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Retail finance

PART 1

Car loans
Loan taken for purchase of car secured by
hypothecation of car
Car finance market divided into
New cars
Used cars (pre owned cars)

Loan can be availed but 80-95% of asset


value
Registration and insurance is additional
Procedure is same for two wheeler and CV
loan

Car loans
Registration of
vehicle and
marking of
hypothecation
on the car

Selection of car at
dealer

Car finance
scheme explained
by bank
representative

Submission of
credit papers by
customer

Disbursement of
loan to dealership
Loan approval ,
submission of
EMI PDCs

Credit cards
Credit cards can be used for
shopping at malls etc and also to
withdraw cash
Limit is set in the card at the time of
issue
Interest free credit period is offered
for payment varying from 10-45 days
Beyond due date interest and
overdue charges are payable

Credit cards
Advantages
Easy shopping since immediate cash flow not
required
No need to carry cash / cheque
Wide acceptability
Cash withdrawal subject to limits

Disadvantages
Over spending
Overdue charges / interest in case of non
payment on due date
Possibility of frauds forged signatures, now PIN /
OTP ensure additional security for card holders

Credit cards parties


Cardholders persons authorized to use credit
cards for payment of goods and services
Banker / card issuer
Merchants entities who agree to accept credit
cards for payment of goods and services
Merchant acquirers Banks / NBFCs which
enter into agreement to process credit card
transactions
Credit card associations organizations that
authorise card issuers to issue credit cards
under their trademark

Guidelines on credit card operations


Banks should explain all the terms and
conditions to the customer in detail
Copy of MITC (most imp. T & C ) should be given
Information on min amt due etc should be clear

TAT should be informed when they apply for


card
If bank issue credit card without customer
consent they are liable to pay penalty twice
the value of charges reversed
Loan / credit facility / time extension can be
givne for repayment of loan

Guidelines on credit card operations


Add on cards can be issued
If limit is reduced customer should be
informed immediately
Any request for reduction in limit / closure to
be done within 7 days of receipt of request
Monthly statement to be sent by courier /
post / email
If the bank intends to report the default
status to the CIC, the Board approved
procedure should be adhered to including
issue of sufficient notice

Home loans
Home loans are loans for purchase or
construction of house or flats, repairs and
renovation
Can be offered to salaried class, self
employed, businessmen
Loan amount is based on the capacity to pay
of the borrower and the cost of the house
Repayment is allowed maximum upto age of
retirement or 70 days whichever is earlier

Home loans
Home loans upto 30 years are also
offered subject to age criteria
Repayment is made through EMI
Standard credit procedures apply
including evaluation of credit history,
financial strength, cash flow and
current outflow on other loans
Loan is secured by way of mortgage
over the house

Home loans
If income of spouse is taken into
consideration while arriving at home
loan then his / her personal
guarantee is also taken
Additional collateral security may be
taken for comfort depending on the
risk profile
Interest rates offered are
Either fixed
Or floating linked to Bank PLR

Home loans
EMI is split into principal interest components
Home loans go through legal and technical
checks before disbursement
Documents such as approved plan/ CC are
checked for under construction property. For
ready flats OC / society bye laws etc are
verified
Disbursement for under construction
property is based on work certified by the
architect

Home loans
LTV as issued in RBI guidelines are
(maximum)
90% for home loan up to 20 lacs
80% beyond 20 lacs up to 75 lacs
Above 75 lacs 75%

Cost of the house is excluding stamp


duty and registration

Documents required
(illustrative)

Sale deed / agreement to sell


NEC
Approved building plan
Title search
Valuation report
Bank statement / salary slips etc
KYC documents
ITRs
NOC from society

Personal loans
Unsecured loans given without any
tangible security
Examples
Loan to professionals
Loan to pensioners
Salary loan

Depends completely on credit profile


capacity to pay

Personal loans
Could be given for educational /
household expenses
Third party guarantee may be taken
Standard credit documents and loan
documentation
ROI is higher than secured loans
Loan period 24-36 months generally,
can extend upto 60 months
Processing fee is levied

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