bank of maharashtra home loan
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INDEX
Sr.No. Contents Page No.
1 Introduction 1
2 Industry profile 3
3 Company profile 17
4 Product profile 32
5 Objective of study 42
6 Scope of project 44
7
Research methodology 46
i) Primary Data 49
ii) Secondary Data 49
iii) Limitation of the study 51
8 Theoretical background of the study 53
9 Data analysis & interpretation 70
10 Findings 84
11 Conclusion 86
12 Suggestions 88
13 Bibliography 90
14 Annexure 92
Introduction
The successful development in the banking business has become a complex
process in the world of competition today. The development of marketing a new
service, the complexity of a new and different product, their market and therefore
their process through which they developed, dictates that a number of different
people, each which their own role, work together to create the service.
The project represents a information regarding company’s/banks
performance and the service for the home loans to the all sections of society.
The main objective of the project is to understand/study the different product
of a housing loan, the rate of interest of housing loan the days for sanctioning of a
housing loan. This will help us to select the appropriate bank of financial institution
which will have less interest rate and maximum repayment period.
For the execution of the project, the methodology adopted is the collection
of information through primary and secondary data collection method, questionnaire,
processing and analyzing data.
The banks collected for comparison of a housing loan are the main stream
banks in Kopargaon i.e. state bank of India, bank of Maharashtra , bank of
Baroda ,central bank of India. Bank of Maharashtra is very good service provider in
the banking sector
Industry Profile
A. Banking and finance in india
The Indian money market is classified in to : the organized sector(comprising
private, public and foreign owned commercial banks and cooperative banks, together
known as scheduled banks); and the unorganized sector(comprising individual or
family owned indigenous bankers or money lenders and non banking financial
companies (NBFCs)).
The unorganized sector and micro credit and still preferred over traditional
banks in rural and sub-urban areas, especially for non-productive purposes, like
ceremonies and short duration loans.
B. Early History
Banking in India originated in the first decade of 18th century. The first banks
were The General Bank of India, which started in 1786, and Bank of Hindustan, both
of which are now defunct. The oldest bank in existence in India is the State Bank of
India, which originated in the "The Bank of Bengal" in Calcutta in June 1806. This
was one of the three presidency banks, the other two being the Bank of Bombay and
the Bank of Madras. The presidency banks were established under charters from the
British East India Company. They merged in 1925 to form the Imperial Bank of India,
which, upon India's independence, became the State Bank of India. For many years
the Presidency banks acted as quasi-central banks, as did their successors. The
Reserve Bank of India formally took on the responsibility of regulating the Indian
banking sector from 1935. After India's independence in 1947, the Reserve Bank was
nationalized and given broader powers.
C. Post-independence
The partition of India in 1947 adversely impacted the economies of Punjab
and West Bengal, paralyzing banking activities for months. India's independence
marked the end of a regime of the Laissez-faire for the Indian banking. The
Government of India initiated measures to play an active role in the economic life of
the nation, and the Industrial Policy Resolution adopted by the government in 1948
envisaged a mixed economy. This resulted into greater involvement of the state in
different segments of the economy including banking and finance. The major steps to
regulate banking included:
In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an
existing bank may be opened without a license from the RBI, and no two banks could
have common directors.
However, despite these provisions, control and regulations, banks in India
except the State Bank of India, continued to be owned and operated by private
persons. This changed with the nationalization of major banks in India on 19th July,
1969.
D. Nationalization
By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has emerged as
a large employer, and a debate has ensued about the possibility to nationalize the
banking industry. Indira Gandhi, the-then Prime Minister of India expressed the
intention of the GOI in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalization." The paper was received with
positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued
an ordinance and nationalized the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received the presidential approval on 9th August, 1969.
A second dose of nationalization of 6 more commercial banks followed
in 1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization, the GOI controlled
around 91% of the banking business of India.
After this, until the 1990s, the nationalized banks grew at a pace of around
4%, closer to the average growth rate of the Indian economy.
E. Liberalization
In the early 1990s the then Narsimha Rao government embarked on a policy
of liberalization and gave licenses to a small number of private banks, which came to
be known as New Generation tech-savvy banks, which included banks such as Global
Trust Bank (the first of such new generation banks to be set up) which later
amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis
Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the
economy of India, kick – started the banking sector in India, which has seen rapid
growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed
relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in
banks may be given voting rights which could exceed the present cap of 10%at
present it has gone up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this
time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
F. Current situation
Currently, banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for
the private sector and foreign banks. In terms of quality of assets and capital
adequacy, Indian banks are considered to have clean, strong and transparent balance
sheets relative to other banks in comparable economies in its region. The Reserve
Bank of India is an autonomous body, with minimal pressure from the government.
The stated policy of the Bank on the Indian Rupee is to manage volatility but without
any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some
time-especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to
increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the
first time an investor has been allowed to hold more than 5% in a private sector bank
since the RBI announced norms in 2005 that any stake exceeding 5% in the private
sector banks would need to be vetted by them.
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public
sector banks (that is with the Government of India holding a stake), 29 private banks
(these do not have government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,
the public sector banks hold over 75 percent of total assets of the banking industry,
with the private and foreign banks holding 18.2% and 6.5% respectively.
Since liberalization, the government has approved significant banking
reforms. While some of these relate to nationalized banks (like encouraging mergers,
reducing government interference and increasing profitability and competitiveness)
other reforms have opened up the banking and insurance sectors to private and foreign
players.
Central bank Reserve Bank of India
Nationalized banks
Allahabad Bank · Andhra Bank · Bank of Baroda ·
Bank of India · Bank of Maharashtra · Canara Bank ·
Central Bank of India · Corporation Bank · Dena
Bank · Indian Bank · Indian Overseas Bank · Oriental
Bank of Commerce · Punjab & Sind Bank · Punjab
National Bank · Syndicate Bank · Union Bank of
India · United Bank of India · UCO Bank · Vijaya
Bank · IDBI Bank
State
Bank Group
State Bank of India · State Bank of Bikaner & Jaipur ·
State Bank of Hyderabad · State Bank of Indore · State
Bank of Mysore · State Bank of Patiala · State Bank of
Saurashtra · State Bank of Travancore
Private banks
Axis Bank · Bank of Rajasthan · Bharat Overseas
Bank · Catholic Syrian Bank · Centurion Bank of
Punjab · City Union Bank · Development Credit
Bank · Dhanalakshmi Bank · Federal Bank · Ganesh
Bank of Kurundwad · HDFC Bank · ICICI Bank ·
IndusInd Bank · ING Vysya Bank · Jammu &
Kashmir Bank · Karnataka Bank Limited · Karur
Vysya Bank · Kotak Mahindra Bank · Lakshmi Vilas
Bank · Nainital Bank · Ratnakar Bank · SBI
Commercial and International Bank · South Indian
Bank · Amazing Mercantile Bank · YES Bank
Foreign ABN Amro Bank · Barclays Bank · Citibank · HSBC ·
banks Standard Chartered · Deutsche Bank
Regional
Rural banks
South Malabar Gramin Bank · North Malabar Gramin
Bank · Pragathi Gramin Bank · Shreyas Gramin Bank
Financia
l Services
Real Time Gross Settlement(RTGS) · National
Electronic Fund Transfer (NEFT) · Structured
Financial Messaging System (SFMS) · CashTree ·
Cash net · Automated Teller Machine (ATM)
G. Structure / Constituents of Indian Finance System
The India Finance System is composed of different institutions and will see
subsequent address to certain roles and have accordingly brought out a variety of
instrumentation and helped create a healthy money market, which is fundamental
requisite of good finance system.
Commercial Banks
Public Sector Private Sector
State Bank of India
Nationalized Banks Non-Scheduled Banks
Regional Rural Banks
Other Banks in IndiaAssociate Banks
Foreign Banks in India
14 major banks nationalized
on 19th July 2, 1969
6 Banks nationalized on
15th April 1980
H. Categories of Bank:
Banking in India falls mainly under two categories, viz. Commercial banks
and Co-operative banks, while commercial banks cater to the needs of industry and
trade largely; the cooperative banks play a major role in financing agriculture and
allied activities in rural areas, and trade and services in urban areas.
The commercial banks may be classified into four group in terms of
ownership: 1) Public Sector Banks 2) Regional Rural 3) Indian Private Sector Banks
and 4) Banks incorporated outside India.
The commercial banks can be further classified into Scheduled banks and
Non Scheduled Banks. Scheduled Banks are those listed in the second schedule to the
Reserve Bank of India Act 1934
These banks satisfy the criteria laid down under section 42 (6) of the RBI
Act that they should have capital and reserve of Rs. 5 lakhs and their activities should
not be detrimental to the interests of depositors. The scheduled banks are required to
maintain cash reserves equal to 5 % of DTL which can go up to 15 % under section
42 (1). Those, which are not included in the 2nd schedule, are called the non-scheduled
banks. The number of take- oven/liquidation as also in some cases up gradation into
scheduled banks category.
I. Introduction to finance :
Finance is the handmaiden of economic growth Institutions like banks, which
command huge financial resources, can play a crucial role in shaping the economy of
a country by judiciously deploying their funds over such important activities as would
lead to an overall economic growth. A bank’s offer compared to a dam and the money
lying scattered with individuals and institutions in society to the water running its own
course without any direction. Money is collected by banks by way of deposits, and
from this fund money is turned back to the community in the form of loans. Thus,
banks act as a vital link between the savers and the needy.
India is striving to transform herself into an industrially developed country
based on a rural and agricultural economy which should not only be able to feed the
millions of her populations but also to produce raw material for her mills. This can be
done by bringing about the necessary change from an agrarian economy to a
diversified one. Banks have crucial role to play not only in the achievement of this
objective but more significantly in determining how speedily and efficiently it is
achieved. Since the nationalization of the fourteen major banks, the banking industry
has developed adequately enough to meet the changing needs, both corporate and
personal. Banks now offer a wide range of financial services in an extensively varied
environment. The complex task of managing these changes and their consequences
requires that banker should be more professional than ever before.
J. The Business of Banking
Banking has been understood differently at different times and indifferent
countries. In India, the earliest legislation that dealt with the business of banking was
the Indian Companies Act 1913. The Banking Regulations Act came in 1936. Under
this Act all companies having their principal business, accepting deposits from the
public were classified as banks. Hence between 1936 and 1942 even trading and
industrial concerns accepting deposits were classified as banks, if accepting such
deposits was their principal business. The Government of India passed a compressive
Banking Regulation Act in 1949. Accordingly a banking company was defined as a
company which carries on the business of banking that is to say accepting for the
purpose of lending or investing deposits of money from the public, repayable on
demand of otherwise, and withdrawal cheque, draft, order of otherwise. The study
group reviewing legislation affecting banking is of the opinion that “banking should
be abroad based.” The definition given by the Banking Regulation Act 1949 is
certainly not exhaustive, and it needs certain alterations for the sake of simplification.
The purpose of accepting deposits is strictly not relevant for the definition of banking,
through it is basic for banking regulation. There is no need to distinguish between
“loans” deposits” in the context of banking regulation. The definition of banking
should cover all forms of deposits from the public, and banking regulation should take
into its ambit all the different types of banking.
K. Functioning of a Bank:
Functioning of a Bank is among the more complicated of corporate
operations. Since Banking involves dealing directly with money, governments in most
countries regulate this sector rather stringently. In India, the regulation traditionally
has been very strict and in the opinion of certain quarters, responsible for the present
condition of banks, where NPAs are of a very high order. The process of financial
reforms, which started in 1991, has cleared the cobwebs somewhat but a lot remains
to be done. The multiplicity of policy and regulations that a Bank has to work with
makes its operations even more complicated, sometimes bordering on illogical. This
section, which is also intended for banking professional, attempts to give an overview
of the functions in as simple manner as possible.
Banking Regulation Act of India, 1949 defines Banking as "accepting, for the
purpose of lending or investment of deposits of money from the public, repayable on
demand or otherwise and withdrawal by cheques, draft, order or otherwise."
Deriving from this definition and viewed solely from the point of view of the
customers, Banks essentially perform the following functions:
1. Accepting Deposits from public/others (Deposits)
2. Lending Money to public (Loans)
3. Transferring money from one place to another.
4. Acting as trustees.
5. Keeping valuables in safe custody.
6. Government business.
But do these functions constitute banking? The answer must be a no. There are
so many intricacies involved in the activities that a bank performs today, that the
above list must sound very simple to a seasoned banker. Please click on the activity to
see what a Bank has to do to give the above services to its customers. These activities
can also be described as back office banking. Banks are organized in a linear structure
to perform these activities at the base of which lies a Branch. The corporate office of a
bank is normally called Head Office
L. Forms of advances:
Advances by commercial banks are made in different forms such as loans,
cash credit, overdrafts, bills purchased, bills discounted etc. These are generally short-
term advances. Commercial banks do not sanction advances on a long-term basis
beyond a small proportion of their demand and time liabilities. They cannot afford to
lock up their funds for long period. Hence a considerable percentage of their advances
is repayable on demand.
Advances may be granted against tangible security or in special deserving
cases on an unsecured/clean basis.
1. Loans
2. Overdrafts
3 Cash credits
4. Temporary Overdrafts
5. Clean advances
6. Term loans
7. Bridge loan
8. Participation loan
9. Loans to small borrowers
10. Hire purchase and leasing finance
11. Bills purchased
12. Bills discounted
Company profile
Mahabank –A brief Introduction
3.1Bank of maharashtra
The Bank was founded by a group of visionaries led by the late V. G. Kale
and the late D. K Sathe and registered a banking company on the 16th September,
1935 at Pune. The authorized capital was Rs. 10 lakhs and issued capital of Rs. 5
Lakhs. Their vision was to reach out to and serve the common man and meet all their
banking needs. Successive leadership of the Bank and the employees have endeavored
to fulfill their vision.
Today , Bank of Maharashtra has over 12 million customers across the length
and breadth of the country served through a network of 1508 branches in 23 states and
2 Union Territories – a truly pan India bank.
1936 : Commenced operation on 08.02.1936 in Pune
1938 : Second branch of the bank was opened in 1938 at Fort, Bombay.
1940 : Third branch came up at Deccan Gymkhana, Pune.
1944 : Status as Scheduled Bank obtained.
1946 : Deposits crossed Rs. One crore mark, formed fully owned
Subsidiary Maharashtra Executor & Trustee Company, The first
branch outside Maharashtra opened in Hubli (Mysore State , Now
Karnataka)
1949 : Expansion to AP : Hyderabad branch opened
1963 : Expansion to Goa : Panjim Branch opened
1966 : Expansion to Madhya Pradesh Indore branch opened . Entered in
Gujrat : Baroda branch opened
1969 : Nationalised along with 13 other Banks, Entry in Delhi by opening
Karolbagh branch on 19.12.1969
1974 : Deposit base crossed Rs.100 Crore mark
1976 : Marathwada Grameena Bank, first RRB established on
26.08.1976
1978 : New Head Office building inaugurated by Hon,ble Prime Minister
of India Shri Morarji Desai, Deposits crossed the figure of Rs.500
Crores
1979 : "Mahabank Agricultural Research and Rural Development
Foundation" registered as a public trust, was established for
Undertaking research and extension work and to provide more
extensive services to farmers.
1985 : 500th branch in Maharashtra state was opened at the hands of
the Prime Minister, Mrs. Indira Gandhi at Nariman Point , Mumbai.
First Advanced Ledger Posting Machine (ALPM) was installed at the
branch. Golden Jubilee Year Celebrations launched at the hands of Dr.
Manmohan Singh, Governor Reserve Bank of India
1986 : Thane Grameena Bank sponsored
1987 : The 1000th branch of the Bank was inaugurated at Indira
vasahat, Bibwewadi, Pune at the auspicious hands of Dr. Shankar
Dayal Sharma, the Honorable Vice President of India.
1991 : "Mahabank Farmer Credit Card" was launched, Entered into Domestic
Credit Card Business, Main Frame Computer installed, became
member of the SWIFT
1995 : Diamond Jubilee Celebrations – Dr.C.Rangarajan the RBI Governor
was the Chief Guest, Deposits crossed Rs.5000 crore mark.
1996 : Moved into "A" category from the earlier "C" category. Autonomy
obtained
2000 : Deposits crossed Rs.10,000 crore mark
2004 : Public issued of Shares-24% owned by Public Listed in BSE and NSE
2005 : Bancassurance and Mutual Fund distribution business started
2006 : Crossed total business level of Rs.50,000 Crore, Branch CBS Project
started
2009 : Entered into 75th year of dedicated service to the Nation. Adopted 75
underdeveloped villages for integrated overall development
2010 : 100% CBS of branches achieved, Total Business crossed Rs.One lakh
crore, opened 76 branches in the Platinum Year taking the total to 1506
Our Vision To be a vibrant, forward looking, techno-savvy, customer centric
bank serving diverse sections of the society, enhancing shareholders' and employees'
value while moving towards global presence.
3.2 Credit Facilities
For financial support to the micro, small and medium enterprises the Bank has set
up fourteen SME finance branches.
Four Agri High Tech branches are set up for financing investment in high tech
agriculture.
Two Industrial Finance branches of the Bank focus on advances and other banking
requirements of the corporate clients.
There are two Overseas Branches which serve the clients engaged in export-
import business and also provide all types of foreign exchange related services.
Besides these two branches, the Bank provides forex related services through its
28 Foreign Exchange Centres spread across the country.
3.3 IT Initiatives
The Bank completed the process of networking all its branches and bringing them
under Centralized Solution, thereby achieving 100% CBS.
Insurance of VISA ATM Debit Card (Insta-Card) as Welcome Kit at the time of
opening of accounts for Savings and Current Accounts.
The Mobile Banking product "Maha Mobile" was launched offering services like
balance enquiry, view last transactions, cheque status enquiry, request for cheque
book/statement of accounts, change MPIN and intra bank fund transfer up to
Rs.50,000 per day.
A customer centric product "Maha e-statement" for sending weekly/monthly
electronic statements for saving, current, cash credit and loan accounts
automatically to the registered customers via email.
Sending transaction alerts and reminders to customers for the transactions done by
them.
Online Share Trading-Maha E-Trade: For facilitating safe and easy online share
trading for its customers, Bank has entered into an arrangement with M/s Religare
Securities Pvt. Ltd. , M/s Munoth Securities and M/s Enam Securities.
Facilitating e-commerce transactions including online shopping, utility bill
payments, airline ticketing etc through the Internet.
Cheque Deposit Machines for collection of Cheques with image
acknowledgement have been rolled out at 15 centers.
Application Supported by Blocked Amount (ASBA) : Facility to apply for IPO /
FPO based on lien marking (without remitting the share application money) as per
SEBI guidelines has been extended to retail investors.
As part of corporate social responsibility, pilot FI implementation has been rolled
out at Nandurbar, Malharpeth Satara and Parvati, Pune.
An electronic queue management system for streamlining the customer service at
frontline counters has been implemented for the customers at select branches from
Pune, Nasik and Delhi.
As per directives of Government of India, Bank has initiated steps to implement
CBS in the Maharashtra Gramin Bankar, an RRB sponsored by the Bank.
3.4 Human Resources
A comprehensive HRM policy facilitates acquisition and retention of human
resources for consistent and sustainable business growth.
Monetary and non-monetary rewards and recognition mechanism is in place to
motivate performance of a high order.
Mahabank Employees Welfare Trust administers annual contribution from Bank's
net profit towards activities/Programmes for welfare of employees and their
families through recreation, education, health and insurance.
3.5 Corporate Social Responsibility
On the eve of Bank's Platinum Jubilee celebrations during the year 2009 the Bank
selected 75 villages under " Mahabank Platinum Gramin Unnati Prakalp " for their
overall socio-economic development, giving emphasis on cleanliness, health ,
education , drinking water, housing , financial inclusion, rain water harvesting and
water shed development programmes. These villages are located in the states of
Maharashtra, Kanataka , Andhra Pradesh, Madhya Pradesh, Goa Chhalitisgarh
and Gujrat.
The Rural Development Centres at Hadapsar and Bhigwan have been undertaking
various developmental activities for the benefit of farmers viz. Lab to Land
Project, Development of Saline Soil Testing and Offering advice on the use of
fertilizers.
A Trust viz. Mahabank Agricultural Research and Rural Development Foundation
(MARDEF) undertake various projects and village improvement programmes.
MARDEF is imparting training to farmers on various subjects in agriculture, e.g.
dairy emu farming, goat rearing, cultivation practices in grape farming,
application of fertilizers, agriculture credit schemes, etc.
" Mahabank Agril Bulletin" is published every quarter with focus on new trends in
agriculture. The interactive access to farmers / villagers is provided at doorstep
through "Krishi Mitra " in Pune and Satara districts, a mobile van carrying Touch
Screen Facility and the Officials accompanying the vehicle provide information to
farmers on various schemes of the Bank.
The Bank has established Mahabank Self Employment Training Institute (MSETI)
for providing training to rural youth and women to enable them to acquire skills
for self-employment. The Institute has centers at Pune, Nagpur, Aurangabad,
Amravati and Nasik. So far the Institute imparted training to 5,742 youths and has
achieved settlement rate of 71 percent.
Gramin Mahila Va Balak Vikas Mandal (GMVBVM) , an NGO formed by Bank
of Maharashtra NIMB is actively involved in formation , nurturing , training and
ensuring linkage of SHGs to Bank Credit. The GMVBVM also helps SHGs in
marketing products of SHGs through outlets established in Pune City under the
name "SAVITRI ". The GMVBVM guides and actively helps SHGs for selection
and purchase of raw materials and quality production.
The Bank started a novel project for counseling farmers in six districts of
Vidarbha area in Maharashtra State on different subjects, like agriculture, animal
husbandry etc. under the "Mahabank Vidarbha Shetkari Jagruti Abhiyan".
3.6 Convener of SLBC
The Bank is shouldering the responsibility of Convener of State Level
Banker's Committee (SLBC) for Maharashtra. The SLBC could resolve many issues
which helped the State to achieve Credit Plan allocation.
In order to speed up the work of identification of villages for providing
Banking services in every village having population of over 2000, a Meeting of Lead
District Managers was convened by SLBC on 24/02/2010 at Pune. Accordingly 4348
unbanked villages having population over 2000 were identified in 33 districts of
Maharashtra. The member banks have been asked to finalise roadmap for such
villages under Financial Inclusion plan for extending banking services.
As per the recommendations of High level Committee for review of
Lead Bank Scheme, SLBC has formed 11 sub committees on various subjects for
effective implementation of Lead Bank Scheme.
During the year, three SLBC and two Steering Committee meetings
were held.
3.7 Marching Ahead
Expanding the ATM network of the Bank to 500 by March, 2011 from the present
level of 358 ATMs.
Implementation of CBS in Regional Rural Bank (RRB): The Bank has initiated
steps to implement CBS in the Maharashtra Gramin Bank , an RRB sponsored by
the Bank.
To be everyone's bank for every banking need and a one stop Financial Services
Mall.
3.8 Customer Service Committee
3.8.1 High Level Committees on Customer Service
As per guidelines issued by Reserve Bank of India bank has constituted Board Committee
on Customer Service and reconstituted Standing Committee on Customer Service.
There is outside representation on Standing Committee. These Committees meet every
quarter and take review of the policies having bering on customer service.
Regional Offices should ensure the compliance of decisions taken by these committees.
Te Code of Bank's Commitment of Customers-Bank is member of the Banking Codes
and Standards Board of India. It has signed a covenant to implement the Code of Bank's
Commitment to Customers. All staff members should go through the Code and ensure
that there is total compliance of the same.
3.8.2 Customer Service Committee at the Head Office Level.
Customer Service Committee' has been constituted at the Head Office
under the Chairmanship of the Executive Director of the Bank. The Committee shall meet
at Head Office, once in a Quarter, to Discuss / Review Minutes of the Quarterly
Customer Service Committee Meetings held at the Regional Office Level, Customer Issues,
Suggestions for further increasing Customer Satisfaction levels, Grievance etc.
3.8.3 Branch Level Customer Service Committee
To further improve the Customer Satisfaction levels, "Customer Service
Committee" be formed at the branch level, at all branches. The Branch Committee should
meet once in a Month to discuss and examine the following specific areas and quarterly
report be sent to C.O.
a. Business Growth, Control over Expenditure, Upkeep of Branch Premises, Security
Arrangements, Housekeeping e.g. balancing of Books etc.
b. Customer Service with special reference to the following :
Promptness in Encashment of Cheques' Drafts.
Promptness in Deposit of Cash.
Expediting issuance of Drafts / IT/ MT Cheque Books.
On spot issuance of FDR.
Timely compliance of Standing Instructions.
Speedy Collection of outstation Cheques / Bills.
Time! Credit for Outstation Cheques.
Promptness in issuance of Certificate of Interest paid on the FDRs.
Timely completion of Pass Book/ Issuance of Statement of Accounts.
3.9 KYC/AML Compliance
i. Our bank has adopted KYC/AML Compliance policy. It consists of (1) Customer
Acceptance Policy (2) Customer Identification Procedure (3) Monitoring of Transactions
(4) Risk Management. The major work areas of KYC/AML compliance, which is
applicable to new as well as existing accounts, consist of following:
II. Collection of customer information such as true name, true address, date of birth,
nature of employment or business, source of income, financial status, name of employer if
employed, PAN, photograph/s etc. of individual customer/s and prescribed documents in case
of non-individual customers.
III. Classification of each account into high, medium & low risk categories depending
upon the risk perceived and creation of customer profile and its up-dation based on the
operations in the accounts.
IV. Periodical review of risk categorization of accounts at the periodicity of not less than
once in six months for all accounts.
V. Periodicity of up-dation of customer identification data/profile including photographs,
at the periodicity of not less than once in two years, in case of high & medium risk categories &
not less than once in five years in case of low risk categories customers.
VI. Transactions monitoring so as to detect any abnormal/suspicious transaction.
VII. Reporting of Cash and Suspicious transactions & counterfeit currency notes detected,
(CTR, STR, CCR) to Principal Officer of the bank through Regional Office, for onward
submission to Financial Intelligence Unit India (FIU-IND).
VIII. Maintenance & preservation of records in respect of nature, amount, currency &
date of transaction, parties to the transaction etc. for 10 years from the date of cession of
transaction which will permit reconstruction of individual transactions so as to provide if
necessary, evidence for prosecution of person involved in criminal activity.
IX. Record pertaining to the identification of customer & his address obtained while
opening of accounts & during the course of business relationships are to be preserved for at
least 10 years after the business relationship is ended. The identification record & transactions
data should be made available to competent authorities upon request.
X. (ix)Ensure to cross check all account opening applications & transactions carried out in the
accounts with updated consolidated list of terrorists individuals/organizations circulated by
RBI/Govt. & report these accounts which bear resemblance with individuals/entities listed therein
to RBI/FIU-IND through Principal Officer of the Bank.
XI. KYC compliance to be ensured by branches in following manners
XII. (A) KYC Compliance of Existing Accounts
XIII. Collection of customer information by getting filled in customer information form or
personal information from afresh which contains mandatory information as given under (I) above.
XIV. Ensuring photographs of each signatory.
XV. Classification of account into three risk categories based on the collected information of
the account and as per the guidelines given & taking review of risk categorization at the periodicity
of not less than once in six months.
XVI. Carrying out customer identification procedure, (collection of identify proof, address proof
and mandatory information) by collecting the copies of officially valid documents namely
Passport/PAN Card/Driving License/Voter's Identity Card issued by Election Commission of
India, in case of individuals. For non individual accounts (legal persons) prescribed documents are
to be collected.
XVII. Collection of documents for confirmation of address namely electricity bill, telephone bill,
or any other documentary evidence of address, current, permanent, for non individual accounts,
address of works, factory, registered office, contact phone/mobile numbers, e-mail addresses etc. as
the case may be.
XVIII. Xerox copies duly verified from the originals under the signature of authorized Officials &
certified true copy in case of non individual accounts are to be kept on record.
XIX. Obtaining PAN where the account holder is Income Tax Assessee is mandatory as per the
Income Tax Rules.
XX. Existing account holders who are unable to give identity and address documents as
mentioned earlier, then such accounts should be categorized under simplified/relaxed KYC norms
& the operations in such accounts should be restricted to, Balance to Rs. 50000/- & credit
summation to Rs. 1 lakhs during the year, till the account holder submits the documentary
evidence/proof of identity and address acceptable to the banks.
XXI. In case existing old accounts also, identity proof, address proof & other mandatory
information to be obtained & kept on record though such accounts are satisfactorily operated
since last several years, customers are known to the bank and their credentials are not doubted.
3.10 KYC Compliance of New Account
KYC compliance is to be ensured at the time of opening new accounts in following
manner.
Getting filled in New Account Opening Form along with Customer Information Form
(CIF)/Personal Information Form. That will form the customer profile initially.
Account is opened after taking interview; obtaining photographs after obtaining
identity & address proofs or prescribed documents in case of non individual accounts,
copy of PAN where account holder is Income Tax Assessee or From No. 60/61.
In case of accounts of proprietary concern the following documents are to be obtained
for verification.
Proof of name, address & activity of the concern, like Registration certificate (in case
of Registered concern), certificate/license issued by the municipal authorities under
shop & establishment Act, sales & income tax returns, CSTNST certificate,
certificate/registration document issued by sales tax/service tax/professional tax
authorities, license issued by the registering authority like certificate of practice issued
by institute of chartered accountants of India, institute of cost accountants of India,
Indian medical council, food & drug control authorities etc. (any two of the
documents are to be obtained which should be in the name of the proprietary
concern.)
Classifying the account as and when opened into three risk categories as per the given
guidelines & on the basis of information available.
In case the individual customer who desires to open as account is unable to provide
copy of officially valid document of identity and or address proof, then account can
be opened with Introduction from the existing account holder (subject to certain
conditions).
Operations in the account should be restricted to balance to Rs. 50,000/- & credit
summation to Rs. 1 lakhs during the year.
Introducer should be six months old, having satisfactory operations in the account, he
should certify address, photograph of the person opening new account & he should be
subjected to full KYC procedure.
Monitoring of transactions (applicable to all types of accounts) Monitoring of
transactions in all accounts to be done regularly on an ongoing basis so as to detect
abnormal/suspicious transactions. High risk accounts to be monitored intensively.
Reporting Principal Officer of the bank. (AGM Inspection) for further reporting to
FIU-IND in electronic format.
Cash Transactions Report (CTR)
Suspicious Transaction Report (STR)
Counterfeit Currency Report. (CCR)
Reporting should be accurate & within the given time limit.
Product profile
Housing loan scheme for public
Purpose 1. Build your own house
2. Purchase new house/Flat (Old or New)
3. Repairs/Renovation of existing house
Persons Eligible Salaried Persons, Professionals, Businessmen with
sufficient disposable income. Farmers having min five
acres of irrigated land holding. Non Resident Indians
are also eligible.
Age Minimum 21 years—Maximum 50 yrs. for salaried
persons.
Maximum 55 years for other than salaried persons
Margin 25%
Quantum of Loan
1) For salaried class a) 75% of cost of house including registration,
mortgage, electricity deposit etc. ( category wise as
above)
b) 50 times of Gross Salary or 60 times of Net Monthly
salary whichever is higher. c) Minimum of (a) or (b)
2) For Businessmen a) equal to average annual income (Net profit +
Depreciation) of last 3 yrs X 4 times (B/S, IT returns)
Also note repayment of any other term liabilities.
b)75% of cost of house
c) Min of (a) or (c)
3) For Farmers 4 times of average annual net income. Cross check
gross income, land holding, cropping pattern, Sugar
Factory/APMC/ other agencies bills etc. Ensure for
repayment capacity & repayment experience.
If jointly owned, consider joint holder’s income
Maximum Loan Quantum No maximum limit for Metro/Urban area
Rs.15 lakh in Semi Urban/Rural area
Rs.5 lakh for repairs/renovation in all areas
Total deductions including proposed EMI should not
exceed 65% of gross monthly salary / annual income.
Security Upto Rs 25000/- One Guarantor with sufficient
income/net worth
Above Rs 25000/-
Equitable/Regd. Mortgage of property or Equal
amount of paper security (NSCs, FDRs of our Bank
etc. excluding shares) guarantee of the spouse.
Insurance For full value against fire/ Earthquake etc with Bank’s
clause.
Rate of Interest:
Mahabank Housing Loan Scheme
Tenor
fixed/ Floating
.
A.
Upto and
inclusive
of 5 years
Above 5 years and
Upto and inclusive
of 10 years
Above 10 years but
below & inclusive of
20 years
Upto `.30 lacs.
floating BR
(10.00%)
BR+0.25%
(10.25%)
BR+ 0.50%
(10.50%)
fixed 10.75% 11.25% ---
Above `.30 lacs
& less than `. 75
lacs.
floating BR+0.50%
(10.50%)
BR+ 1.00%
(11.00%)
BR+1.25%
(11.25%)
Fixed 11.75% 12.00% ----
`.75 lacs & above
floatingBR+0.75%
(10.75%)
BR+1.25%
(11.25%)
BR + 1.50%
(11.50%)
fixed 12.00% 12.25% ----
For Repairs and renovation: BR + 1.25% (11.25%)
For Repairs and renovation: BPLR-3.00% i.e.9.25% p.a.
Security : Upto 25000/ One acceptable worthy guarantor Above
25000/- Mortgage + guarantee of Spouse. If mortgage is
not possible, accept paper/liquid security. Shares should
not be accepted.
Repayment : Max. Repayment period is as under:
1. For construction of house 20 years.
2. For repairs/renovation 5 years.
3. For extension of House 10 years
Note 1) Repayment by EMI for all borrowers except farmers.
2) For Farmers - Annually or 6 monthly depending on
harvesting time, cropping pattern, income from allied
activities.
3) Repayment to start one month after full disbursement or
18 months after the first disbursement whichever
is earlier. Maximum period up to date of retirement. If
to be continued from pension, then obtain deposit equal
to loan balance amount.
4) Sanctioning authority may allow reduction in repayment
period & apply revised interest rate based on regular
repayment & capacity to repay & recovery of Process
fee
5) Step up EMI or ballooning of repayment can be
considered at initial stage
6) Lump sum / part payment of loan above EMI can be
allowed. No Prepayment Charges
7) Take over by Banks / FIs - 2% prepayment charges on
Outstanding Balance
Processing Charges:
Loan Slab Processing fees
Loan upto Rs.5.00 lakh Rs.1000/-
Loan above Rs.5.00 lakh and upto Rs.15.00 lakh Rs.2500/-
Loan above Rs.15.00 lakh Rs.5000/-
Other products for housing purpose
1. Home conversion loan
Purpose Change in Security (House Property) for better
accommodation
Repayment Not to exceed 20 years from the date of original loan
Eligibility Those who have acquired the present home with the
help of a housing loan, which is outstanding can be
given additional loan for better accommodation.
Present Loan To be continued and repayment capacity for additional
loan to be recalculated.
Security Charge on the new property to be taken while
releasing the charge on the existing property
simultaneously.
Other Terms Same as per the housing loan scheme.
2. Land purchase loan
Eligibility The applicant must construct house on the plot
purchased with bank finance with in 2 years.
Margin 30% for purchase of land
Repayment 20 years from the date of purchase of land & EMI will
start after one month of land purchase
Penal Interest To be charged @2% p.a. after completion of 2 years
with a right of recall, if the construction is not done or
not completed within this period.
Other Terms As per existing housing loan scheme.
3. Bridge loan
Purpose To acquire a new flat and utilize the sale proceeds of
existing one as margin or consideration.
Limit Housing loan together with bridge loan not to exceed
85% of the cost of proposed house.
Repayment Capacity To be assessed for both HLP+ Bridge loan. But EMI
will be taken only on HLP, if bridge loan is repaid
within stipulated period of 9 months.
Maximum Period 9 months. If the property could not be sold, then EMI
to be collected on entire portion by converting /
merging bridge loan into HLP
Special Clause To be incorporated in the document to ensure that
existing flat is taken as additional security in the event
of failure to repay Bridge loan in time.
Other Terms As per the existing scheme.
4. Stamp duty loan
Purpose If house is acquired by means of GIFT, Litigation etc.
payment of stamp duty & registration fee is necessary.
A loan can be considered for this purpose.
Amount Upto Rs.1,00,000/-.
Repayment Maximum 60 months
Other Terms As per the existing scheme.
5. Refinance loan schemePurpose To repay debts incurred from private sources for
purchase of house.
Proof To be ascertained from operations in the a/c.
Period Raising such funds, purchase of house and subsequent
application of loan to Bank should take place within a
period of 6 months
Repayment Maximum 5 years
Other Terms As per the existing scheme.
6. Purchase of old house/ flat
Purpose If house is more than 10 years old, sanctioning
authority may consider the request on merit.
Conditions 1. Valuation report by approved valuer. 2. Structural
stability report by Govt. Approved Structural Engineer
where residual working life of the house more than 30
years. 3. Applicant’s standing, past experience if any
etc. Min Margin of 25% be stipulated
7. Takeover of housing loanPurpose Taking over the housing loans from other Banks/FIs.
Conditions No overdue of the previous Bank/FI.
Approval Grid No prior approval of grid at any level is required for
takeover of existing outstanding of Housing loan.
Terms All other terms as applicable for Housing loan to
public are to be followed.
8. Additional loan
Purpose Loan for additional Expenses due to escalation in cost
on the same security subject to repayment capacity.
Expansion Expansion of existing house on which existing loan is
outstanding without any overdue
Terms All normal terms and conditions to be followed.
Preference To our existing farmer-customers where the land is
already mortgaged for other facilities & repayment of
present loans is regular.
Sanction by RAB/RAPC of the concerned region
A free credit card is offered to all housing loan borrowers
Golden Jubilee Rural Housing Loan Scheme is in vogue & continues on above
terms & conditions population below 50000 & Loan
Maximum Rs 5 Lakh)
Objective
1) Study of Home Loans for Bank of Maharashtra.
2) Comparative study of home loan of the banks in Kopargaon.
For the period of 3 years on following criteria.
I) Interest rate
II) Total distribute loan amount
III) Total distribute home loan amount
IV) Account holders\ for home laon
V) Numbers of defaulters in home loan
VI) Duration of sanctioning the home loan
3) To study practical cases in Bank of Maharashtra, to find out
reasons for defaulters.
Scope
1) This project will help Bank of Maharashtra to know is position with respective
home loan in Kopargaon reason.
2) It will also help the bank to concentrate on the weakness which should be
overcome for improving performance in housing loan.
3) This project also gives idea about home loan its document required interest
rate charged etc.
Research Methodology
Research forms the foundation of any project that is undertaken:
Research in common parlance refers to the search of knowledge. One can also define
research as a scientific and systematic search of pertinent information on a specific
topic.
Redman and Moray define research as “systematized effort to gain new
knowledge”. Humans are generally very inquisitive in nature and this inquisitiveness
is the mother of knowledge and the method employed by humans to gain knowledge
of the unknown is research.
Research thus is an original contribution to the existing stock of
knowledge making for its advancement. It is the pursuit of the truth with the help of
study, observation, comparison and experiment.
Research methodology is a way of systematically solving the research
problems. It may be understood as a science of how research is done. The purpose of
research is to discover answer to the question through application of scientific
procedures.
All this means that the researcher has to design a separate mythology
for the problem undertaken by him which may differ from problem to problem.
Research carried out in their project is based on theoretical and field study. &
Structure of interview method.
Research objective
The Objective of this study is to compare housing product of different banks
in Kopargaon. This will help us to identify and select appropriate bank which will
have less interest rate and maximum repayment of period with easy documentation.
Steps In Research Methodology
Defining the problem &
Research objective
Develop Research plan
Collect the information
Analysis the information
Present the findings
Make the decision
Sources of data
A. Primary Data:
This data can be collected through experiment or through survey. The various
method of primary data collection is:
1. Observation method
2. Interview method
3. Questionnaire method
The methods adopted in this study are:
Personal interview through structured questionnaire of Finance head of SMEs,
Brokers etc. Sample of questionnaire is attached as an annexure.
B. Secondary Data:
Secondary data refers to the data which have already been collected and analyzed by
someone else usually published data are available in form of:
1. Various publication of central, state and local government.
2. Books Magazine and Newspapers.
3. Accounting records, sales force reports etc.
4. Websites of banks.
Digramatic approach
Data analysis involves converting a series of recorded observation (data) into
descriptive statements (information).
The Analysis will be showed with the help of
a) Chart
b) Graphs
Steps in Research Methodology:
Step 1: Objective of Study of Home-Loans
The first step in this study is the defining the objectives of the study and according to
that develop the further plan.
Step 2:Developing plan for gathering information
The second stage calls for developing the most efficient plan for gathering the need
information. Decide the methods of data collection and the data sources, sampling
method and contact method. Decide the primary and secondary sources for collecting
the data.
Primary Data:
Primary data is a data, which is gathered by the researcher himself. Primary data of
this project is collected by the personal visit to the banks.
Secondary Data:
Secondary data is a data is data which is gathered from the available sources i.e.
newspaper, magazine, Internet, financial books. Etc
Step 3:Collect the Information
This is the most important step in the study. This is up to the individual’s ability to
gather the information from the selected samples.
Step 4:Analyze the Information
Step 5:Present the Findings
1. I was unaware of their operation. The banking activities are very large in
number. I wish to know the whole gamut of policy and operations.
2. Financial terminology was new to me and that was a limitation to
understand the whole process.
3. I had no work experience earlier, so I had a hesitation in approaching my
colleagues. Soon I overcame this problem.
4. Time Constraint was one of the limitations. Document verification requires
more time and concentration. A minute mistake in the exercise could be
costly.
Theoretical background of Study –
Loans:
Bank loans are called indirect agents of production. For achieving a
sustained rate of economic growth over a long period, greater efforts have to be made
to increase agricultural and industrial production, and in this increased production,
bank credit plays a significant role. But banks in India are not free to employ their
funds n an arbitrary manner, while lending, they will have to keep in mind factors like
a desirable balance among liquidity, safely and profitability, legal and statutory
requirements, socio-economic conditions of the country, priorities set by economic
planners, and so on. Banks try to achieve this objective through maintaining a
particular relationship between their assets and deposits. As such, between advances
and deposits in the form of advances among as many different types of securities and
over as wide an areas as possible, and they avoid granting too large a proportion of
their advances to one party or to a single industry. While these factors limit banks
capability to lend, they are, nevertheless expected to grant credit according to the
changing economic scene conditioned by the programs and priorities of different Five
Year Plans.
In a loan account the entire amount is paid to the debtor at one time,
either in cash or by transfer to his current account. No subsequent debit ordinarily
allowed except by way of interest, incidental charges, insurance premiums, expenses
incurred is provided for by installment without allowing the demand character of the
loan to be affected in any way. There is usually a stipulation that in the event of
installment remaining unpaid, the entire amount of the loan will become due. Interest
is charged on the debit balance, usually with quarterly rests unless there is an
arrangement to the contrary. No cheque book is issued. The security may be personal
or in the form of shares, debentures. Government paper, immovable property, fixed
deposit receipts, life insurance policies, goods etc.
Home Loans in India
You'll soon realize that home loan companies do exist, and
they continue to exist to provide Basic Home Insurance as well as Home Loan
Information including Home Loan Resources because of the very people who desire
to own a house the soonest possible time - like you!
It is definitely one of the major things that you can board on in your
lifetime. The bad news is: however is that not everyone in this globe is like you,
loaded enough (financially, of course) to be able to build a house as soon as he wants
to.
Whether you are Non Resident Indian or Resident of India, and you are
thinking to start your journey of buying a new house, looking to move to a new house,
investing in property or are looking forward to refinance, Consider answering these
questions to yourself:
Which type of home loan should I prefer?
Will it be the best scheme that will be fitting my budget?
Can any insurance plan cover for an unpaid monthly due?
Is there a fine or penalty or even some reward as well if the whole amount of
loan is paid ahead of the due date?
These are just a dash of the questions to be answered when considering
taking the plunge…into the loan journey. The different home loan types are hereby
presented to you to make your journey that more smoother or step by step, safer and
comfortable. Yet, Got a fix on fixed rate or variable rates, offset accounts, lines of
credit or bridging loans!!
With so many real estate’s sites coming up in Indian market, finding an
ideal house isn't that big a issue nowadays, when you can virtually see all across the
home you need to purchase by the various real estate simulation programs and videos
available, but you still need to purchase it, right? - To really say "own" it. A home
loan, also popularly identified as a mortgage, is an easier financial option to own a
house. Once you've decided to endeavor on a home loan, there are so many things that
you need to be informed with. Not only is it going to be an emotional experience, it is
also going to be a very informative monetary journey, as you will be dealing with the
whole caboodle of the mortgage process along the way.
There are thousands of home loan companies waiting to provide you
with your financial needs. Part of the success of this whole financial move is partly in
your hands, the greater part relies on the efficiency of your chosen mortgage
company.
Home Loan Types
Owning a piece of land or property is a lifetime dream for every
individual. There are many home loans provider in the market to make your dream
come true. But before you opt for any home loan provider, you need to consider
certain factors related to property that you are interested in buying and also about the
salient features offered by a home loan provider and also study some Home Loans and
Home Insurance FAQs which helps in applying a Home Loan in India.
And the most important thing is you should know about each and every
term related with Home Loans before applying for a Loan. It is always advisable to
consult a home loan expert or consultant before applying for a home loan or
purchasing a property.
You can take different types of home loans like Bridge Loans, Home
construction Loans, Home Equity Loans, Home Extension Loans, Home
Improvement Loans, Land Purchase Loans etc for different schemes available in the
market. There are different types of home loans tailored to meet your needs.
Home Purchase Loans: These are the basic forms of home loans used for
purchasing of a new home.
Home Improvement Loans: These loans are given for implementing repair
works, healing and renovations in a home that has already been purchased.
Home Construction Loans: These loans are available for the construction of
a new home.
Home Extension Loans: These loans are given for expanding or extending an
existing home. For eg: addition of an extra room etc.
Home Conversion Loans: These loans are available for those who have
financed the present home with a home loan and wish to purchase and move to
another home for which some extra funds are required. Through home
conversion loan, the existing loan is transferred to the new home including the
extra amount required, eliminating the need of pre-payment of the previous
loan.
Land Purchase Loans: These loans are available for purchasing land for both
construction and investment purposes.
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.
Why take a Home Loan?
What's an average middle class Indian's most cherished dream?
Purchasing and moving into a dream house would generally rank
among the top three things on the wish list of most people. After all it’s what been
proved by Maslow’s Law of Hierarchy as well. That entire house hunting every few
years, grumpy landlords, killing rents would be a thing of the past. Hey, you even get
to use nails to hang your favorite paintings and pictures. Don’t you???
Taking a home loan nowadays has become very simpler. The RBI has
been regularly slashing interest rates, with the result that housing finance loans that
came at an interest rate of 16.5% to 18% four years ago are now available at 11.5% to
13% or lower. Each year the Finance Minister's generosity during the Budget seems
to be solely concentrated for the housing sector and construction sector. The Budget
2000's allowed interest payment up to Rs1lakh and principal payment of Rs20, 000 to
be exempted from income tax. To top it all, the Housing Finance Companies (HFCs)
are aggressively wooing customers. Now, when the sun shines, it’s the best time to
make hay. Isn’t it?
RBI directive for home loans
The Reserve Bank of India (RBI) has in the latest directive
asked the Indian banks to be more "fair and transparent" while signing their
agreements with the consumers. This has come following complaints from various
consumer sections regarding home loans.
It has emphasized on the fact that while giving a home loan, the banks
should not tie their loans with their own prime lending rates (PLR) which often results
in pro-bank and against consumer interest.
Households should get credit counseling before signing any loan agreement.
In such case, banks should give credit counseling to customer before giving a
loan. Any non-governmental organization can also give independent credit
counseling to small borrowers.
Consumers often complain of not receiving benefits of falling interest rates as
banks tie their floating rate loans with its PLR and even when rates fall, the
banks kept the PLR unchanged. But when interest rates are hiked, the banks
increase the benchmark rate, thus making customers pay a higher rate and
consequently increase the number of EMIs too. The RBI has asked the banks
to mend rules for the same.
Individual borrowers should ask for the exact tenure and EMI while taking a
fixed rate loan. The RBI has also resolved to look into all consumer
complaints if it is bought to the regulator's notice.
The IRDA (insurance regulator) has powers to take action against banks if a
customer feels cheated while buying an insurance product. On its regulatory
role, the RBI is trying to maintain a balance between the extent of freedom
granted to the banks and the objectives of governance.
RBI has made it mandatory for all banks - including private and foreign banks
- to offer a passbook to their customers with the address and telephone number
of the nearest branch.
Customers have often been harassed by banks' call centers where there is no
accountability of the query made. The "do not call" registry has also been
flouted by banks as customers are bombarded with unnecessary product
offerings. The RBI has directed the Indian Banks' Association to come out
with a single "do not call" registry or when a customer adds his name to a
single bank registry it should then stop unsolicited calls from all banks.
On rising credit card frauds and wrong statements given by the banks, the RBI
has asked the customers to approach the ombudsman to redress their problems.
This way the RBI feels would inculcate more consumer friendly practices
among Indian banks.
Tax benefits
There are certain tax benefits for the resident Indians based
on the principal and interest component of a loan under the Income Tax Act, 1961. It
may help one get tax benefit up to Rs.50, 490 p.a. (approx). if interest repayment of
Rs.1,50,000 p.a. is paid. In addition to this, one also is eligible for getting tax benefits
under section 80C on repayment of Rs.1, 00,000 p.a. that further reduces the tax
liability by Rs.30,000p.a.
These deductions are available to assesses, who have taken a loan to
either buy or build a house, under Section 24(b). However, interest on borrowed
capital is deductible up to Rs150, 000 if the following conditions are fulfilled:
Capital is borrowed for acquiring or constructing a property on or after April
1, 1999.
The acquisition and construction should be completed within 3 years from the
end of the financial year in which capital was borrowed.
The person, extending the loan, certifies that such interest is payable in respect
of the amount advanced for acquisition or construction of the house
A loan for refinance of the principle amount outstanding under an earlier loan
taken for such acquisition or construction.
If the conditions stated above are not fulfilled, then the interest on
borrowed capital is deductible up to Rs30, 000 though the following conditions have
to be satisfied:
Capital is borrowed before April 1, 1999 for purchase, construction,
reconstruction repairs or renewal of a house property.
Capital should be borrowed on or after April 1, 1999 for reconstruction,
repairs or renewals of a house property.
If the capital is borrowed on or after April 1, 1999, but construction is not
completed within 3 years from the end of the year, in which capital is
borrowed.
In addition to the above, principal repayment of the loan/capital
borrowed is eligible for a deduction of up to Rs1,00,000 under Section 80C from
assessment year 2011-12.
Terms and conditions for availing Tax benefits on Home Loans
1. Tax deductions can be claimed on housing loan interest payments, subject to
an upper limit of Rs1, 50, 000 for a financial year.
2. An additional loan for extension/improvement to the same house and the
individual's deductions on the existing loan are less than Rs1, 50,000; he can
claim further benefits from the additional loan taken, subject to the upper limit
of Rs 150,000 for a financial year.
3. Tax benefits under Section 24 and deduction under section 80C of the Income
Tax Act can be claimed only when the payment is made. If an individual fails
to make EMI payments, he cannot claim tax benefits for the same.
4. According to the Income Tax Act, tax rebates can only be claimed by the loan
applicant.
5. The interest on home loans taken for repairs, renewals or reconstruction, also
qualifies for the deduction of Rs 150,000.
6. A husband and wife, both of whom are tax-payers with independent income
sources, get tax deduction benefits, with respect to the same housing loan; to
the extent of the amount of loan taken in their own respective name.
7. If an individual buys a house and sells it within the same year or after 3 years,
and if any profit is made, then a capital gains tax liability arises on the same
for which the individual is liable to pay short-term capital gains tax since the
sale took place in the same year. But in case, if the sale had taken place after 3
years, then a long-term capital gains tax liability would have arisen.
8. On being proved that the home loan is simply an arrangement between the
loan-seeker and the builder or with a third party for the purpose of claiming
tax benefits, then tax benefits will not be allowed and benefits, previously
claimed, will be clubbed to the income and taxed accordingly.
9. Tax benefits on interest on housing loans are allowable only for the original
loan and according to Section 24 (1), tax benefits can also be availed for a
second loan taken to repay the first loan but not for subsequent loans. This
means that if you have already availed of one loan to refinance the original
loan and want to no avail a third loan to refinance the second loan, tax rebate
on interest payments will not be permissible.
Home Loan Tips
The home buying process can seem complicated, but if you take things
step-by-step and you know how to choose the right home loan, you will soon be
holding the keys to your own home!
Ten steps to buying a home
Step 1: Figure out how much you can afford. What you can afford
depends on your income, credit rating, current monthly expenses, down payment and
the interest rate. The calculators can help, but it is best to visit a lender to find out for
sure. A housing counselor can help you figure out how to manage and pay off your
debt, and start saving for that down payment!
Step 2: Know your rights
Step 3: Shop for a loan. Save money by doing your homework. Talk to
several lenders, compare costs and interest rates, and negotiate to get a better deal.
Consider getting pre-approved for a loan.
Step 4: Learn about home buying programs
Step 5: Shop for a home. Choose a real estate agent, Wish list - what
features do you want, Home-shopping checklist - take this list with you when
comparing homes.
Step 6: Make an offer. Discuss the process with your real estate agent.
If the seller counters your offer, you may need to negotiate until you both agree to the
terms of the sale.
Step 7: Get a home inspection. Make your offer contingent on a home
inspection. An inspection will tell you about the condition of the home, and can help
you avoid buying a home that needs major repairs.
Step 8: Shop for homeowners insurance Lenders require that you have
homeowners insurance. Be sure to shop around.
Step 9: Sign papers. You're finally ready to go to "settlement" or
"closing." Be sure to read everything before you sign!
Step 10: The House is yours now. Have Puja or hawan.
Terms used in Housing Finance
EMI: Equated Monthly Installment till the loan is paid back. It consists of a
portion of interest and the principal
Floating Rate of interest: Rate of interest which varies with the market
lending rate. This means that there is an element of risk of paying more than budgeted
amount in case the lending rates goes up
Monthly Reducing balance: In this system interest reduces monthly with
repayment of Principal amount
Annual Reducing Balance: In this system principal is reduced annually at the
end of the year so you end up paying interest even for the portion of principal you
have actually paid back
Fixed rate of interest: Rate of interest remains unchanged throughout the
period of the loan
Processing charge: It's a fee payable to the on applying for the loan
Prepayment Penalties: When loan is paid back before the agreed term of the
loan, then banks/ institutions charge penalty for the prepayment
Commitment Fee: Some institution charge commitment fee in case the loan
is not availed within a stipulated period, after it is processed and sanctioned.
Miscellaneous Cost: It is quite possible that some lenders may charge
documentation or consultant charges.
Eligibility
Home loan eligibility for Resident Indians depends upon the
repayment capacity of the loan applicant. The maximum loan that can be sanctioned
varies with the banks and other housing finance companies (HFC) and generally, the
maximum loan amount granted is 80 to 85% of the cost of your home.
Home loan eligibility corresponding to repayment option is based on
the following factors. Even though, the eligibility criteria may vary according to the
HFCs regulations.
Home loan Eligibility Criteria
Age (Minimum) 21 Years
Age (Maximum) 58(salaried)
60(Public limited/Government Employees)
65 (self employed)
Qualification Graduation
Income Stable source of income and saving history
Dependents Number of dependents, assets, liabilities
Other income sources Spouse's income
About the Home loans in Kopargaon:
Total number of banks in Kopargaon.
1. STATE BANK OF INDIA
2. BANK OF MAHARASHTRA
3. ICICI BANK
4. STATE BANK OF HYDERABAD
5. BANK OF BARODA
6. CENTRAL BANK OF INDIA
7. CANARA BANK
8. HDFC BANK
9. AHMEDNAGER DISTRICT CO-OPERATIVE BANK
10. THE KOPARGAON PEOPLES CO-OPERATIVE BAN
11. DENA BANK
12. UNION BANK OF India
13. BANK OF INDIA
Procedure for getting Approval of Home Loan :
First of all the applicants have to make an application to the Concerned bank
in which he/she wants to get loan.
The next step is bank send all document to head office in Ahmednagar then
Head office checking all documents and again send to local branch.
The next step is identification and selection of the property. Bank or financial
institutions will verify the all documents and the customers i.e. Income and
ability to repayment.
Documents required at the disbursement stage as per the “procedure & draft
booklet” for the location in which the property is located.
Additional documents may be required as per the nature of the application.
Disbursement of loan will be in stages as the construction is progressing.
Documents required for sanctioning of the Home Loan:
For General Applicant:
Passport size Photograph
Age verification (school/college/leaving certificate or mark sheet, PAN card.
Election Identity card, Passport, Driving License, Ration Card, Birth Certificate.)
Bank statement for past 36 months or salary Account and any other operating
A/C.
For salaried people Additional:
Latest salary certificate/sleep showing all the deduction of the employer.
Four months’ salary statements required in case of variable salary.
Latest form 16/ I.T. Returns
Appointment/Increment letter from the employer for annual benefit to be
considered.
For self employed:
Computation of Income, Balance sheet, the Profit and Loss A/C along with
schedules of company and individuals for past 3 years duly certified by C.A.
Memorandum/Article of Association or partnership as applicable.
Brief profits of the company.
A/C continuity proof for the last one year.
Office address proof.
Residence address proof.
Qualification certificate for self employed professionals.
Sale deed/ Agreement of sale
Letter of allotment of Housing Board or society.
Copy of approval plan if applicable.
Permission for construction if applicable.
Valuation of property which is to be financed.
In case of agricultural land conversion into – copy of relative order.
NOC under the provision of ULC Regulation Act,1976 in original
(* More or less documents may be required as per the banks rules.)
Data Analysis & Interpretation
1) Bank of Maharashtra
Interest rate
Year Fixed Rate Floating Rate
2008 – 2009 11.00% 10.25%
2009 - 2010 11.50% 10.50%
2010 – 2011 12.00% 11.00%
Loan amount, A/c holders & defaulters.
Year Total Loan
Amt.
Distributed
Total Home
Loan Amt.
Distributed
Total A/c
Holder for
Home Loan
Total
Defaulter for
Home Loan.
2008 – 2009 4,00,00,000 46,00,000 87 1
2009 - 2010 3,05,00,000 21,00,000 80 _
2010 – 2011 3,80,00,000 43,15,000 80 _
2) State bank of India
Interest Rate
Year Fixed Rate Floating Rate
2008 – 2009 11.25% 10.50%
2009 - 2010 11.50% 11.00%
2010 – 2011 11.25% 10.75%
Loan amount, A/c holders & defaulters.
Year Total Loan
Amt.
Distributed
Total Home
Loan Amt.
Distributed
Total A/c
Holder for
Home Loan
Total
Defaulter for
Home Loan.
2008 – 2009 27,00,00,000 13,00,00,000 150 65
2009 - 2010 29,00,00,000 17,00,00,000 120 70
2010 – 2011 25,00,00,000 10,00,00,000 180 67
3) Bank of baroda
Interest Rate
Year Fixed Rate Floating Rate
2008 – 2009 11.00% 10.00%
2009 - 2010 11.25% 10.25%
2010 – 2011 11.50% 10.50%
Loan amount, A/c holders & defaulters.
Year Total Loan
Amt.
Distributed
Total Home
Loan Amt.
Distributed
Total A/c
Holder for
Home Loan
Total
Defaulter for
Home Loan.
2008 – 2009 7,20,00,000 1,58,00,000 125 _
2009 - 2010 7,58,00,000 2,38,00,000 148 _
2010 – 2011 13,40,00,000 3,00,00,000 178 1
4) Central Bank Of India
Interest Rate
Year Fixed Rate Floating Rate
2008 – 2009 11.00% 10.25%
2009 - 2010 11.50% 10.50%
2010 – 2011 12.00% 11.25%
Loan amount, A/c holders & defaulters.
Year Total Loan
Amt.
Distributed
Total Home
Loan Amt.
Distributed
Total A/c
Holder for
Home Loan
Total
Defaulter for
Home Loan.
2008 – 2009 46,00,000 19,00,000 53 6
2009 - 2010 48,00,000 13,00,000 62 8
2010 – 2011 52,00,000 16,00,000 71 8
Comparison in interest rate
2008 – 2009
Name of Bank Fixed Rate Floating Rate
Bank of Maharashtra 11.00% 10.25%
State Bank of India 11.25% 10.50%
Bank of Baroda 11.00% 10.00%
Central Bank of India 11.00% 10.25%
Interpretation:
In these year SBI charges highest interest rate (floating & fixed). Bank of
Maharashtra, Bank of Baroda & Central Bank of India charges the same lowest Fixed
Interest rate. Bank of Baroda charges the lowest floating interest rate comparatively
another 3 banks in Kopargaon region.
2009 – 2010
Name of Bank Fixed Rate Floating Rate
Bank of Maharashtra 11.50% 10.50%
State Bank of India 11.50% 11.00%
Bank of Baroda 11.25% 10.25%
Central Bank of India 11.50% 10.50%
Interpretation:
In the year Bank of Maharashtra, SBI & Central Bank of India give the same highest
Fixed Interest rate for home loan. Bank of Baroda lowest fixed interest rate. SBI
charge highest & Bank of Baroda charges the lowest floating interest rate.
2010 – 2011
Name of Bank Fixed Rate Floating Rate
Bank of Maharashtra 12.00% 11.00%
State Bank of India 11.25% 10.75%
Bank of Baroda 11.50% 10.50%
Central Bank of India 12.00% 11.25%
Interpretation :
In these year Central Bank of India charges the highest interest rate (Floating
& Fixed) & Bank of Maharashtra charged highest fixed interest rate(12.00%) & Bank
of Baroda charges the lowest floating interest rate.
Comparison of % of home loan.
2008 – 09
Total distribute loan amount & total distribute home loan amount.
Year Total Loan
Amt. Distributed
Total Home Loan Amt.
Distributed
Bank of Maharashtra 4,00,00,000 46,00,000
State Bank of India 27,00,00,000 13,00,00,000
Bank of Baroda 7,20,00,000 1,58,00,000
Central Bank of India 46,00,000 19,00,000
2009 – 10
Total distribute loan amount & total distribute home loan amount.
Year Total Loan
Amt. Distributed
Total Home Loan Amt.
Distributed
Bank of Maharashtra 3,05,00,000 21,00,000
State Bank of India 29,00,00,000 17,00,00,000
Bank of Baroda 7,58,00,000 2,38,00,000
Central Bank of India 48,00,000 13,00,000
2010 – 11
Total distribute loan amount & total distribute home loan amount.
Year Total Loan
Amt. Distributed
Total Home Loan Amt.
Distributed
Bank of Maharashtra 3,80,00,000 4315,000
State Bank of India 25,00,00,000 10,00,00,000
Bank of Baroda 13,40,00,000 3,00,00,000
Central Bank of India 52,00,000 16,00,000
% Of home loan amount in total distribute loan amount.
Name of The Bank
Year
2008 - 09 2009 - 10 2010 -11
Bank of Maharashtra 11.50% 6.89% 11.36%
State Bank of India 48.15% 58.62% 40.00%
Bank of Baroda 21.94% 31.40% 22.39%
Central Bank of India 41.30% 27.08% 30.77%
INTERPRETATION :
In all 3 years SBI % of distributed home loan % is high & Bank of
Maharastra’s % is low in the total distributed home loaon A/c.
Comparison in home loan a/c holder.
Name of BankYear
2008 - 09 2009 - 10 2010 -11
Bank of Maharashtra 87 80 80
State Bank of India 150 120 180
Bank of Baroda 125 148 178
Central Bank of India 83 62 71
INTERPRETATION :
In all 3 years SBI having more home loan A/c holders & Central Bank of India having
less home A/c holders as compared another banks.
Comparison of nos. Of defaulters a/cs. Holder.
Name of BankYear
2008 – 09 2009 - 10 2010 -11
Bank of Maharashtra 1 0 0
State Bank of India 65 70 67
Bank of Baroda 0 0 1
Central Bank of India 6 8 8
Interpretation :
In all three years SBI having more defaulters & Bank of Maharashtra & Bank of
Baroda having only one defaulters in the years 2008 – 09 & 2010 – 11 respectively.
Duration for sanction of home loan.
Name of Bank Days
Bank of Maharashtra 7
State Bank of India 5
Bank of Baroda 6
Central Bank of India 15
Interpretation :
Bank of Maharashtra sanctioning the home loan in 7 days, State Bank of India in 5
days. And Bank of Baroda & Central Bank of India Sanctioning the home loan in 6
days & 15 days respectively.
Practical Cases for Home Loan in the Bank of
Maharashtra at Kopargaon-
1] Mr.Prakash Khare , Kopargaon. He is a teacher. His monthly income / salary Rs
20000pm. He taken a home loan from bank of Maharashtra, Kopargaon. On
12.4.2005 at 9.00% interest rate [floating interest rate]. His home loan period is 20
year and his amount is Rs 4,50,000. His loan installment is Rs 6100 p.m. he paid the
total amount of loan Rs 2,80,000 and Rs5,06,000.amount remained in his loans . he
totally paid 72 installment. Current interest rate is 11.50%.
Mr. Khare give the following document to bank for loan purpose’
1]2 photograph.
2]Voting card Xerox.
1] 8A.
2] Certificate of Non Agriculture Land [Issued by collector Act 44 ].
3]Tax paid Receipt.
4] Search Report [Issued by Advocate]
5] Estimate and plan of House [Issued by registered civil engineered]
6] Local Authority [Issued by municipal corporation ]
7] Income source [salary Sleep]
8] 1 Garrunter .
9] Mortgaged certificate of his loan.
Solution -
Mr. Khare taken loan from bank of Maharashtra ,Kopargaon at Rs 450000. On
9,00% interest rate & his loan installment is Rs 6100pm, but he is not paid regular
installment ,hence Bank charged the penalty on his remained loan amount . because
bank rule is any customer not paid the regular installment charged the penalty
[Penalty means - compounding interest + 2% penalty].
Mr.Khare not knows the penalty charge on his loan amount .
In this period , bank of Maharashtra interest of home loan is 10 time changed [like
9.25 % , 9.75%, 10.25%, 10.50% , 10.75% , 9.50%, 11.25%, 11.75% ].
Mr.Khare loan amount is increase . because he not paid the regular installment &
bank charged the penalty . He paid total amt. is Rs. 280000 in 72 installments means
he paid Rs. 3889 per month. [280000/72 = 3889] but his actual instalments is Rs.
6100 per month and he paid Rs. 3889 per month. His installments amt. remains is Rs.
2211 per month on his remains amt. add in Remains loan amt. and plus bank charged
penalty on his loan. Amount hence his loan is increases like Rs. 506000. he taken loan
of Rs 450000 & his remained loan amount is Rs506000.
Conclusion ,
Bank should inform to all the customer for the home loan the amount of
penalty being charged in case of defaulters.
2] Mr. Suryavanshi ,Kopargaon. He is teacher . his monthly income/salary is Rs
15000. He taken home loan from bank of Maharashtra , Kopargaon.His loan Amount
is Rs175000. On 28.12.2004. at 9.50% interest rate [floating interest rate] his loan
amount Rs 175000 . his loan installment Rs 1000pm . He paid total Amount Rs
150000 &Rs 58770.is remaincce in his loan . he total 100 installment is paid. His loan
current interest rate is Rs11.50%.
He Gives the following document to bank
1]80A
2]Certificate of Non Agriculture Land [Issued by collector Act 44]
3]Tax paid Receipt .
4]Search Report [Issued by Automate]
5]Estimate & plan of House [Issued by Registered civil engineered]
6]Local Authority [Issued by municipal corporation].
7]Income Source [Salary sleep]
8]1 Garuntered
9]Mortgaged Certificate of his land.
Solution -
Mr. Suryavanshi , Kopargaon. He taken loan from Bank of Maharashtra ,
Kopargaon ,on 28/.12.2004 at Rs 175000.&intrest rate is 9.50% ,&his installment Rs
1000pm.his monthly income is Rs 15000pm .
He paid regular installment .bank not charged penalty because he paid regular
installment of his loan .
He paid Rs150000 & Rs 58770 is remained amount in his loan .
Findings
1) It is found that in first two years (2008-09, 2009-10) SBI charges high interest
rate & in 2010-11 Central Bank of India charges high interest rate for home
loan as compared to other banks while Bank of Baroda charges lowest.
2) It is being observed that out of the total amount of loan distributed % of home
loan is high in SBI for all three years with 48.15%, 58.62% & 40.00%
respectively for 2008-09, 2009-10 & 2010-11. Bank of Maharashtra has
distributed lowest % of amount for home loan.
3) SBI is having highest number of A/C holders for home loan for all three years.
4) Number of defaulters is highest in SBI & lowest in Bank of Maharashtra &
Bank of Baroda.
5) Time taken for sanctioning home is lowest in SBI i.e. 5 days and highest in
Central Bank of India is 15 day.
Conclusion
1. With compare to all four banks. Bank of Baroda and SBI have a very good
performance in home loan sector in Kopargaon region.
2. Bank of Maharashtra also give the good performance in home loan.
3. Bank of Maharashtra sanction loan only to credit worthy customers & so they
are in good position with only one defaulter in 3 years.
Suggestion
1. Bank of Maharashtra should reduce the interest rate to attract customers.
2. Bank of Maharashtra should launches the new attractive scheme for increasing
home loan disbursement.
3. Bank of Maharashtra is in good position when it comes to number of
defaulters so should maintain it.
4. Bank of Maharashtra should try to reduce the time taken for sanctioning home
loan which will help to attract customer.
5. While going through practical cases it found that bank is not giving
information about penalties being charges. Bank should disclosed all the home loan
related to penalties in case of defaulters to customers.
Bibliography
Books :
1) Practical Banking Advances
By Bedi & Haldikar.
2) Fund Management in Commercial Bank.
By Malhotra & Verma
Internet :
www.bankofbaroda.com
www.googlesearch.com
www.sbi.co.in
www.mahabank.com
www.bankrate.com
www.apnaloan.com
Questionnaire
Name of the Bank : -
Name of the person : -
1) What is the Interest rate of Housing Loan?
Fixed Rate Floating Rate
2008 – 2009
2009 – 2010
2010 – 2011
2) What is the amt. of total Loan Distributed in 3 Years?
Year Amt.
2008 – 2009
2009 – 2010
2010 – 2011
3) What is the total distributed amt. for Home Loan?
Year Amt.
2008 – 2009
2009 – 2010
2010 – 2011
4) How many customer/A/c’s of Home Loan?
Year A/c.
2008 – 2009
2009 – 2010
2010 – 2011
5) How many number of defaulters for Home Loan?
Year No.
2008 – 2009
2009 – 2010
2010 – 2011
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