanding principal as Rs.96, 240/- from Jan 11. The interest will be calculated on Rs.1,00,000/from Jan 1 to Jan 10 and from Jan 11, interest will be calculated on Rs.96,240/-. With a lower outstanding principal, the total interest paid out reduces and so does the EMI.
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Monthly reducing balance method

Here, the principal component is deducted at the end of every month and then the interest is calculated on this new outstanding reduced principal. The above table gives the cash outflow on a loan of Rs.1, 00,000/- at 21% interest for 3 years, when interest is calculated by monthly reducing balance method.
Annual reducing balance method

Here the principal component of EMI though reduced every month, is summated annually. Therefore, the interest is calculated on the original loan amount for the entire year. At the end of the year, the accumulated principal component is deducted from the original loan amount and the interest for the next year is on this reduced loan amount. If borrower has taken a loan of Rs.1,00,000/- at 21% interest for 3 years, the EMI will be Rs.4,018/-.
Which EMI plan to choose?

1. Payment of EMIs in advance or in arrears? Paying the EMI at the beginning of the month (EMI in advance) means that he lock borrower money for the month; while paying in arrears, (i.e. at the end of the month) gives him an extra month before the payout. The effective rate of interest on the loan also goes up when he pay the EMI at the beginning of the month. Hence if two schemes offer the same EMI, choose the one, which allows payment in arrears.
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2.
Advance EMI payment

In advance EMI schemes a certain number of EMIs are collected from the borrower in advance. The number of EMIs that have to be paid out in advance varies with the interest charged on the loan. The more borrower pay in advance the lesser should be the interest charges. Also in 100% financed loans, some EMIs have to be paid upfront as advance. This effectively reduces the loan amount and in real terms the financier has not given him 100% finance but charges interest on the entire cost of the asset.
3.
Deposit linked plan

Here, the financier offers a lower rate of interest, provided the borrower invests 20% to 25% of the asset cost as a fixed deposit with the financier. The interest on this deposit is usually lower than the interest charged on the loan. Here again borrower must consider the cost of parking borrowers funds in the deposit as the returns on it may not weigh favourably with the low interest charged on the loan. In the end, the thumb rule of EMI to remember: EMI is lowest, when interest is calculated on a daily reducing basis. The reason why EMI varies for the same loan amount, tenure and interest rate is the difference in the compounding frequency of interest rates.
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bank remember that one liner joke - Why sharks never take lenders? The answer is Professional courtesy.
4.
Pre-EMI:
In case of part of disbursement of the loan, monthly interest is payable only on the disbursement amount. This interest is payable monthly till the final disbursement is made, after the EMIs would commence.
4.6. MONETARY CEILINGS

The Maximum Permissible Loan Amount is subject to following monetary ceilings:
Repairs/Renovation
Rs. 10 lacs 10% of the Project Cost (or) 3 lacs
Above Rs.10 lacs require prior administrative clearance of network GM
Furnishings and consumer durables
Whichever is less where additional security is available
4.5: Table 4.5: monetary ceilings
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4.7. TOTAL PROJECT COST

The total value house or flat or the project cost includes: The cost of undivided share of the flat/land /construction cost, Additional Amenities like Car Parking, KEB & BWSSB deposits, Insurance premium VAT & service taxes, Maintenance cost & Stamp duty and Registration expenses subject to borrowers eligibility as calculated above whichever is lower for purchase /construction of new or old property.
4.8. MARGIN
Purchase/ Construction of a new House/ Flat/ Plot of land: The SBI home loan borrower should pay 20% of the cost of home for loans up to Rs 1 crore and 25% for loans above Rs 1 crore.
Loan Amount Up to Rs. 75 Lacs Above Rs. 75 Lacs. Margin (Min.) 20% 25% Maximum LTV*Ratio (Max.) 80% 75%
4.6: Table 4.6: criteria of margin amount
Repairs/ Renovation of an existing House/ Flat: 20% *LTV ratio - Loan to value ratio=Loan amount/Value(project)
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4.9. SECURITIZATION
In most cases, the property to be purchased itself becomes the security and is mortgaged to the bank till the entire loan is repaid. Equitable or Registered mortgage of property (or) Other tangible security of adequate value like NSCs, Life Insurance policies etc., if the property cannot be mortgaged
4.7: Table 4.7: Securitization (Source: Researchers methodology)
4.10. FEES OR CHARGES

Pre4.10.1. Pre-Sanction Fees
(i)
Processing Fee:
The revised processing fee structure (including service tax) from 9th November 2009 is as under: Loan Amount Processing Fee (Revised): Loan Amount Up to Rs.5 Lac Above Rs.5 Lac and up to Rs.10 Lac Above Rs.10 Lac and up to Rs.20 Lac Above Rs.20 Lac and up to Rs.50 Lac Above Rs.50 Lac and up to Rs.1 Cr Above Rs.1 Cr and up to Rs.5 Cr Above Rs.5 Cr
4.8: Table 4.8: Processing fee amounts
Fee Rs.1000/ Rs.2000/ Rs.5000/ Rs.7,000/ Rs.8,000/ Rs.10,000/ Rs.20,000/
Note: 75 % of the processing fee may be refunded in the following cases: Rejection of loan application on account of unsatisfactory presanction survey report. Rejection of loan application on account of unsatisfactory legal/valuation reports. In cases where applications are sanctioned or rejected after complete loan processing, fee will not be refunded. (ii) Legal Charges: Advocate's fee for property search and the title investigation report. a. Legal Fee/charges: Rs.1500/b. Govt. Stamp duty: 0.25% of loan amount as stamp duty at the time of equitable mortgage creation at the Bank. c. Approx Govt. Stamp papers of Rs.1500/-(approx) for execution of loan documents at the time of sanction (Legal/Engineer/Processing fee cheques to be paid at the time of submission of application form to the bank. Govt Stamp duty of 0.25 %( prevailing now) of the loan amount and Rs750/- approx to be paid at the time of documentation of loan. Insurance will be done after the registration of the property.) (iii) Valuation Charges: Valuer's fee for valuation report. Engineer's Valuation fee: Rs.1, 500/76
4.10.2. Post-sanction Fees .10.2. Posti) ii) Stamp duty payable for Loan agreement & mortgage. Property insurance premium: Insurance: Insurance of property building against
fire/earthquake etc with New India Assurance Company to be done. iii) Service Charges Payable to builders who have been engaged as Marketing Associates.
4.11. RATE OF INTEREST

SBI EASY HOME LOAN (JULY 2010) (Base Rate =7.50% p.a.) Interest rate for proposals sanctioned between 1st July 2010 and 30th September 2010.
Loan amount Interest during first year 2nd & 3rd year Floating interest rate after 3rd year Fixed interest rate after 3rd year Maximum Rs.50 Lacs 8% p.a.(Fixed) 9% p.a.(Fixed) 1.75% above Base Rate, Currently effective rate being 9.25% p.a. 3.50% above the Base Rate prevailing at the time of reset, With a reset frequency of 5 years.
4.9: Table 4.9: Rate of interests of SBI Easy Home Loan
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SBI ADVANTAGE HOME LOAN (JULY 2010) Interest rate for proposals sanctioned between 1st July 2010 and 30th September 2010.
Loan amount Interest during first year 2nd & 3rd year Above Rs.50 Lacs 8% p.a.(Fixed) 9% p.a.(Fixed)
Floating interest rate after 2.25% above the Base Rate, Currently 3rd year effective rate being 9.75% p.a.
Fixed interest rate after 3rd 3.50% above the Base Rate prevailing at the year Time of reset, with a reset frequency of 5 years.
4.10: Table 4.10: Rate of interests of SBI Advantage home loan
4.12. MORATORIUM
Up to 18 months from the date of disbursement of first instalment or 2 months after final disbursement in respect of loans for construction of new house/ flat (moratorium period will be included in the maximum repayment period)
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4.13. GUARANTOR:
The bank insists on a Guarantor till the property is registered/title transferred on borrowers name and Equitable Mortgage registered in favour of the bank. Guarantor details in the application with Assets & Liabilities duly filled in along with the above mentioned documents are required. For Takeover Loans From Other Banks Guarantor Is A Must An eligibility criterion of guarantor is that: 80% of the net credit worthiness of the guarantor should be more than the loan amount (takeover amount). The Title holders of the property should ONLY be the borrowers. If the agreement is on the joint names (maximum three persons), then the Sale deed also should be on the joint names and the loan also will be on the joint names. The same is also applicable for take over loans. i.e. Joint Owners then Joint name in the loan application / Single Owner then Single name in the loan application.
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4.14. TAX BENEFITS

Both principal as well as interest of home loans attract tax benefits. With effect from 1st April 2005 (i.e. assessment year 2005-07) under section 80C of the Income Tax Act 1965: Principal amount of repayment of loan along with other savings such as PF, PPF, and Life Insurance premium etc up to a maximum of Rs 1, 00,000/- will be eligible for deduction from gross income. Interest paid on loan after completion of construction will be deductible from income from property For self occupied - Income will be treated as nil and interest payment will be treated as minus income which will be adjusted against other income. For rental property - It will be adjusted against rental income.
4.15. PACKAGE OF EXCLUSIVE BENEFITS

Complimentary international ATM-Debit card. Complimentary SBI Classic/ International Credit Card with waiver of joining and first year's fees. Option for E-banking. Concessional package under 'Credit Khazana' for prospective car loan borrowers whose accounts are conducted satisfactorily. 50% concession in charges in respect of all personal
remittances/ collection of outstation cheques.
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4.16. INSURANCE COVER

Compulsory insurance of property, Optional life cover from SBI Life & free accident insurance cover for borrower available. The house/flat to be insured against the risk of
fire/riots/earthquake/lighting/floods etc. in the joint names of the borrower and the bank for the actual project cost after netting off the cost of land, stamp duty an registration charges. People seeking home loan often encounter such worries like what if anything happens to them in that case what would happen to the home loan? Naturally, their main concern is that should something happen to them their folks would have to encounter the problem of facing the impact of repaying the loan debt. Home loan insurance is completely different from home insurance. This type of insurance covers the amount of home loan borrower owe to the bank. This doesn't include the amount he has already paid but the amount still to be paid and evidently his family members will not face the problem of paying the amount being owed to the bank but the insurance provider will bear the brunt of the same. The insurance companies are not very impending about how much amount is to be paid as part of the insurance premium as the premium amount varies depending on the case. The premium amount broadly relies on conditions like - age of the person availing the loan (the younger the person, the lower the premium amount); loan amount (the lesser the loan amount, the lower the premium); period of the loan (the more the loan repayment
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period, more is the premium); another important factor is the health of the loan taker (the premium amount would be low in case of good health of the individual). SBI offers mortgage life insurance policy to the SBI home loan applicants thereby consolidating the insurance premium along with the EMIs. The State Bank of India offers a free personal accident insurance cover to their clients availing home loan so that the client's family doesn't have to face any problem if he/she meets an accident that proves to be fatal.
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4.17. VALUATION POLICIES

The existing valuation policy was reviewed, and ECCB approved the following valuation and re valuation policy w.e.f. 01.04.08 for individual home loans (IHLS):
Purpose Of Home Loan Valuation Policy Valuation of land plus project cost i.e. stage-wise estimated expenditure obtained from the
empanelled architect / engineer irrespective of loan amount. Disbursement to be made according to the stage of construction. Construction of new dwelling unit For loans unto Rs. 2 laces at rural /semi-urban branches, the sanctioning authority may waive valuation as above and my assess the valuation based on market prices by enquiry and a certificate by the contractor/engineer involved in construction. Purchase of second sale plot /dwelling units Valuation report obtained from the empanelled architect/engineer/valuer irrespective of the loan amount and age of the property. For loans up to Rs 20 lacks, reasonableness of the price mentioned in the underlying sale
did/agreement to sale etc. ascertained by the Purchase of new dwelling units sanctioning authority as per prevailing market prices. For loans above Rs.20 lacks, valuation report obtained from an external empanelled architect/ engineer / valuer. Purchase of plot for constructions of Property regional dwelling unit from regional govt. housing development authorities
4.11: Table 4.11: valuation policies
valued
at
cost
price
as
per
the
agreement of sale/lease.
CHAPTER - 5
SYSTEMS AND PROCEDURES
5.1. STAFF INVLOVED AND THEIR ROLES
5.1: Table 5.1: Systems and procedures in lending process

(RACPC - The staff from respective Retail Asset Central Processing Cells)
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5.2. PROMOTION AND DISTRIBUTION OF THE PRODUCTS (a) PROMOTION:

State Bank of India, has come up with a non-conventional method to promote its home loan business. SBI promotes home loan segment at its Home Fair Melas at Home each circle level. SBI also use to enter into an agreement with the known builders to promote its home loan segment. The bank is looking forward to develop special processing channels so as to provide quick services to home loan customers. There would be no processing fees on loans, adding that the home loans approved at the fair would bear 0.25 per cent less interest than the nominal rate from the start of fourth year of repayment. Around 24 property dealers and builders were present at the fair. Several kinds of staff are involved in these Fairs, who include: Marketing Associates Field Officers Associated Builders and The staff from respective Retail Asset Central
Processing Cells (RACPC).

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The staff do undertake several initiatives with the prospective customers at these Fairs itself like: Enquiries Guidance Instructions Requirement Specifications Application forms distribution Application Approvals and Customer Services
(b) DISTRIBUTION:
State Bank of India supplies and sells its home loan products through its over 11,440 branches nation-wide and associated RACPCs.
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5.3. PROCESS UNDERTAKEN 5.3.1. APPLICATION SUBMISSION

The home loan application form of SBI is rather lengthy compared to the forms at other private sector lenders. Completely documents. Need to submit the documents from builder. In my case, the project had APF not in SBI (basically already approved by SBI); so not much documentation was required. Otherwise they would make a surge report, which can consume some time. I guess they are quite strict about it. filled in Form along with the necessary
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5.3.2. PRE-SANCTION PROCESS

1. The Field Officers hold Personal Discussion with the prospect customer regarding Interest Rate, Eligibility, EMI and all the terms and conditions 2. The prospect customers options and acceptance are ascertained and recorded. 3. Necessary documents are collected from the customer. 4. Pre-Inspection Sheet is maintained along with the documents to record inspection by the Banks staff (or) outsourced agency. 5. Bank's Field Investigation for address proof/Employment etc. 6. All the documents are sent to Retail Assets Central Processing Cell (RACPC) for credit appraisal based on the customers appraisal financial capacities. 7. All the terms are conditions including Loan amount, interest rate, tenure, EMI etc are determined. 8. The RACPC would submit its credit appraisal report on the customer to the branch.
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Legal Opinion:
Empanelled Lawyer(s) does submit the Title Deed verification and the search report for 30 years in respect of properties of the customer. The legal clearances/ opinion of the flat/property which borrower is buying / staying /constructing have to be obtained from an advocate from Bank panel. Submission of legal documents & legal check. The search report reveals encumbrance on the property based on which the grant of loan can be avoided and the prospect borrower may be asked to rectify it.
Valuation check:
The Engineers valuation of the property and estimate for the construction to be obtained with bank panel engineer. In case of takeover loans, two panel engineer valuation is required and the least value between them should be more than the takeover amount.
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PRECAUTIONS TO BE TAKEN: Applications form to be complete in all respects. Market information about the potential borrower should be gathered. Pre-sanction survey should be conducted wherever required. The authenticity of salary slip, form 16 return, and proof of identification, address and income etc. should be cross checked. Income from all sources is to be considered, wherever applicable, when the sanctioning authority is satisfied about the quantum and uninterrupted flow thereof during the tenure of the loan.
5.3.3. SANCTION STAGE

The branch manager would consider the credit appraisal report of RACPC and will take a decision whether to sanction or not the loan to the customer. The decision is informed to the prospect customer the decision so taken via Field Officer. If the decision is sanctioned, the Field Officer would issue Offer letter to the prospect.
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5.3.4. POST-SANCTION PROCESS

Registration of Property documents Signing of Agreements and submitting post-dated cheques SBI insists on all the margin money contributions to have been made to the seller and the money receipts to be handed over to them prior to the loan disbursement. The customer needs to submit the cash amount for various stamps, mortgage fee etc. SBI would take 12 cheques of SBI a/c for security. borrower can link his SBI savings a/c to have standing instruction to deduct EMI. Normally, almost all home purchase transactions will entail payment of an advance to the seller and on the day of registration, the remaining contribution from the buyer and the loan amount from the bank are exchanged with the property documents. Not with SBI. And once the registration is done, the loan applicant needs to get the latest Encumbrance Certificate (EC) from the Registrars Office and submit it to SBI. Subsequent to this process, SBI will create an equitable mortgage on the property in favour of the bank as collateral. This entails a fee of Rs 7000 (I understand that this is a percentage of the registered value of the property) to the loan applicant. Only after all this is done, will the process be complete. I never saw this equitable mortgage fee being mentioned anywhere in the high decibel advertisements from SBI.
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5.3.5. DISBURSEMENT
The disbursement is made in phases correlating to the actual progress made in the construction. The proper end-use of funds is ensured by visits to the sites. Certificate from the engineer may be required to be submitted by the borrower stating the status of the project. By BC/DD crossed A/c Payee only incorporating the
builders/sellers A/c No. and bankers name and sent directly to builder/seller by Regd. AD/Speed Post.
5.3.6. POST- DISBURSEMENT PROCESS

Property inspection is carried out and recorded in the Inspection Register at each stage of disbursement by the field officers. The installments are disbursed in different proportions in different phases as per the progress of the work.
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5.3.7. REPAYMENT
Loan repayment options: SBI lays down certain rules and regulations pertaining to the repayment of loans. The loan applicants can repay the amount in the form of equated monthly installments. The repayment is allowed up to the age of 70 years. Repayment period: Maximum 25 years (or) Up to the age of 70 years (the age by which the loan should be fully repaid) of the borrower, whichever is early. MAXIMUM REPAYMENT PERIOD: For applicants up to 45 years of age: 25 years For applicants over 45 years of age: 15 years Moratorium period (Repayment holiday): The moratorium period is included within the maximum repayment period.
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5.3.8. PRE-CLOSURE
Pre-closure is allowed by the Bank at any time after the complete disbursal and before the actual tenure. If the loan is pre-closed from own resources for which proof is submitted by the customer, penalty is not levied irrespective of period for which the a/c has run. PrePre-closure Penalty: No penalty if the loan is pre-closed from own savings/windfall gains for which documentary evidence is produced by the customer. In case, such proof is not produced by the borrower, penalty @2% on the amount prepaid in excess of normal EMI dues shall be levied if the loan is pre closed within 3 years from the date of commencement of repayment
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5.3.9. RECOVERY MECHANISM

The following debt collection practices will be applied to all debts (rates and sundry debtors) over $200 that is not in dispute which have been outstanding for 90 days: First reminder letter will be forwarded, requesting payment within 14 days or to contact Council to enter into an arrangement. Where no response is received, second reminder letter will be forwarded requesting payment within 14 days or to contact Council to enter into an arrangement. Where no response has been received a letter of demand for payment within 7 days will be forwarded. The letter will state that failure to make payment in full or to enter into an arrangement will result in the commencement of legal action. Where no response has been received, outstanding debt will be forwarded to Councils debt collection agent.
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Various Recovery Procedures State Bank of India adopts various recovery procedures to recover the debt from its defaulters. The various recovery procedures are mentioned below: Reasons For Default : There are various reasons for default like mismanagement, diversification of fund, short fall in investment, will fall default etc. So a credit manager should take various factors into account before lending a loan. Demand Notice: When a defaulter does not repays loan a demand notice is issued to him that he has to repay his loan with a stipulate time period. Legal Notice: When a defaulter does not respond to the demand notice a direct notice is issued to him that if he does not repay the loan action would be taken against him legally and the court notice is issued against him. Transfer To NPA Account: When a defaulter does not respond to respond to any legal notice or he becomes bankrupt the Whole account is transferred to NPA account.
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5.3.11. CUSTOMER CARE

SBI home loan customer care services can be accessed from everywhere and at any time using the toll-free helpline numbers or the Internet. The bank has extensively covered all major cities of the country while at the same time not overlooking the customer care requirements of people residing in rural and semi-urban areas. borrower can get instant solutions to all borrowers home loans related queries the moment he get in touch with the staff working in a local SBI home loan customer care center. State Bank of India is undoubtedly the largest financial institution among all the public and private sector banks operational in India. As a result, it receives an extremely large number of requests seeking home loans and other types of financial assistance. With an extensive customer base spanning all across the country and also at some locations abroad, SBI has emerged as the largest provider of home loans in India. Thus it is not uncommon to see an SBI branch at a remotely located rural or semi-urban area, no matter where it lies on the geographical map of the country. The customers can talk to SBI executives in a friendly environment and obtain information regarding the types of home loans, current interest rates, repayment options, maximum loan terms, EMI calculation and so on. Moreover, borrower can use SBI home loan customer care service for registering his complaints and grievances, which ensure a swift remedial action by the concerned
97
authority of the bank. Furthermore, it is also possible to meet an SBI senior official directly through a special service known as Public Grievance Cell Facility and get solutions instantly. This facility is available at all SBI branches across the nation and to avail the same borrower need not take prior appointment or permission. An Individual can access SBI home loan customer care service through toll-free numbers and also through Internet. Though the customer care toll free numbers are different for each city, the services provided there remain the same, comprehensive, instant and bearing the quality standard of State Bank of India. SBI Home Loans Customer Care Number (Toll Free):
Ahmadabad: Bangalore: Bhopal: Chennai: Delhi: Patna: Guwahati: Hyderabad: Kolkata: Lucknow: Mumbai: 1800 233 7933 1800 425 8002 1800-233-7551 1800 425 4424 1800 11 4545 1800 345 6100 1800-345-3631 1800 425 3888 1800 345 3455 1800 180 5201 1600 22 8866 Ahmedabad: Bangalore: Bhopal: Chennai: Delhi: Guwahati Hyderabad: Kolkata: Lucknow: Mumbai: helpline.lhoahm@sbi.co.in sbihelpline.lhoblr@vsnl.net mysbi@sbi.co.in helpline.lhoche@sbi.co.in helpline.lhodel@sbi.co.in luithelp@sify.com helpline.lhohyd@sbi.co.in sbihelpline.lhokol@sbi.co.in sbihelp@sancharnet.in helpline.lhomum@sbi.co.in
SBI Customer Care Mail ID:
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CHAPTER -6
PERFORMANCE EVALUATION
6.1. COMPETITORS
S.No. Competitor Severity of Competition(Low/moderate/High)? 1 ICICI low 2 HDFC moderate 3 Andhra Bank low 6.1: Table 6.1: Competitors (Source: Researchers methodology)
Interpretation: Majority of the competitors for the bank are from private sector in region. The closest competitor for the bank is HDFC .Virtually; there was an ad war with teasing rates between the two banks. Others include the local player Andhra bank and the private giant ICICI.
6.2. STRENGTHS AND WEAKNESSES

S.NO. 1 2 3 4 5 6 7 Strengths Able Work Force Network Innovative Schemes Loan Pricing Lack Of Prepayment Penalty, Transparency The Interest Rates Weaknesses Long Turnaround Time Multiple Visits Documentation Needs Competition Varied Customer Demands Shortage Of Staff
Table 6.2 strengths and weaknesses (Source: Researchers methodology)
Interpretation: The biggest strength of the bank has been its large distribution network and able workforce. The weakest elements of the institution are the long processing times and the shortage of staff.
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6.3. SIZE OF HOME LOA .3. LOAN

Financial Year 2007-08 2007 2008-09 2008 2009-2010 2009 Amount(Rs. crores) lent 42,710 54,063 71,193
6.3: Table 6.3: Size of home loan
08-09, 09-10) (Source: SBI Annual Report 08
SIZE OF HOME LOAN

80,000 Amount (Rs. crores) lent 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2007-08 2007 2008-09 Financial year 2009-2010
6.1: Diagram 6.1: Size of home loan
Interpretation: There has been steady increase in the home loan book size of SBI In the year 2009 2009-10, the size had grown to 71,193 cr from 54,063 cr in the year 2008 09, which implies the size had 2008-09, doubled in two years.
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6.4. SHARE OF HOME LOANS IN TOTAL ADVANCE .4. LOANS ADVANCES.

Retail Credit segment Home loans Other advances Total retail advances Amount in Rs. crores % 2,42,28,515 23% 8,11,12,858 77% 10,53,41,373 100%
6.4: Table 6.4: Share of Home Loans
08-09, 09-10) (Source: SBI Annual Report 08 SHARE OF HOME LOANS IN TOTAL ADVANCES. 2009FOR 2009-10
23%
Home loans Other advances
77%
6.2: Diagram 6.2: share of home loan
Interpretation: The home loan segment had got a small i.e., 23% share in the total retail segment of advances by the branch in the year 2009 200910. The other retail advances like car loans, educational loans, personal loans etc got the 77% share of total retail advances of Rs. 8,11,12,858 crores in the year.
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6.5. QUALITY OF ASSETS .

Total Assets 2,42,28,515 crores Non Performing Assets in Home loan Segment 4,16,730 lacs Total Advances 2,42,28,515 crores
6.5: Table 6.5: Quality of assets
NPAs/Total NPAs/Total Advances Assets 1.72% 1.72%
(SOURCE: SBI ANNUAL R REPORT 08-09, 09-10)

QUALITY OF ASSETS
NPA's 1.72%
Standerd Assets 98.28%
6.3: Diagram 6.3: Quality of Assets
Interpretation: Advances amounting to Rs. 4,16,730 lacs went default out of the total advances in the year 2008 2008-09. That implies the ratio of NPAs to total Advances is 1.72%, Of course well within the limits.
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6.6. NATURE OF COMPLAINTS collected from Online . Consumer Forums:

Nature of Complaints Number of Complaints Tedious Procedures 13 Delays in Processing 19 Transparency 12 Negligence by staff 11 Lack of/ of/improper guidance 7 Insurance cover 5 Teasing interest rates 10 Hidden charges 6
6.6: Table 6.6: customer complaints
(Source: www.consumercomplaints.in)
Nature of Complaints(% of total) for the year 2009-10 20096 10 5 7 11 19 13 Tedious Procedures Delays in Processing Transparency Negligence by staff Lack of/improper guidance Insurance cover Teasing interest rates 12 Hidden charges
Diagram 6.4: customer complaints 6.4:
Interpretation: Majority of the customers are very much concern about the unreasonable delays in processing. Operational systems used by SBI are so complex. The transparency level of the bank is maintained low. Most of the existing customers are demanding for uniform demanding rates.
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6.7. AWARDS AND REWARDS

Best Bank 2009 State Bank of India has been adjudged the best bank 2009 by Business India. (August-2009) Shri Om Prakash Bhatt Declared as one of the 25 most 25 Indians valuable Indians by the week magazine for 2009. (Published in August-2009 Issue) Best Home Loan Provider 2008 by Outlook Money NDTVProfit. The Most Preferred Home Loan Provider by CNBC AWAAZ Consumer Awards for 3 years consecutively.
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RECOMMENDATIONS
On the basis of the collected data and the analysis along with detailed discussion made in conclusion of this report, some suggestions can be made to the bank which will be helpful to them in improving their services operational and financial performance. These suggestions have been discussed as follows: 1. Using Information Technology and Electronic Data Interchange at various stages of lending process would definitely give an edge to the bank in fighting competition and arrive at a more realistic lending decision. E.g.:
Use of Central Mortgage Registry (proposed in the Budget2010 to be set up) for Title/Deed verification, which will ensure that no two borrowers in the country will be able to raise institutional loans against the same asset. This would help the bank in reducing NPAs.
Use of credit appraisal reports from CIBIL or Credit Information Companies (CIC) to avoid frauds. Online Processing for various inspections and verifications etc. Online Disbursals and Repayments.
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2.
To increase their customers, the bank should provide specialized services in this sector. These services can be such as proper guidance to the customer regarding the processing of loans, especially for the customers who are illiterate.
3.
To satisfy their customers and for good dealings in future, the bank should make prompt disbursement of loan amount to the customers so that they can buy or construct their dream home as early as possible.
4.
The Bank should use easy procedure, or say, less lengthy procedure for the sanctioning of loan to the customer. There should be less number of legal formalities, in case this exists, then, these should be completed in less time. This will be helpful in attracting more customers.
5.
Although the interest rates on specific norms, yet customers seek uniform interest rate giving equal justice to both the existing as well as new customers.
6.
The bank should improve their overall services to increase the number of customers for home loans. They should recruit professionals to provide such services and to satisfy the customers.
7.
Although SBI Bank is a market leader in 'home loans' sector but they should innovate their services, viewing the- increasing competitions from other banks such as HDFC.
106
8.
The Banks should try to provide proper knowledge regarding their home loan schemes, even to people who don't know about such schemes and their benefits especially in rural areas. So they should provide knowledge to the ignorant customers, especially in rural areas and backward urban area.
9.
So, above are the main suggestions provided to the banks. By considering these suggestions, the banks can strengthen their customer base in home loans sector.
10. They should improve their services and reduce legal proceedings and should be friendly to their customers. 11. The bank needs to take serious and sincere steps in reducing the processing times by taking certain measures like using Information Technology to process the documents.
107
CONCLUSION
The ratio of mortgage to GDP in India has remained low at 7%, as against 12% for china, 41% for Hong-Kong and more than 80%foor developed countries, thus providing for further growth in the housing sector during the coming years. Hence, the banks shall have more opportunities to tap the market. Banks have been constantly increasing their market share, there by intensifying competition from other banks as well as Housing Finance Companies. While the discounted / special scheme rates are offered to new home loans, existing customers continue to ply higher rate of interest. The Indian Banks Association has planned to introduce a uniform rate for all borrowers. As being a Largest Lender in the segment SBI needs to carry the same spirit and the move is in the right direction is certainly expected from all the banks. We need to watch how banks / HFCs adjust their lending portfolios to this effect in future. Last, but not the least, you may be the King in the Market, but, the Indian customer is your Boss by whom, finally, your decision has to be moulded.
108
APPENDIX
QUESTIONNAIRE
(BANK OFFICIAL)
Dear Sir/ Madam, As part of my T.Y.BANKING & INSURANCE curriculum, I, BAKALKAR AMIT, am undertaking a study Project on Home Loans for which I need your views regarding banking products & services in shape of a questionnaire designed by me. The data being collected are solely for academic purpose. I request you to kindly extend your co-operation. 1) How many Home Loan Products that your Bank is offering to the prospect
customers? Sr.No. 1 2 3 4 5 6 2) 3) What are the unique features of your offerings? How are you rewarding your customers who service their loans regularly Product/Scheme Customer Segment Interest Quantum of Tenure Amount rate
and stand up to your expectations? 4) What are the Value Added Services, if any, that you are offering to the
customers? 5) What are the concessions, if any, that you are offering to the customers?
109
6)
What are your strengths and weaknesses in the segment? S.NO. Strengths Weaknesses
7)
Who are your main competitors and whats the level of competition you
face from them? Sr.No. 1 2 3 4 8) How are you promoting your products? Medium used Print Media TV Advertisement Personal Selling Campaigns Road-Side Hoardings 9) How are you distributing your Products? Channel (Sanctioned by) Proportion of use (low/medium/high) Any additional Info Competitor Severity of Competition (Low/Medium/High)?
S.NO. 1 2 3 4
Terms/Conditions
Proportion of Sales
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10)
What is the Process Undertaken (within your branch) What is done (operations) /considerations
S.NO 1 2 3 4 5 6 7 8 9 10 11
Stage Promotion Guidance to prospective Application submission Pre-Sanction Process Sanction Post-Sanction Process Valuation Inspections Legal Sanctions Disbursement Post-Disbursement Inspections
Who does it
How many days it takes
11)
How do you see the performance of Marketing Associates and their role in
bringing sales? 12) How many sales you have made from Marketing Associates? Number of Sales from MAs Total Sales % of Total Sales 13) What are the various standard formats (Proforma Sheets) that you use at
various stages? Title of the Sheet Primary Contents Purpose Who Maintains it
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14)
What did your customers prefer (Fixed/Floating Interest Rate)? Type of Interest Rate Fixed Floating Number of Borrowers
15)
What is the Authority Structure for distribution of Loans: Terms/Conditions Sanctioned by Authoritative organ Administrative Clearance by
16) 17) 18) 19) 20) 21) 22) 23)
How are the builders considered and approved? What is the criterion for Repayment? What are the Pre-Closure norms? What is the criterion for Re-Phasement? How are you providing for Bad Loans? What is the Recovery Mechanism that you practice? What is the nature of recovery agents? How do you undertake Take Overs?
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24)
How many prospects (demand)- Applied-Sanctioned-Under Process-
Disbursed? Customers Have shown interest in buying your products Applied(Applications) Approved Sanctioned Disbursed 25) How many Home loans you have disbursed to: Target Segment Individuals from Weaker sections Mortgage loans Salaried individuals Self-Employed individuals Realtors Your Staff 26) Number of accounts Amount (Rs.) Number of Proposals
What was the purpose of home loans towards which disbursements have
been made? Purpose To Pay for First homes To Purchase second homes To Improve/renovate existing homes Number of Accounts Amount(Rs.)
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27)
NMI Profile of Customers: NMI Range Up to Rs.2 Lacs Between Rs.2 Lacs and Rs. 5 Lacs Above Rs.5 Lacs No. of Borrowers Total Amount (Rs.)
28)
Loan Amount Disbursals: Loan Amount Upto Rs.5 Lac Above Rs.5 Lac and up to Rs.10 Lac Above Rs.10 Lac and upto Rs.20 Lac Above Rs.20 Lac and upto Rs.50 Lac Above Rs.50 Lac and upto Rs.1 Cr Above Rs.1 Cr and upto Rs.5 Cr Above Rs.5 Cr No. of Borrowers
29)
Size Of Home Loan Book for the last 3 financial years: Financial Year 2006-07 2007-08 2008-09 Amount(Rs. crores) lent
30)
Year-on-Year Credit Growth : Financial Year 2006-07 2007-08 2008-09 % growth rate
31)
What is the Share Of Home Loans in the retail portfolio?
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32)
How many Home Loans have been Taken Over from other Banks: Bank Number of Accounts Amount (Rs.)
33)
How many Outstanding Loan accounts are there? Number of Accounts Outstanding Total Amount Outstanding(Rs.) Total Outstanding/Total Advances (%)
34) 35)
How are you mitigating risk factors in lending to the segment? What is Net Income Generated on the segment?
Net Interest Income generated on Home Loans
Total Net Interest Income
% of Total Net Income
36)
Have you met the Targets set?
How many complaints have been reached at Banking Ombudsmans 37) Office?
Total Complaints
Share of Home Loans
% of total
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QUESTIONNAIRE
(CUSTOMER) Name.__________________________________________________________ Age.______ Occupation.__________________________________________ Income Married Rs. /Unmarried Yes No Monthly Annual
Home Loan Taken YES, IF YES
from which Bank/Financial institutions___________________________ Amount Rs. /Floating EMI Rs. Rate % /-
Interest Rate. Fixed
Purpose: For First Home....................... For second Home.................... For repairing Existing Home Any Complain regarding Home loan You have taken _______________ _______________________________________________________________
__________________________________________________________________________________
IF NOT Interested for taking Home loan Yes Applied Yes No No
If yes, then from Which Bank/F.I. ________________________________

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Reasons for selecting particular bank? ________________________ ________________________________________________________________ Amount Rs. /-
Purpose: For First Home....................... For second Home.................... For repairing Existing Home
Signature
Thank you.
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BIBLIOGRAPHY
BOOK Jain J. N, Modern Banking & Principles & Techniques New , Techniques, Delhi, Rejal Publication. MAGAZINE Outlook Money, 21 Home loan essentials to know now, 8 September 2010. NEWS PAPERS Economic Times of India and DNA Economic Times DNA 17 Aug 2010 25 March 2010 20 March 2010
Article Dates
7 Sep 2010 9 Sep 2010 1 Sep 2010 31 Aug 2010
WEB RESOURCES: i. ii. iii. iv. v. vi. vii. viii. ix. www.statebankofindia.com www.onlinesbi.com www.apnaloan.com www.consumercomplaints.in www.Consumercourt.in www.lendingtree.com www.guide2homeloan.com www.indiahousing.com www.deal4loans.com
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OTHER RESOURCES 1. The Training and Guidance Material supplied to the staff of the Branch. 2. Annual Reports of RBI(made available on its website
(www.rbi.org.in) 3. Annual Reports of SBI(made available on its website
(www.sbi.co.in)
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A PROJECT ON

SUBMITTED TO UNIVERSITY OF MUMBAI

2010-2011 (VTH SEMISTER)

Place: __________ Date: ___________ Signature of Student

Date. BAKALKAR AMIT CHANDRAKANT.

OBJECTIVES OF THE STUDY Identification Of The Problem

Offer A Solution To The Problem

NEED FOR THE STUDY

SCOPE OF THE STUDY

TOOLS AND TECHNOLOGIES USED

LIMITATIONS OF THE STUDY

1.2. HOME LOAN INDUSTRY IN INDIA .

Diagram 1.1: Housing in India .1:

Diagram 1.2: Demographics in Housing 1.2:

Diagram 1.3: Housing Finance Timeline 1.3:

Diagram 1.4: Improved Affordability 1.4

SOURCES OF FUNDING FOR HOUSING FINANCE

ISSUES IN AFFORDABLE HOUSING

Major Home Loan Providers

1.3. INDIA'S MORTGAGE MARKET SCORES OVER WEST

2.3 ASSOCIATE BANKS:

2.5. FOREIGN OFFICES:

2.6. ATM SERVICES

2.7 GROUP COMPANIES:

2.8. PRODUCTS AND SERVICES 2.8.1. Personal Banking

2.8.2. Other Services

Customer can always meet our employees face to face.

2.1 Table 2.1: Best Practices in SBI (Source: Researchers methodology)

2.12 SHARE HOLDERS:

Share holdings As on 31st March 2010

Promoters MFs/UTI Banks/Fis Insurance Co. FIIs

Diagram 2.1: Shareholders of SBI

2.13. UNIQUE FEATURES OF SBI HOME LOAN PRODUCTS:

Diagram 3.1: Home Loan Products Offered by SBI

(Source: Researchers methodology)

3.1. SBI EASY HOME LOAN

3.1: Table 3.1: loan amount in SBI easy home loan

3.2. SBI ADVANTAGE HOME LOAN

Loan Amount Above Rs.50 Lac and up toRs.1 Cr

Processing Fee(Revised) Rs.8,000/-

Above Rs.1 Cr and up toRs.5 Cr

3.2: Table 3.2: loan amount in SBI advantage home loan

3.3. HOME LOAN PRODUCT VARIANTS i) SBI Max Gain

ii) SBI Freedom

ii) SBI Realty

3.3: Table 3.3: Margin of bank on loan amount. (Source: www.sbi.co.in)

iv) SBI Flexi

v) NRI Home Loans

vi) SBI Optima

vii) SBI Tribal Plus

viii) Gram Niwas

ix) Sahyog Niwas

x) SBI Happy Home Loans

xi) SBI Green Home Loan

3.4. HOME LOAN TOP-UP PRODUCTS

SBI Home Line

ii) SBI Home Plus

iii) SBI Life style Loan

ii) SBI Reverse Mortgage Loan

(Source: Researchers methodology) 56

4.2. DOCUMENTS (1) ADVOCATE Check List: (Prepare separate set)

(2) ENGINEER Check List:

Place: Date: _ Signature of Student