A PROJECT REPORT ON

HOME LOAN COMPARISON AND CREDIT RATING

AT

THE UNITED WESTERN BANK LTD

SUBMITTED TO UNIVERSITY OF PUNE

BY RUCHITA SINGH MBA (FINANCE) (2004-2006)

VISHWAKARMA INSTITUTE OF MANAGEMENT PUNE

TABLE OF CONTENTS

S.NO. TOPIC PAGE NO. ______________________________________________________

1. 2. 3. 4 5. 6. Executive Summary Objective of the Project Company Profile Introduction to the topic Home Loan and Customer Rating Home Loan Scheme of The United Western Bank Ltd. 1 2 3-4 5-16 17-19

Home Loan Scheme of HDFC Bank Ltd., ICICI Bank Ltd., State Bank Of India, Karur Vysya Bank Ltd, Karnataka 20-33 Bank Ltd. and South Indian. Bank Ltd. SWOT Analysis of United Western Bank Ltd. Critical Analysis Customer Rating 34-35 36-50 51-58 59 60 61

7. 8. 9.

10. Recommendation 11. Conclusion 12. Bibliography .

Executive Summary

EXECUTIVE SUMMARY

These days housing finance is in the limelight old private sector banks, new private sector banks and even public sector banks have become extremely active in this field, there is no doubt what so ever that there is tremendous shortage of housing in our country. With the interest rates on housing loans at historical low along with simplified procedure of obtaining it. Many people are willing to take home loans today. With the new thrust in the retail segment by the banking community on the whole, this sector has become attractive both for the lenders and borrowers.

Customers Rating is carried by banks before sanctioning loan to customers. Customer Rating reflects the borrowers accountability, expected capability and inclination to pay interest and principal in a timely manner.

In this project I have studied in detail about Home Loan scheme of banks and then compared them with each other. I have also studied in detail about customer rating undertaken by The United Western Bank Ltd.

At the end I have given suggestion to The United Western Bank Ltd regarding changes which can be made in the Home Loan scheme and activities which can be undertaken to promote this product.

Objective Of The Project

OBJECTIVE OF THE PROJECT

To understand the term Home Loan. To understand the important factors related to Home Loan Scheme. To study the Home Loan Scheme of The United Western Bank Ltd along with other leading banks. To study the Customer Rating of The United Western bank Ltd. with reference to Home Loan. To compare the Home Loan Scheme of leading banks in India.

Company Profile

THE UNITED WESTERN BANK

The United Western Bank Ltd is one of the leading private sector commercial banks in India. The head office of the bank is situated at Satara, which is just two hours drive from pune. Many eminent personalities hailed from this area.Shri Annesaheb Chirmule was one such personality. He founded The Western India Life Insurance Company Ltd, a leading insurance company in those days. In 1955 due to nationalization of the insurance business by the Indian Government, The Western India Life Insurance Company Ltd was merged with LIC of India. Annasaheb Chirmule worked with the view to make natives self-dependent .He founded The Satara Swadeshi Commercial Bank Ltd in 1907.The success of this bank led him to establish one more commercial bank . The United Western Bank Ltd, which commenced operation on March 8, 1937. In 1951, The United Western Bank Ltd acquired the status of a scheduled bank. A series of mergers into the bank followed. Union Bank of Kolhapur in 1956 and The Satara Swadeshi Commercial Bank Ltd, in 1961 was merged with the bank. This and the progressive policies of bank led to acquire status of (B) class bank in 1969 and (A) class bank in 1974 Incorporated in 1936, the bank is one of the largest private sector commercial banks in India. The share holding of the bank is well dispersed all over the country. The bank can be described as bank with a steady past, prospering present and promising future. The bank has three tier organizational structure. Head office Zonal office Branches

The bank 230 branches spread over 47 districts of 9 states are controlled by 5 zonal offices at Mumbai, Pune, Kolhapur, Jalgaon, and Nagpur. The head office of Satara oversees the operations of 5 zones.

Important Services provided: Provides various types of Loans, accepts various types of deposits. Operates 169 Fully computerized and 78 partially computerized Branches. Provides extended Hours Services at branches in Residential area. Operates 65 ATM Centers. Provides merchant Banking facilities. Operates special Agriculture Finance Branch at Kholapur. Operates 15 Foreign Exchange Centers and 54 Foreign Correspondents. Provides SANMAN- Deposit Scheme for Senior Citizen.

Introduction To The Topic

HOUSING FINANCE
Of late, housing finance has not only become popular, but the procedure for obtaining a loan has become so simplified that housing loans are easily available. This may be attributed to the change in the housing policy of both the Central and State governments. A redeeming feature of Indian housing finance is the recent entry of commercial banking in a big way. Housing and land development occupy a peculiar position in India so far as the state and central government are concerned. Both the governments have the power to make enactments on the subject of housing and land. As a result, the housing policy in India has been wide and varied.

HOUSING
Housing means the houses or conditions that people live in .

HOUSING FINANCE
A set of all financial arrangements hat are made available by Housing Finance Companies(HFCs) to meet the requirements of housing is called housing finance.

HOUSING FINANCE IN INDIA-GROWTH FACTOR

Housing finance has received a boost through through a combination of growing demand and rising affordability .while the demand for housing has always been there and will be for a long time to come, its increase affordability has been the key to growth. According to HDFC, every rupee spent on housing leads to 78 paise increase in GDP. BUDGETARY SUPPORT Tax benefits, a low interest rate regime and high salary levels among certain sections are chiefly responsible for fuelling fast growth in the housing financial servicing sector. Tax benefit for housing finance contributes to housing development. For this purpose RBI maintains a soft interest regime. The bank rate of interest is constantly being slashed so that it acts as a stimulant for housing demand. Similarly, a sharp increase in size of pay packets has played an important role in making a house affordable. Regardless of salary levels, if the cost of a house comes down it would pep up the demand for housing finance. The is reason to believe that we are witnessing a gradual movement towards loosening the restrictions that increase the cost of a house.

 NEW DYNAMICS An important development in the housing finance business has been the entry of new players. The relatively low risk in a housing portfolio has spurred a new entrance in the last few years. Arguably, the most significant entrant has been ICICI Home Finance. The entry of new players and the consequent increase in competition has been followed by an interesting trend. The interest rate of most housing finance companies (HFC) move in unison, there by suggesting that interest rate is not likely to be a competitive tool. The high level of competition has made it impossible for an HFC, with branches across the country, to charge an interest rate higher than the competition. Commercial banks are an exception to the rule, in the sense that they always charge lower than the competition. DISTINGUISHING SERVICE Companies are trying to distinguish themselves through a difference in service standards. Industry officials emphasize that service quality is the key to competitive strength .A the moment, there seems to be little to chose from among the top housing companies when it comes to service .Assuming almost similar service standards ,future growth is likely to be decided by access to resources. A strong brand name such as HDFC Bank Ltd, ICICI Bank Ltd, and LIC is likely to command access to a lot more resources and customers. Therefore the bigger players are likely to be more dominant players.

HOUSING FINANCE ASSISTANCE-FACTORS

Housing finance companies consider the following factors before making any financial assistance for housing: Loan amount Tenure Administrative and processing cost Prepayment charges Services Value addition

Sources of finance like HFCs and banks EMI calculation methods

. THE LOAN AMOUNT The amount of loan that any HFC decides to provide to a loan seeker depends on the following variables: Customers repayment capacity Rate of interest charged Term of loan

Repayment is done through EMI , which includes principle and the interest . As a rule , an HFC fixes the EMI between 30 &40 percent of the customers gross monthly income, or 50 percent of the net monthly income. LOAN COST The effective cost of the loan depends on the type of method used by banks or finance companies. Based on the method, the principal component, which is paid monthly, is deducted from the outstanding principal amount. The two methods, which banks and finance companies generally follow are: Monthly rest system Under this system, the principal amount is deducted every month from the outstanding amount, and the interest for the following month is calculated on the outstanding principal. Loan Amount (Rs.) 1,00,000 1,00,000 1,00,000 Tenure (Years) 5 10 15 Interest (Percentage) 13 13 13 EMI (Rs.) 2,275 1,493 1,265 Total Payment (Rs.) 1,36,500 1,79,160 2,27,700

Annual rest system Under this system, although the principal amount is paid every month, it is accounted only at the end of the year. This is illustrated as follows: Loan Amount (Rs.) 1,00,000 1,00,000 1,00,000 Tenure (Years) 5 10 15 Interest (Percentage) 13 13 13 EMI (Rs.) 2,370 1,536 1,290 Total Payment (Rs.) 1,42,200 1,84,320 2,32,200

The above example illustrates that for the same amount and for same rate of interest, the amount of EMI varies with the type of method used. FIXED AND FLOATING RATES Customers should check whether the rates offered are fixed or floating (varies with PLR). Floating rates are better in a falling rate scenario, but expensive in an increasing rate scenario. The borrower should check whether it is viable to shift the loan from fixed rate to floating rate in a decreasing rate scenario by carrying out cost benefit analysis. PREPAYMENT CHARGES This is an important factor to be considered, especially in situations where the ability to repay the loan matters. There are certain HFCs which charges prepayment, in case the loan is repaid before schedule. This pushes up the coat of the fund of the borrower. Borrowers who are desirous of repaying ahead of the schedule should approach HFCs which do not have a prepayment charge. VALUE ADDITION The value addition includes supplementary services that HCFs provide, such as fast disbursals of loan, legal services, meeting with brokers, builders and so on.

These days Housing Finance is in the limelight. Not long ago the Housing Finance meant HDFC. It is no more so. Virtually all banks led by New Private Sector Banks and even Public sector Banks have become extremely active in this field. There is no doubt whatsoever that there is tremendous shortage of housing in our country. With the interest rates on housing loans at historical low, many people are willing to take loans today. The banks on the other hand are flushed with funds due to less off take of credit by the corporate sector, due to the recessionary conditions prevailing for the past few years. Secondly the rate of default in this sector is pretty low, making these loans very attractive for the banks. With the new thrust in the retail segment by the banking community on the whole, this sector has become attractive both for the lenders and the borrowers. What has also helped is that the real estate rates seem to have stabilized. Two acts namely the Urban Land Ceiling Act and the Rent Control Act has a great impact on this sector. The ULCRA was enacted in 1976 with the objective to make more land available for the construction of houses. This was sought to be achieved by preventing concentration of urban property in the hands of few. But in fact this legislation ended up in choking up the land supply. According to the Ministry of Urban Affairs out of the total surplus land of 2,20,674 hector identified, only 19,000 hectors have been taken possession of by the various state governments. This has led to a scarcity of affordable land for residential construction. Recently the Central government has repealed this act and has advised the state governments to also do the same. However all state governments have not acted on this as yet. The Rent Control Act also had a similar adverse impact on the housing industry. This law favors the tenant, and this discourages investment in housing sector for letting the property on rent or lease. Under this act the owner runs the risk of the property being taken over by the tenant at some stage. Some states have recently amended their Rent Control Acts, but a lot still needs to be done. Unless the investor gets market related returns on his investments in this sector and unless he has the right to repossess the property from the tenant, the investor is not likely to make investments in this sector. Hosing finance is offered by many specialized Housing Finance Companies approved by the regulator National Housing Bank, a subsidiary of the Reserve Bank of India. It is also offered by public and private sector banks along with many co-operative banks. The NHB specifies various norms to be followed by the HFCs (Housing Finance Companies) and regulates the industry. It specifies the interest rates to be followed in lending and borrowing, income recognition and prudential norms, borrowing limits and audit to the hosing finance companies. It provides refinance facility to the HFCs and facilitates promotion of these companies on the specified lines.

Objectives of NHB: 1. To promote, establish, support or aid in the promotion, establishment and support of housing finance institutions. 2. To make loans, advances or render any other form of financial assistance whatsoever to housing finance institutions, scheduled banks, and to any authority established under any central/state engaged in slum clearance. 3. To subscribe to or purchase stocks share bonds debentures and securities of every other description. 4. To guarantee the financial obligations of these institutions and underwrite their issues of securities.

CUSTOMER RATING

The main objective of this is to assess the applicants sustained repayment capacity over the period. The main points that are considered are: Income Age Academic background and Employment stability Family Background Assets and Liabilities Servicing record in respect of other institutional borrowings Saving history and capacity Number of dependents Income and expenditure pattern

Documents Required for Scrutiny: Salaried Class: Salary certificate Copy of ration card/electricity bill Rent receipt if applicable.

For Self Employed: A brief introduction to business/profession Balance Sheet and Profit and Loss account, duly certified by a chartered accountant. Income tax / wealth tax return for the past three years. Copies of challans of advance tax. Assessment orders. Shop and Establishment Act certificate of registration. Ration card / Electricity bill / Rent receipt (if applicable)

Legal Appraisal: After Customer Rating is done, legal appraisal is done wherein all other documents like original title deeds, revenue receipts, encumbrance (search) certificates for the past 30 years are verified by a lawyer to confirm that the withholder can create an equitable mortgage in favor of the HFC by simple deposit of title deeds. Technical Appraisal: The Technical officer will verify the original documents and counter check all the furnished information. Following documents are generally required: Layout Plan Approved Plan No-encumbrance certificate Clearance under Urban Land ceiling Act Commencement certificate A detail estimate of cost of construction.

EXPLANATION OF TERMS
EMI EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal. EMI calculation EMI Formula: l x r [(1+r) n / (1+r) n-1] x 1/12 l = loan amount r = rate of interest n = term of the loan Eligibility conditions for a Home Loan To qualify for a home loan, most of the lending institutions in India require you to be: a) An Indian resident or NRI b) Above 21 years of age at the commencement of the loan c) Below 65 when the loan matures d) Either salaried or self employed The interest rates offered for Home Loans. (Daily Reducing, Monthly Reducing and Yearly Reducing) Interest rates are different from institution to institution and generally range from about 7.25% to around 10.75 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted. Annual reducing In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively less than the annual reducing system. Monthly reducing In this system, the principal, for which you pay interest, reduces every month as you pay

your EMI. Daily Reducing In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system. Fixed rate of interest Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market. Floating rate of interest This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up. The other costs that usually accompany a Home Loan Home loans are usually accompanied by the following extra costs: Processing Charge: Its a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee. Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid. Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned. Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.

The repayment period Repayment period is the period during which loan is to be repayed.Repayment options range generally from 5 to 20 years.

Loan amount /Quantum Of Loan Usually, most banks and financial institutions give up to a maximum of 85% of the cost of the house. The 15%, sometimes called seed money, will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, number of dependents, monthly outgoing and repayment capacity. This varies from case to case. Securities required for home loans In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates. Guarantor to get a Home Loan Some institutions ask for 1 or 2 guarantors, others require no guarantor at all.

TAX BENEFITS OF HOME LOAN

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, 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 a. 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. b. For rental property It will be adjusted against rental income Interest paid on loan before completion of construction will be allowed as deduction from income at 20% per year for the next five years.

Home Loan Scheme Of United Western Bank Ltd.

THE UNITED WESTERN BANK LIMITED. HOUSING LOAN SCHEME

The united western bank brings to people vastupurti purti a unique housing loan scheme that translates their dream. Purpose of Loan Loan for Construction and purchase of house/flat including purchase of land. Renovation/Extension/repair of Existing house /flat. For taking over of housing loans from other banks / Housing finance companies. For furnishing. For purchasing durable goods along with loans for the purchase and construction of house/ flat. For purchase of house /flat on resale.

Eligibility Any Individual with regular source of income either singly or jointly with his/ her spouse. Age of person should be at least 21 years.

Quantum An amount based on the repayment capacity of the applicant subject to : 45 times of net income earners or 4 times of annual income for business / professionals. Maximum amount Rs 75 lakhs. 80% to 85% of the cost of house flat depending on loan amount.

Loan amount, the installment of which does not exceed 50% of monthly income

Minimum of above will be the loan amount For repairs renovation, modification of existing house up to Rs 2lakhs.

Rate of interest Fixed for the first five years @ 8.5% and then floating as per the prevailing rates after 5 years which would be PLR- 3% per annum.Present prime lending rate is 11.5% per annum. Repayment period Security Main security for loan will be mortgage of property to be purchased out of loan. Processing fees 0.5% upfront. Maximum Rs 1000. Commitment charges 1% commitment charges on outstanding balance if loan is repaid within first 5 years. For construction of new house /flat (18years) For purchase of new house/flat. (18 years) For purchase of house/flat on resale. (18years) For additional construction of house (7 years) For repairs, renovation, extension (7years) For taking over of housing loan from other banks / housing finance companies. (18 years) For furnishing. (7years)

Margin EMI Rs 2052 for first 5 years and after that according to floating rates prevailing at that time. Repayment holiday Repayment holiday of 18 months. 15% for loan up to 5 lakhs and 20% above 5 lakhs.

Details About Other Leading Banks

BANKS IN INDIA

PUBLIC SECTOR / NATIONALISED BANKS: Allahabad Banks Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank Punjab National Bank Syndicate Bank UCO Bank Union Bank of India.

OTHER PUBLIC SECTOR BANK: IDBI Bank

OLD PRIVATE SECTOR BANKS: Bank of Rajasthan Ltd. J & K Bank Ltd. Karur Vysya Bank Ltd. South Indian Bank Ltd. United Western bank Ltd.

NEW PRIVATE SECTOR BANKS: HDFC Bank Ltd. ICICI Bank Ltd. UTI Bank Ltd.

STATE BANK OF INDIA AND ITS ASSOCIATES: State Bank Of India

The top Home Loan providers in India are HDFC Bank Ltd, ICICI Bank Ltd and State Bank Of India. Presently The United Western bank Ltd cannot compete with these banks as they have vast resources and expertise at their disposal. They are bigger in size than The United Western bank Ltd. On the other hand Karur Vysya Bank Ltd, South Indian Bank Ltd And Karnataka Bank Ltd is almost equal to The United Western Bank Ltd in terms of resources and expertise. The United Western Bank Ltd faces stiff competition from these banks. Therefore it is necessary to study in detail the Home Loan scheme of all these Banks. While applying for a Home Loan following factors are considered by applicants. The various purposes for which Home Loan is given. Eligibility for getting a Home Loan. Interest Rates EMI of loan Quantum of loan Margin Repayment period Processing fees Prepayment charges Other incentives provided by banks etc.

Banks and Financial institutions should consider these factors while deciding a Home Loan scheme or while making changes in the existing Home Loan scheme.

HDFC Bank Ltd.

Purpose of Loan Construction/purchase of house/flat Extention, Renovation and Repair of Existing house /flat. For taking a home loan from any other bank and financial institution.

Quantum For purchase/construction: Loan up to 85% of property. Repayment period Up to 20 years. Margin 15% of the total cost in case of house/flat . Interest rates (%) Lenders name Fixed floating Upto 5 years 8.75 7.75 6-10 years 8.75 7.75 11-15 years 8.75 7.75 16-20years 8.75 7.75

Equated monthly installment per lakh (Rs.) Lenders name Fixed Floating Upto 5 years 2064 2013 6-10 years 1250 1200 11-15 years 996 942 16-20years 880 821

Processing fees Fixed floating 0.50% 0.50%

Pre-payment charges Nil

ICICI Bank Ltd.

Purpose of Loan For construction/purchase of house/flat For renovation/extention/repair of Existing house /flat. For purchase of plot for construction of house/flat.

Quantum Up to Rs. 3 crore. Repayment period Up to 20 years. Margin 15% in case of purchase and construction of house/flat. 25% in case of purchase of land for construction of house/flat.

Interest rates (%) Lenders name Fixed floating Upto 5 years 8.50 8.00 6-10 years 8.50 8.00 11-15 years 8.50 8.00 16-20years 8.50 8.00

Equated monthly installment per lakh (Rs.) Lenders name Fixed Upto 5 years 2052 6-10 years 1240 11-15 years 985 16-20years 868

Floating

2028

1214

956

837

Processing fees Fixed floating waived waived

Prepayment charges Nil

State Bank Of India

Purpose of Loan Construction/purchase of house/flat Renovation/extention/repair/alteration of existing house /flat. For taking a Home Loan from any other bank, financial institution.

Quantum Up to 60 times the net monthly income will be sanctioned depending upon age of customer. Repayment period Up to 20 years. Margin 25% for new house/flat. 20% for old house/flat. 20% of the cost for renovation/repair.

Interest rates (%) Lenders name Fixed floating Upto 5 years 8.50 8.00 6-10 years 9.00 8.50 11-15 years 9.00 8.50 16-20years 9.25 8.75

Equated monthly installment per lakh (Rs.) Lenders name Fixed Floating Up to 5 years 2052 2028 6-10 years 1267 1240 11-15 years 1014 985 16-20years 915 884

Processing fees Fixed floating 0.25% 0.25%

Pre-payment charges 2%

Karnataka Bank Ltd.

Purpose of Loan Construction/purchase of house/flat Renovation/remodeling/repair of Existing house /flat.

Eligibility Individuals who are residents of India. Salaried persons aged 21 years and above who are in confirmed service with a minimum service of 3 years and a minimum gross monthly salary of Rs 6000/-. Businessmen/Professionals/ self employed persons aged 21 years and above, with a minimum experience of 3 years and a minimum gross annual income of Rs 60,000/-.

Quantum For purchase/construction: 60 times of latest monthly take home (net) salary in case of salaried persons. 5 times of latest annual net income +depreciation provided, if any, as per P and L A/c in case of traders / professionals / self employed persons. Rs 50 lakh. Whichever is lower.

Renovation and repairs: Up to Rs 10 lakh or 40% of the value of the house/flat, whichever is lower. Repayment period Up to 15 years. Repayment holiday upto 18 months considered. Repayment period within 70 years of age. Margin

25% of the total cost in case of house/flat up to 5 years old. 30% of the total cost in case of house/flat more than 5 years old and up to 20 years old. Reduction in margin by and up to 10%considered on special conditions. 30% of the cost for renovation/repair.

Interest rates (%) Lenders name Fixed floating Upto 5 years 8.25 6-10 years 8.75 11-15 years 9.00 16-20years

Equated monthly installment per lakh (Rs.) Lenders name Fixed Floating Upto 5 years 2040 6-10 years 1253 11-15 years 1014 16-20years

Processing fees Fixed floating 0.25%

Pre-payment charges Nil

The Karur Vysya Bank Ltd.

Purpose To purchase a ready built Flat / House (new and also existing not older than 10 years). To purchase a plot and construction of house. For repairs / renovation / additional construction. For taking over Housing Loan liability from other Banks & recognized Housing Finance Companies.

Quantum Loan available up to Rs 15, 00,000/-

Repayment period Repayment of loan up to 15 years with holiday period 12 months

Margin 25%

Interest Rate (%) Type of Loan Fixed Floating Up to 5yrs 10.50 10.00 6-10yrs 10.50 10.00 11-15yrs 10.75 10.25 16-20yrs

EMI per Lakh (Rs.)

Type of Loan Fixed Floating

Up to 5yrs 2149 2125

6-10yrs 1349 1322

11-15yrs 1121 1090

16-20yrs

Processing fees Fixed Floating 1.00% 1.00%

South Indian Bank Ltd

Purpose Purchase of Flat or House Construction of Flat/House For major repair, renovation, extension or improvement of Flat/House Takeover of HL from other Banks/ reputed housing finance companies Purchasing land & constructing a house.

Quantum Loan for new construction/purchase/ take over etc Max: Rs.50 lacs. For renovations/ additions/ major repair, improvement etc Max: Rs.5 lacs. Margin Purchasing land & constructing a house 30 %: old House/renovation. Repayment Period Minimum 5 years & Maximum 20 years. Interest Rate (%) Type of Loan Fixed Floating Up to 5yrs 9.00 8.00 6-10yrs 9.50 8.50 11-15yrs 9.50 8.50 16-20yrs 9.50 8.50

EMI per Lakh (Rs.) Type of Loan Fixed Floating Up to 5yrs 2076 2028 6-10yrs 1294 1240 11-15yrs 1044 1029 16-20yrs 932 868

Processing fees Fixed Floating 0.25% 0.25%

Prepayment Charges 2%

Critical Analysis

INTEREST RATES (%)

Lenders Name The UW Bank Ltd. South Indian Bank Ltd. Syndicate Bank Union Bank United Bank of India UTI Bank Ltd ICICI Bank Ltd IDBI Bank Jammu & Kashmir Bank Ltd Karnataka Bank Karur Vysya Bank Ltd Punjab National Bank Allahabad Bank Andhra Bank

Type of Loan
Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating

Upto 5 yrs

6-10 yrs

11-15 yrs

16-20 yrs.

8.5% for the first five yrs and then floating rate as per PLR 9 8 8 7.25 8.25 8 8.5 9.5 9.75 7.75 8.5 8 8.5 8 8 7.75 8.25 10.5 10 9.25 7.75 8.25 7.25 7.75 7.25 9.5 8.5 8.5 7.75 9 8.75 9 9.5 10.25 8 8.5 8 8 8.5 8.25 8.75 10.5 10 10.25 8 8.75 7.75 8.5 8 9.5 8.5 8.75 8 9.5 9.25 9.25 9.5 10.75 8 8.5 8 8 9.25 9 9 10.75 10.25 10.5 8.25 8.75 7.75 8.75 8.25 10.5 8.25 9.25 8.25 8.75 8.25 9.5 8.5 9 8.25 9.5 9.25 9.25 9.5 10.75 8 8.5 8 8 9.75 9.5

INTEREST RATES (%)

Lenders Name Bank of Baroda Bank of India Bank of Maharashtra Bank of Rajasthan Canara Bank Central Bank of India Corporation Bank Dena Bank HDFC Bank

Type of Loan
Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating

Upto 5 yrs
9 8 8.5 7.25 8 8.25 7.5 8 7.5 8.5 8 8.25 7.5 8.75 7.25 8.75 7.75

6-10 yrs
9.5 8.5 9.25 8 8.5 8.75 8 9 8.25 9 8.5 8.5 8 9.25 7.75 8.75 7.75

11-15 yrs
10 8.5 9.25 8.5 8.75 9 8.25 9.25 8.50 9.5 9 8.5 8.25 9.5 8 8.75 7.75

16-20 yrs.
10 8.75 9.25 8.5 8.75

9.25 8.50 9.5 9 8.25 9.5 8 8.75 7.75

EQUATED MONTHLY INSTALLMENT PER LAKH (Rs)

Lenders Name The UW Bank Ltd. South Indian Bank Ltd. Syndicate Bank Union Bank United Bank of India* UTI Bank Ltd ICICI Bank Ltd IDBI Bank Jammu & Kashmir Bank Ltd Karnataka Bank Karur Vysya Bank Ltd Punjab National Bank Allahabad Bank

Type of Loan

Upto 5 yrs

6-10 yrs

11-15 yrs

16-20 yrs.

2052 for the first five years and then according to floating Interest rates. Fixed 2076 1294 1044 Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating 2028 2028 1992 2040 2028 2052 2052 2112 2016 2052 2028 2052 2028 2028 2016 2040 2149 2125 2070 2000 2040 1992 1240 1240 1200 1267 1253 1267 1267 1335 1213 1240 1214 1214 1240 1227 1253 1349 1322 1320 1200 1254 1200 1029 999 956 1044 1059 1029 1029 1121 956 985 956 956 1029 1014 1014 1121 1090 1090 960 1000 941

932 868 900 852 932 916 916 916 1015 836 863 837 837 949 932

990 950 916 852

EQUATED MONTHLY INSTALLMENT PER LAKH (Rs)

Lenders Name Bank of Baroda Bank of India Bank of Maharashtra Bank of Rajasthan Canara Bank Central Bank of India Corporation Bank Dena Bank HDFC Bank

Type of Loan
Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating

Upto 5 yrs
2076 2028 2051 2004 2028 2037 2004 2025 2001 2052 2028 2037 2002 2067 2013 2064 2013

6-10 yrs
1294 1240 1280 1213 1240 1250 1213 1264 1224 1267 1240 1237 1211 1280 1200 1250 1200

11-15 yrs
1075 980 1029 985 999 1014 971 1025 981 1044 1014 982 967 1044 956 996 942

16-20 yrs.
965 883 915 868 884

911 864 932 900 849 932 836 880 821

PROCESSING FEES

Lenders Name The UW Bank Ltd South Indian Bank Ltd. State Bank Of India Syndicate Bank Union Bank United Bank Of India UTI Bank Ltd Bank Of Rajasthan Andhra Bank Central Bank Of India Corporation Bank Dena Bank HDFC Bank Ltd. Bank Of India

Type of Loan
Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating

Percentage
0.50% 0.25% 0.25% 0.25% 0.25% 0.50% 0.50% Waived Waived Waived Waived 1.00% 1.00% 0.50% 0.50% 0.50% (w) 0.50% (w) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.50% 0.50% 0.25% (w) 0.25% (w)

PROCESSING FEES
Lenders Name Bank Of Maharashtra Bank Of Rajasthan Canara Bank HDFC Bank Ltd. ICICI Bank Ltd IDBI Bank Jammu & Kashmir Bank Ltd. Karnataka Bank Ltd. Karur Vysya Bank Ltd Punjab National Bank Type of Loan
Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Fixed Floating Waived 0.50% 0.50% 0.50% (w) 0.50% (w) 0.50% 0.50% Waived Waived 0.75% 0.25% 0.25% 0.25% 1.00% 1.00% 0.75% 0.75%

Percentage

INTEREST RATE (%) COMPARISON

12

10

United Western Bank

6

Karur Vysya Bank South Indian Bank

Karnataka Bank

0 interest rate

Lenders Name United Western Bank Ltd Karur Vysya Bank Ltd South Indian Bank Ltd Karnataka Bank Ltd

Interest Rate (%) Up to 5yrs 8.50 10.50 9.00 8.25

EMI PER LAKH (Rs)

2160

2140

2120

2100

2080

United Western Bank Karur Vysya Bank South Indian Bank Karnataka Bank

2060

2040

2020

2000

1980 EMI PER LAKH(Rs) up to 5 yrs

Lenders Name United Western Bank Ltd Karur Vysya Bank Ltd South Indian Bank Ltd Karnataka Bank Ltd

EMI Per Lakh(Rs) Up to 5yrs 2052 2149 2076 2040

PROCESSING FEES (%)

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Processing Fees

United Western Bank Karur Vysya Bank South Indian Bank Karnataka Bank

Lenders Name United Western Bank Ltd Karur Vysya Bank Ltd South Indian Bank Ltd Karnataka Bank Ltd

Processing Fees(%) 0.50 1.00 0.25 0.25

Quantum of Loan

Lenders Name The United Western Bank Ltd.

For Purchase and Construction of House/Flat (up to 45 yrs of age) 60 times of net monthly income. Or, 5 times of net annual income. (above 45 yrs of age) 48 times of net monthly income. Or, 4 times of net annual income and Salary. 50 lacs 50 lacs 40 times net monthly income and salary 50 lacs 50 lacs 100 lacs 80% of purchase 50 lacs 50 lacs 92% of property 100 lacs Upto age of 45: 60 times of net monthly income. Or, 5 times of net annual income. Above 45 years: 48 times of net monthly income. Or , 4 times of net annual income 50 lacs For Salaried Person: Maximum of 72 months gross salary For Others: Maximum of 6 times average annual income Up to age of 45: 60 months net salary Above 45 years 48 months net salary Up to 85%of the property

Bank of Rajasthan Ltd. U.C.O. Bank Jammu & Kashmir Bank Ltd. Bank of India Canara Bank Dena Bank Punjab National Bank Syndicate Bank South Indian Bank Ltd IDBI Bank ICICI Bank Ltd. State Bank Of India

Corporation Bank Syndicate Bank

State Bank of Mysore

HDFC Bank Ltd.

Quantum of Loan

Lenders Name Union Bank UTI Bank Ltd.

For Purchase and Construction of House/Flat 50 lacs For Salaried Person: Maximum Rs.50 lacs or, 48 times of net monthly salary. Loan amount is least of the two above. For Businessmen: Income below Rs.2.40 lacs p.a. loan amt. To be restricted to 2.5 times of avg.annual income. Income above Rs.2.4 lacs p.a.loan amt to be restricted to 3.0 times of the avg.annual income. 4 times of annual gross income For Salaried Person: 40 times of monthly gross salary. For Others: 4 times the annual average (last 3 years) net taxable income plus depreciation. For Salaried Person: 40 times of gross salary. or, 85% of cost of house including registration on mortgage, electricity deposit. Loan amount whichever is less. For Businessmen: 33.3 Times of avg.total income of last 3 years. 85% of cost of purchase of h/f and 75% of cost of old h/f Loan amount will be which ever is lower. For Salaried Person: 36 times monthly gross income. For Businessmen: 3 times the gross annual income 100 lacs

Allahabad Bank Bank of Baroda

Bank of Maharashtra

Andhra Bank

United Bank of India

Maximum Repayment Period of Home Loan

Lenders Name The United Western Bank Ltd. Central Bank of India Dena Bank South Indian Bank Ltd. Karnataka Bank Ltd. Bank of Maharashtra HDFC Bank Ltd. Allahabad Bank Bank of Baroda Andhra Bank IDBI Bank ICICI Bank Ltd. State Bank of India Corporation Bank Syndicate Bank State Bank of Mysore United Bank of India Union Bank Bank of India Canara Bank Punjab National Bank Jammu & Kashmir Bank Ltd. Bank of Rajasthan Ltd. U.C.O. Bank Bank of Baroda

Years 18 yrs 20 yrs 20 yrs 20 yrs 15 yrs. Repayment period upto 70 yrs of age. 20 yrs 20 yrs 20 yrs 25 yrs 20 yrs 20 yrs 20 yrs 20 yrs 25 yrs 25yrs 20 yrs 20 yrs 20 yrs 20 yrs 20 yrs 25 yrs 20 yrs 20 yrs 20 yrs 25 yrs

MARGIN

Lenders Name United Western Bank Ltd. Allahabad Bank

Margin of Home Loan 15% for loan up to 5 lacs & 20% for loan above 5 lacs For Salaried Person: If loan is tied up with salary-Nil If tie up is not available-10% For Others: 20% 10% for purchase and construction of house/flat. For limits unto Rs.10 lacs-15% For limits more than 10 lacs-20% Ranging up to 25% 15% in case of purchase, construction, repair and renovation of house/flat. New house/flat 15% Old house/flat less than 25% old house/flat beyond 20 yrs old 40% 10% for construction 20% for repairs/renovation of existing house/flat. For Construction of house/flat less than 10 yrs old 20% For purchase of house/flat beyond 10 yrs margin ranges from 20-25% For repairs or renovation-20% 30% for purchase and construction of house/flat. 15% for new house/flat 20% for old house/flat 20% for repairs and renovation 25% of total project cost for construction/purchase of new flat/up to 5 yrs 30% for acquiring house which is above 5 yrs old

Andhra Bank Bank of India Bank of Maharashtra Bank of Rajasthan Canara Bank

Central Bank of India

Corporation Bank

South Indian Bank ltd State Bank Of India

Syndicate Bank

30% of the estimated cost of addition/extension/repairs/renovatio n. Margin

Lenders Name Union Bank

15% for purchase/construction For repairs 30% of cost of repair 15% for purchase of plot

United Bank of India UTI Bank

ICICI Bank Ltd. IDBI Bank Jammu and Kashmir Bank Ltd. Karnataka Bank Ltd. Karur Vysya Bank Ltd. Punjab National Bank

15% for purchase and construction of house/flat. 15% in case of normal production 25% in case of improvement/renovation loans 50% in case of loans of existing property. 15% for purchase and construction of house/flat. 8% for purchase and construction of house/flat. For Purchase/Construction 15% For Repairs & Renovation 25% 25% for purchase and construction of house/flat. 25% for purchase and construction of house/flat. 20% for purchase and construction of house/flat.

Customer Rating

CUSTOMER RATING

Customer Rating reflects the borrowers accountability, expected capability and inclination to pay interest and principal in timely manner. A Customer Rating is a simple number which many lenders use to determine whether or not they will give a loan or line of credit to an individual. The main objective of this is to assess the applicants sustained repayment capacity over the period. The main points that are considered are: Income Age Academic background and Employment stability Family Background Assets and Liabilities Servicing record in respect of other institutional borrowings. Saving history and capacity. Number of dependents Income and expenditure pattern

Documents Required for Scrutiny: Salaried Class: Salary certificate. Copy of ration card/electricity bill. Rent receipt if applicable.

For Self Employed: A brief introduction to business/profession Balance Sheet and Profit and Loss account, duly certified by a chartered accountant. Income tax / wealth tax return for the past three years. Copies of challans of advance tax. Assessment orders. Shop and Establishment Act certificate of registration. Ration card / Electricity bill / Rent receipt (if applicable)

There are certain procedural aspects, which are required to be compiled with before disbursement of Home Loan in The United Western Bank Ltd takes place. I am therefore, mainly focusing on compliance of such procedural part by the borrower. There are certain forms, which are required to be submitted by the applicant of the loan. Customer Rating form is one such form. It is accompanied by Customer Profile form. This form contain all necessary information about the borrower that helps the bank in granting loan to the applicant. This information is beneficial for the bank as it helps in proper scrutiny of applicants capacity to repay the amount of loan. Bank checks the information to its satisfaction before granting loan to the applicant. This form contains all necessary information about the applicants financial position and also the detail information about the property. Both the Customer Profile Form and Customer Rating Form are designed in an excellent way by The United Western Bank Ltd.

Customer Profile form contains the following information: Name of the applicant. Address Phone number Date of birth Qualification Occupation Period of service Name(s) of dependent(s) Annual income (as per income tax/salary certificate Sum total of all deductions (including taxes, repayments etc) Annual income of spouse (as per income tax/salary certificate) Sum total of all deductions (including taxes, repayments etc)of spouse. Type of accommodation of the applicant. Assets owned by the applicant. Details of bank account(s) of the applicant. Details of bank account where salary is credited. Details of loans and advances taken so far. Signature of the applicant

Information contained in Customer Rating form are as follows: Name of the applicant. Address Phone number. Date of birth Qualification Occupation Period of service No of dependents Yearly income (as per income tax/salary certificate) Income of spouse Type of accommodation of the applicant. Assets owned by the applicant Details about all bank accounts of the applicant Average balance in saving bank account for one year Deposits, if any with The United Western Bank Ltd Details about any loan taken earlier Details about repayment of earlier loans Present monthly obligation, if any(as percentage to salary or monthly income)

Applicants are given points on the information given by them and if the total points scored by the applicant is satisfactory and other formalities are also completed then Home Loan is sanctioned by bank.

Recommendation

RECOMMENDATION

Bank should decrease paper work regarding sanction of Home Loan .It should also complete the paper work and legal requirement relating to sanction of Home loan on behalf of applicants thus minimizing applicants work. Loan sanction period should be decreased to suit applicants requirements. The processing fees or pre-payment rates should be decreased or either of them should be waived for few years. Bank should go for corporate tie-up, where it would provide loans to employees of that company at a rate lower than banks prevailing rates. Door-Step services should be provided by banks. This kind of service is appreciated by people and can help bank in increasing its business. Bank should promote product (Home Loan). It should set up stalls in different parts of cities for few days. Stalls should also be set up in property exhibitions. Advertisement should be given in newspapers with Banks phone number, because it is necessary to make people aware about the Home Loan Scheme. Bank has less presence in other states apart from Maharashtra. Branches should be opened in important cities as most people in other states are still not aware about the existence of this bank.

Conclusion

CONCLUSION

Growth in population and income level had lead to increase in the demand for Home Loan to meet the growing housing needs of people. Affordable interest rate and easy loan sanction by Banks and Financial Institutions have increased the demand of Home Loan in India. From the detail study and comparison of Home Loan schemes of different banks, I observed that few changes are required in the Home Loan Scheme of The United Western Bank Ltd. A decrease in existing paperwork requirements along with decrease in the Loan sanction period is must. Bank should also decrease its processing fees or its pre-payment rates. It should also go for corporate tie ups and should also undertake some promotion work for its Loan product i.e. Home Loan Scheme. Customer Rating form designed by The United Western Bank Ltd. contains all necessary information about the applicant that helps the bank in granting loan to the applicant. After studying this form I observed that the information contained in it is beneficial for the bank as it helps in proper scrutiny of applicants capacity to repay the amount of loan. Bank checks the information to its satisfaction before granting loan to the applicant. This form contains all necessary information about the applicants financial position and also the detail information about the property.

Bibliography

BIBLIOGRAPHY

Prof. Anil Agashe Merchant Banking and Financial services. BanknetIndia.com UWBankIndia.com Dr S Gurusamy Financial services and markets.