final proejct report yoshita tolani

8/12/2019 Final Proejct Report Yoshita Tolani

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E X EC U TI V E S UM M A R Y

PROFILE OF THE ORGANISATION

Bank of Baroda was established in the year 1908 in Baroda. Ever since its inception, the bank

has been growing and expanding its branches successfully.

Bank of Baroda is a state owned banking and financial institution offers a wide range of

banking products and financial services to corporate and retail custoers.

Bank of Baroda is one of the big four banks in !ndia, along with "tate Bank of !ndia, !#!#!

and $un%ab &ational Bank. Bank of Baroda has progressively taken a step towards

coitent and values by providing uncoproising standards of service to its custoers,

stakeholders, eployees and the like.

TITLE

'ousing (oans )*easons for default and iproveent suggested

INTRODUCTION TO TOPIC

Housing loan

'oe is a drea of a person that shows the +uality of efforts, sacrifices, luxuries and above

all gathering funds little by little to afford ones drea. 'oe is one of the things that

everyone wants to own. 'oe is a shelter in person where she-he rests and feel cofortable.

any banks providing hoe loans whether $rivate or $ublic to the people who want to have

hi.

1



Bank of Baroda has been serving the people for any years, providing various housing

loans, according to their varied needs at attractive and reasonable interest rates. any

banks are providing hoe loans at cheapest rates to attract custoers towards the.

Produ!s und"r #o$" loans o%%"r"d &' (an) o% (aroda !o i!s us!o$"rs ar"/

!. Baroda 'oe (oan for !ndividuals *esident !ndian

!!. Baroda 'oe (oan to &*!s-$!2s-2#!s

!!!. Baroda 'oe !proveent (oan

!3. Baroda 4dditional 4ssured 4dvance 444

3. 'oe (oan to "taff under $ublic "chee

3!. 5olden 6ubilee *ural 'ousing 7inance

O(*ECTIVE

Pri$ar' O&+"!i,"

he ain ob%ective of the study is to study in depth the 'ousing loan)reasons for default

and suggestions for iproveent

S"ondar' O&+"!i,"

his includes the following/

• o study in)depth the process of appraisals and sanctioning of credit

• 'ow BoB assesses the credit rating of borrowers

• 6udge whether the pro%ect is viable or not, i.e. approved by the bank



CHAPTER ONE

AREA OF INTERNSHIP AND LEARNING O(*ECTIVE

-.- INTRODUCTION TO TOPIC

Housing loan

'oe is a drea of a person that shows the +uality of efforts, sacrifices, luxuries and

above all gathering funds little by little to afford ones drea. 'oe is one of the things

that everyone wants to own. 'oe is a shelter in person where she-he rests and feel

cofortable.

any banks providing hoe loans whether $rivate or $ublic to the people who want to

have hi.

Bank of Baroda has been serving the people for any years, providing various housing

loans, according to their varied needs at attractive and reasonable interest rates. any

banks are providing hoe loans at cheapest rates to attract custoers towards the.

Produ!s und"r #o$" loans o%%"r"d &' (O( !o i!s us!o$"rs ar"/





3. 'oe (oan to "taff under $ublic "chee

3!. 5olden 6ubilee *ural 'ousing 7inance

-./ O,"r,i"0 o% Housing Finan" Indus!r' in India

:



!ndia;s housing finance industry, ainly coprises banks and 'oe 7inance #opany

'7#s, and to a certain liited extent, saller institutions such as counity)based

organi<ations, self)help groups, etc.

he &ational 'ousing Bank &'B operates as the principal agency for prooting,

regulating and providing financial and other support to '7#s at local and regional levels,

while banks and &on Bank 7inancial #opany &B7#s are anaged and regulated by

the *B!. 4s of 7ebruary =, 01:, => copanies have been granted certificates of

registration by &'B to act as '7#s.

'istorically, the housing finance industry was doinated by '7#s. 'owever, towards the

end of the 1990s, the scheduled coercial banks becae very active in lending to the

housing sector in the backdrop of lower interest rates, rising disposable incoes, stable

property prices and fiscal incentives by the governent.

?hile banks depend on their own e+uity and reserves and large deposit base for funding

their housing loan portfolios, '7#s priarily depend on funding sources such as loans

fro banks and financial institutions, financing fro &'B, borrowing through bonds and

debentures, coercial paper, subordinate debt and fixed deposits fro public, besides

their own e+uity and reserves. !ncreased copetition in the housing finance industry has

also led to the introduction of new ortgage products in the arket, such as variable

interest rate loans, loan for repairs and renovation, and custoi<ed products with features

like ballooning E!, depending on the need and eligibility of the borrowers concerned.

!n addition, soe banks and '7#s also offer hoe e+uity loans leans against the

ortgage of existing property, which ay be used for non)housing purposes

-.1 2"' Tr"nds in T#" Housing Finan" Indus!r' In India

7ocus on salaried segent, self)eployed borrowers ignored

'istorically, banks and '7#s have largely focused on the salaried class, as can be seen by

the fact that salaried borrowers account for 80)8=@ of the total outstanding loans.

A



he key reason behind this skew towards the salaried segent is the ease in validating

the incoe levels and the repayent capabilities of salaried borrowers is better than a

self)eployed person. 7urther, lenders have traditionally viewed the salaried segent as

one with stable cash flows and, hence, consider it as lower risk.

'owever, this has also resulted in the self)eployed borrowers being largely ignored by

the organi<ed lenders, forcing the to rely on personal loans or loans fro unorgani<ed

sources at higher interest rates.

4ccording to #*!"!(, '7#s, despite having a higher cost of funds as copared to banks,

have been able to aintain coparable gross spreads and with iproved efficiencies,

lower operating costs and better risk anageent practices, have a net profit argin

slightly higher than the banks. 4s per their estiates, '7#s are expected to aintain a

net profit argin of 1.>)1.@ of loan book as against banks at 1.=)1.>@ of loan book

based on increental disburseents.

Civersification of sources of funds of '7#s

he typical funding sources for '7#s include bank loans, non)convertible debentures

D&#C, fixed deposits, and coercial papers, &'B refinancing and other loans.

(arger '7#s have been able to build a ore diverse funding base due to their superior

credit rating and their ability to target the &#C arket for funds. !n contrast, saller

'7#s have leveraged the &'B refinance facility for priority sector-rural lending, which

is offered at lower than arket interest rates. his has helped the saller '7#s to

copete with banks and larger '7#s by reducing their cost of funds. 7loating rate loans

account for the bulk of the arket.

4ll housing loans in !ndia typically carry a fixed interest rate or a floating interest rate. 4

fixed rate loan is one where the rate of interest reains constant throughout the tenure of

=



the loan or for a specific nuber of years. ?hereas, in a floating rate loan, the borrower

pays interest at a rate that is linked to the benchark prie lending rates of financiers.

he rate charged on fixed rate loans is generally higher than that charged on floating rate

loans, due to the higher interest rate risk in case of the forer.

Cue to the long)ter nature of the housing loans and ediu)ter nature of the lender;s

liabilities, lenders prefer to lend at floating rates, as it allows the to re)price the loans as

and when their cost of funds increases. he proportion of floating rate loans has been

increasing for the last several years, priarily due to the indirect push fro the lenders

side by way of a higher spread between fixed rate loans and floating rate loans, which in

soe cases was around = pips. $ost 009)10, the rising interest rate scenario ade

borrowers opt for floating rate loans in anticipation of reduction or stabili<ation of

interest rates in the later years. 4ccording to #*!"!(, the proportion of floating rate loans

is expected to continue rising and reach around 9@ in 7iscal 01

-.3 O(*ECTIVES OF THE STUDY

Pri$ar' O&+"!i,"

he ain ob%ective of the study is to study in depth the 'ousing loan)reasons for default

and suggestions for iproveent

S"ondar' O&+"!i,"

his includes the following/

o study in)depth the process of appraisals and sanctioning of credit

'ow BoB assesses the credit rating of borrowers

6udge whether the pro%ect is viable or not, i.e. approved by the bank

>



Based on 01 data, it is ranked 1= on the 7orbes 5lobal 000 list. BoB has total assets

in excess of :.=8 trillion short scale, :,=8: billion long scale, a network of A8:

branches out of which A1 branchesH>I are in !ndia and offices, and over 000 4s.

he bank was founded by the ahara%a of Baroda, '. '. "ir "aya%irao 5aekwad !!! on 0

6uly 1908 in the $rincely "tate of Baroda, in 5u%arat. he bank, along with 1: other

a%or coercial banks of !ndia, was nationalised on 19 6uly 19>9, by the 5overnent

of !ndia and has been designated as a profit)aking public sector undertaking $"J.

Bank of Baroda is one of the (ig Four &an)s o% India, along with "tate Bank of

!ndia, !#!#! Bank and $un%ab &ational Bank.

/./ A SAGA OF VISION AND ENTERPRISE

!t has been a long and eventful %ourney of alost a century across = countries. "tarting

in 1908 fro a sall building in Baroda to its new hi)rise and hi)tech Baroda #orporate

#entre in ubai is a saga of vision, enterprise, financial prudence and corporate

governance.

!t is a story scripted in corporate wisdo and social pride. !t is a story crafted in private

capital, princely patronage and state ownership. !t is a story of ordinary bankers and their

extraordinary contribution in the ascent of Bank of Baroda to the foridable heights of

corporate glory. !t is a story that needs to be shared with all those illions of people )

custoers, stakeholders, eployees K the public at large ) who in aple easure, have

contributed to the aking of an institution.

/.1 (O(7S MISSION STATEMENT

o be a top ranking &ational Bank of !nternational "tandards coitted to augenting

stake holders value through on"rn8 ar" and o$9"!"n".

8



/.3 HISTORY

-:;<=-:>:

!n 1908, ahara%a "aya%irao 5aekwad !!! one of the knights of the aratha Gingdo, set

up the Bank of Baroda BoB,with other stalwarts of industry such as "apatrao

5aekwad, *alph ?hitenack, 3ithaldas hakersey, ulsidas Gilachand and &

#hokshi. wo years later, BoB established its first branch in 4hedabad. he bank grew

doestically until after ?orld ?ar !!. hen in 19=: it crossed the !ndian 2cean to serve

the counities of !ndians in Genya and !ndians in Jganda by establishing a branch

each in obasa and Gapala.

he next year it opened a second branch in Genya, in &airobi, and in 19=> it opened a

branch in Car)es)"alaa. hen in 19= BoB took a giant step abroad by establishing a

branch in (ondon. (ondon was the center of the British #oonwealth and the ost

iportant international banking center. !n 19=8 BoB ac+uired 'ind Bank #alcuttaL est.

19A:, which becae BoBs first doestic ac+uisition.

-:?;s

!n 19>1, BoB erged in &ew #iti<en Bank of !ndia. his erger helped it increase its

branch network in aharashtra. BoB also opened a branch in 7i%i. he next year it

opened a branch in auritius.

Bank of Baroda !n 19>:, BoB ac+uired "urat Banking #orporation in "urat, 5u%arat. he

next year BoB ac+uired two banks/ Jbergaon $eople;s Bank in southern 5u%arat and

ail &adu #entral Bank in ail &adu state.

!n 19>=, BoB opened a branch in 5uyana. hat sae year BoB lost its branch in

&arayan%an% East $akistan due to the !ndo)$akistani ?ar of 19>=. !t is unclear when

BoB had opened the branch. !n 19> it suffered a second loss of branches when the

9



an<anian governent nationalised BoB;s three branches there at Car es

"alaa, wanga, and oshi, and transferred their operations to the an<anian

governent)owned &ational Banking #orporation.

!n 19>9 the !ndian governent nationalised 1A top banks, including BoB. BoB

incorporated its operations in Jganda as a =1@ subsidiary, with the governent owning

the rest.

-:<;s

!n 1980, BoB opened a branch in Bahrain and a representative office in "ydney,

4ustralia. BoB, Jnion Bank of !ndia and !ndian Bank established !JB !nternational

7inance, a licensed deposit taker, in 'ong Gong. Each of the three banks took an e+ual

share. Eventually in 1998, BoB would buy out its partners.

4 second consortiu or %oint)ventrue bank followed in 198=. BoB 0@, Bank of

!ndia 0@, #entral Bank of !ndia 0@ and M!#2 Mabian governentL A0@

established !ndo)Mabia Bank in (usaka. hat sae year BoB also opened an 2ffshore

Banking Jnit 2BJ in Bahrain.

Back in !ndia, in 1988, BoB ac+uired raders Bank, which had a network of :A branches

in Celhi.

-::;s

!n 1990, BoB opened an 2BJ in auritius, but closed its representative office in "ydney.

he next year BoB took over the (ondon branches of Jnion Bank of !ndia and $un%ab K

"ind Bank $K". $K";s branch had been established before 190 and Jnion Bank;s

after 1980. he *eserve Bank of !ndia ordered the takeover of the two following the

banks involveent in the "ethia fraud in 198 and subse+uent losses.

hen in 199 BoB incorporated its operations in Genya into a local subsidiary with a

sall tranche of shares +uoted on the &airobi "tock Exchange. he next year, BoB closed

its 2BJ in Bahrain.

10



/;;;s

• 000/ (o( established (an) o% (aroda Botswana.

• 00/ BoB ac+uired Benares "tate Bank B"B at the *eserve Bank of !ndia;s

re+uest. B"B was established in 19A> but traced its origins back to 181 and its

function as the treasury office of the Benares state. !n 19>A, B"B had ac+uired

Bareilly Bank est. 19:A, with seven branchesL it also had taken over (ucknow

Bank in 19>8. he ac+uisition of B"B brought BoB 10= new branches.

• 00/ Bank of Baroda Jganda was listed on the Jganda "ecurities

Exchange J"E.

• 00:/ BoB opened an 2BJ in ubai.

• 00A/ BoB ac+uired the failed 5u%arat (ocal 4rea Bank, and returned to an<ania

by establishing a subsidiary in Car)es)"alaa. BoB also opened a representative

office each in Guala (upur, alaysia, and 5uangdong, #hina.

• 00=/ BoB built a 5lobal Cata #entre C# in ubai for running its centrali<ed

banking solution #B" and other applications in ore than 1,900 branches across

!ndia and 0 other counties where the bank operates. BoB also opened a

representative office in hailand.

• 00>/ BoB established an 2ffshore Banking Jnit 2BJ in "ingapore.

• 00/ !n its centenary year, BoB;s total business crossed .09 trillion short scale,

its branches crossed 000, and its global custoer base 9 illion people.

• 008/ BoB opened a branch in 5uang<hou, #hina 0-08-008 and in Genton,

'arrow Jnited Gingdo. BoB opened a %oint venture life insurance copany

with 4ndhra Bank and (egal and 5eneral JG called !ndia 7irst (ife !nsurance

#opany.

/;-;s

!n 010, alaysia awarded a coercial banking license to a locally incorporated bank

to be %ointly owned by Bank of Baroda, !ndian 2verseas Bank and 4ndhra Bank. hat

sae year, BoB also opened a branch in &ew Mealand.

11



!n 011, BoB opened an Electronic Banking "ervice Jnit EB"J was opened at

'ariya 7ree Mone, "har%ah J4E. !t also opened four new branches in existing

operations in Jganda, Genya , and 5uyana. BoB closed its representative office in

alaysia in anticipation of the opening of its consortiu bank there. BoB received !n

$rinciple approval for the upgrading of its representative office in 4ustralia to a branch.

he alaysian consortiu bank, !ndia !nternational Bank alaysia !!B,

finally opened in Guala (upur, which has a large population of !ndians. B2B owns

A0@, 4ndhra Bank owns =@, and !2B the reaining :=@ of the share capital.

4s any as 10 banks have been erged with Bank of Baroda during its %ourney so far/

'ind Bank (td 19=8

&ew #iti<en Bank of !ndia (td 19>1

"urat Banking #orporation 19>:

ail &adu #entral Bank 19>A

Jbergaon $eople Bank 19>A

raders Bank (iited 1988

Bareilly #orporation Bank (td 1998

Benares "tate Bank (td 00

"outh 5u%arat (ocal 4rea Bank (td 00A

eon #o)operative Bank (td. 011

/.> (O(7S LOGO

2ur new logo is a uni+ue representation of a universal sybol. !t coprises dual NB;

letter fors that hold the rays of the rising sun. ?e call this the Baroda "un.

1



he sun is an excellent representation of what our bank stands for. !t is the single ost

powerful source of light and energy O its far reaching rays dispel darkness to illuinate

everything they touch. 4t Bank of Baroda, we seek to be the source that will help all our

stakeholders reali<e their goals. o our custoers, we seek to be a one)stop, reliable

partner who will help the address different financial needs. o our eployees, we offer

rewarding careers and to our investors and business partners, axiu return on their

investent.

he single)colour, copelling verillion palette has been carefully chosen, for its

distinctiveness as it stands for hope and energy.

?e also recogni<e that our bank is characteri<ed by diversity. 2ur network of branches

spans geographical and cultural boundaries and rural)urban divides. 2ur custoers coe

fro a wide spectru of industries and backgrounds. he Baroda "un is a fitting face for

our brand because it is a universal sybol of dynais and optiis O it is eaningful

for our any audiences and easily decoded by all.

2ur new corporate brand identity is uch ore than a cosetic change. !t is a signal that

we recogni<e and are prepared for new business paradigs in a globalised world. 4t the

sae tie, we will always stay in touch with our heritage and enduring relationships on

which our bank is founded. By adopting a sybol as siple and powerful as the Baroda

"un, we hope to counicate both.

/.? THE INITIATIVES @

Bank of Baroda is a pioneer in various custoer centric initiatives in the !ndian banking

sector. Bank is aongst first in the industry to coplete an all)inclusive rebranding

exercise wherein various novel custoer centric initiatives were undertaken along with

the change of logo. he initiatives include setting up of speciali<ed &*! Branches, 5en)

1:



&ext Branches and *etail (oan 7actories- "E (oan 7actories with an assebly line

approach of processing loans for speedy disbursal of loans.

he a%or ongoing initiatives of the Bank are detailed below/

/. (USINESS PROCESS REENGINEERING 5(PR6@

!proveent in branch productivity on sales

Best)in)class service levels for custoer delight

*edesign of front K back office processes K roles to reduce turnaround tie

*eduction in operating costs

/.< COMPARISONS 4ITH COMPETITORS 5RATIOS B RS IN CRORE

Bank of

Baroda

SBI PNB State Bank of

Travancore

State Bank

of Mysore

March’13 March’13 March’13 March’13 March’13

Per Share

Ratios

Adjusted

EPS 106.37

206.20 134.31 123.01 88.91

Adjusted

Cash EPS 113.50

222.86 143.33 134.76 98.96

Reprted

EPS 106.37

206.20 134.31 123.01 88.91

Reprted

Cash EPS 113.50

222.86 143.33 134.76 98.96

!perat"#$

Mar$"# %&' 16.10

13.52 16.73 8.76 13.11

(et pr)"t

Mar$"# %&' 11.54

10.39 10.29 6.62 6.34

1A



Curre#t Rat"

22.98

11.46 21.21 18.03 21.63

*"+"de#d

Pa,ut Rat" 23.64

20.12 23.51 18.89 15.51

/.: CORPORATE SOCIAL RESPONSI(ILITY 5CSR6 INITIATIVES

Bank has always upheld inclusive growth high on its agenda. Bank has established :>

Baroda "waro%gar 3ikas "ansthan Baroda *)"E! for iparting training to uneployed

youth, free of cost for gainful self eployent K entrepreneurship skill developent and

= Baroda 5rain $araarsh Gendra and for knowledge sharing, proble solving and

credit counselling for rural asses across the country, as on :1.0:.011. Bank has also

established 18 7inancial (iteracy and #redit #ounselling #entres 7(## in order to

spread awareness aong the rural asses on various financial and banking services and

to speed up the process of 7inancial !nclusion, as on :1.0:.011.

/.-; THE FUTURE

*evolutionary and discontinuous changes in the operating environent are stark

reinders that business success is iperanent. Bank has achieved substantial progress

in technology and is continuously integrating ultiple platfors of technology to

generate synergies. Bank continuously attepts to adapt to the dynaic econoic

environent while engaging in long ter relationships to provide superior custoer

service. Bank;s constant endeavour to delight its custoers, which is built on its strong

fundaentals will ake it stronger, ore resilient and enable to achieve its vision of to

be the ost 4dired Bank.

/.-- (USINESS INDICTORS

1=



2"' (usin"ss India!ors 5Rs. in Cror"6 1-.;1./;-/ 1-.;1./;--

otal Ceposits :8A81.11 :0=A:9.A8

otal 4dvances 8:.9 8>>.:>

otal !nvestents 8:09.A 1>0.>:

otal 4ssets AA:1.A :=8:9.18 &et $rofit =00>.9> AA1.>8

#apital 4de+uacy *atio percentage 1.9= as per Basel !

1A.> as per Basel !!

1:.0 as per Basel !

1A.= as per Basel !!

&et &on $erforing (oans to &et

4dvances percentage

0.=A 0.:=

&et !nterest argin percentage .9 :.1

Business $er Eployee (acs 1A>> 19

Di,id"nd His!or' 5P"r"n!ag"6

01 10

011 1>=

010 1=0

009 90

008 80

00 >0

00> =0

00= =0

00A >=

00: >0

00 A0

001 A0

000 A0

/.-/ (RANCHES AND OFICES

Branch &etwork as of ->-01A

Ar"a No. o% (ran#"s

etro 9=8

Jrban 8A8

1>



"ei)Jrban 1>

*ural 181

otal !ndian A8=A

7oreign 2verseas :1

otal 5lobal A9A

#ontrolling 2ffices

Monal 2ffices 1:

*egional 2ffices =>

'uan *esources "taff as of 01.0A.01:

2fficers 1>:1

#lerks 1>:9

"ub ) "taff 818>

2n #ontract -

otal A1=

/.-1 SU(SIDIARIES AND *V7S

Do$"s!i O,"rs"as

Su&sidiar' Su&sidiar'

(O(CARDS L!d.

(O( Ca9i!al Mar)"!s L!d.

Naini!al (an) L!d.

(an) o% (aroda 5(o!s0ana6 L!d.

(an) o% (aroda 52"n'a6 L!d.

(an) o% (aroda 5Uganda6 L!d.

(an) o% (aroda 5Gu'ana6 L!d.

(an) o% (aroda 5N"0 "aland6 L!d

(an) o% (aroda 5Tanania6 L!d

(an) o% (aroda 5Trinidad To&ago6

L!d.

(an) o% (aroda 5G#ana6 L!d.

R"9r"s"n!a!i," O%%i"s

1



(an) o% (aroda 5T#ailand6

Assoia!" Assoia!"

(aroda Pion""r Ass"! Manag"$"n! Co$9an'

L!d

India Firs! Li%" Insuran" Co$9an' Li$i!"d

(aroda U!!ar Prad"s# Gra$in (an)

(aroda Ra+as!#an Gra$in (an)

(aroda Gu+ara! Gra$in (an)

Nani!al BAl$ora 2s#"!ri'a Gra$in (an)

*#a&uaBD#ar 2s#"!ri'a Gra$in (an)

IndoBa$&ia (an) L!d. 5Lusa)a6

India In!"rna!ional (an) Mala'sia

("r#ad

/.-3 INTERNATIONAL RELATIONS

Bank of Baroda started its overseas %ourney by opening its first branch way back in 19=:

in obassa, Genya. "ince then the Bank has coe a long way in expanding its

international network to serve &*ls-$!2s, !ndian #orporates around the world and to

eet the banking re+uireents of the local population in the country of operation. he

Bank has transfored into N!ndias !nternational Bank.;

he Bank has significant international presence with a network of 10 branches - offices

in A countries including >0 branches-offices of the Bank, A1 branches of its 8

"ubsidiaries and 1 *epresentative 2ffices in hailand. he Bank also has 6oint 3enture

in Mabia with 1 branches and 6oint 3enture in alaysia having )1) branch at Guala

(upur

he Bank has presence in worlds a%or financial centers i.e. &ew

Fork, (ondon, Brussels, Cubai, 'ong Gong and "ingapore. Bank is further expanding the

branch network in JG, J4E, Jganda, Genya and an<ania etc.

18



/.-> RETAIL LOAN FACTORY5RLF6 PROFILE

STRUCTURE OF RLF

#hief anager

"ales #entral $rocessing #ell#$#

/.->.- PRODUCTS COVERED UNDER THE PURVIE4 OF RLFs@

$resently, following products are covered by *(7s/

!. Baroda 'ousing (oan to !ndividuals -&*!s- $!2s,

!! Baroda 'oe !proveent (oan,

!!!. Baroda ortgage (oan

!3. Baroda raders (oan.

3. Baroda (oan to Coctors.

3!. Baroda Education (oan above *s. .=0 lacs.3!!. Baroda (oan against 7uture *ent *eceivable o individuals upto *s.10-) #rores.

3!!!. Baroda 4shray *everse ortgage

/.->./ O(*ECTIVES OF SALES UNIT OF RLF@

19



o arket -sell various ortgage based retail loan products with speed and

accuracy and in tie bound anner.

o populari<e the Bank;s products through participating in various exhibitions, fairs,

conferences etc.

o gather inforation about builders functioning in the area for the purpose of

approving the builders and their pro%ects.

o cross sell the Bank;s other loan, liability and third party products

/.->.1 O(*ECTIVES OF CENTRAL PROCESSING CELL 5CPC6 UNIT OF RLF@

o carry out appraisal and sanction of retail loan proposals received fro the "ales

Jnit - Branches operating in the prescribed coand area and thereby iproving the

processes involved in appraisal and sanction of retail loans.

o reduce the custoer turn)around tie effectively.

o enhance processing capabilities and skills of staff.

o reduce the processing work load of retail loans at branches for aking the free to

carry out arketing and servicing of accounts

o standardi<e the practices relating to appraisal and sanction of retail loans.

o take easures necessary for preventing frauds and other irregularities.

o follow the best practices for anaging risks, and

0



o create a central pool of staff having speciali<ed credit appraisal and sanctioning

skills.

/.->.3 OPERATIONAL SETBUP FOR SALES UNIT IN RETAIL LOAN

FACTORY

1

REGIONAL

HEAD



/. ->.? *O( ROLE RESPONSI(ILITIES OF RLF HEAD

:



• Ensure sooth workflow processes K onitor perforance of all workstations.

anage intra)day floor perforance by de)bottlenecking.

• anage advocates and valuers for +uick turnaround tie.

• 'andle credit decision for coplex and deviation cases.

• *ecoend and subit the proposals falling beyond the C($s of *(7

'ead, as also the Ceviation $roposals, to the *egional 'ead.

• #oordinate with #orporate and *egional 2ffices as and when re+uired.

• o allocate the weekly target to arketing tea for lead generation and

nuber of proposals to be processed by each #$# staff. *otate their %ob roles

periodically.

• $erfor the duties of "ales 'ead as entioned hereunder, wherever no separate

"ales 'ead is provided.

$erforance onitoring of ele)callers, "ales ea and (ead 5enerators.

*oute planning for "ales Executives.

4llocation of war leads to "ales Executives for conversion into business.

#oordinate with the field officers and anage their perforance.

#oordinate with the *etail Banking tea at B## on proposed changes to

the product proposition and on up)coing *etail (oan #apaigns- elas.

*eview the tie)ups with Builders.

*eview the status of pending war leads and pending applications.

#oordinate with 'ead)#$# on incoplete applications and applications

sanctioned but pending custoer acceptance.

#onduct sales calls with the erritory (eader to review perforance of the

erritory "ales ea-"ales Executives.

A



$rovide coaching- feedback to entire tea as appropriate, as also

proper training to the new entrants in *(7.

• onitoring the !" for process and file tracking.

• 7ollow up with the Branches for generation of leads.

• o ensure that the leads generated by Branches and *(7 "ales tea, are

attended and closed in tie.

• "ubit the (eads 5eneration *eport in respect of (eads generated by

Branches as well as *(7, to the *egional 'ead on weekly basis.

• Evolve suitable strategies, in consultation with the *egional 'ead, for

iproveent in (ead 5eneration of $oor (ead 5enerating Branches.

• 7ollow up with the Branches for expediting the disburseents in the loans

sanctioned by the *(7.

• Ensure tiely subission of various inforation - data as re+uired by

various higher authorities fro tie to tie.

• *eview the perforance of *(7 and "ubit $erforance *eport, at given

periodicity, to the *egional 'ead and #orporate #entre.

• 'andle adinistrative tasks of the *(7.

• o aintain the +uality of assets.

=



• o check the frauds and control &$4s in respect of the accounts sanctioned by

*(7, by strictly following Bank;s guidelines on $reventive easures, issued by

Bank fro tie to tie.

• o forulate 4rea "pecific "chees.

• $"* clearance on day to day basis.

• o scrutini<e the online loan applications daily and dispose off within

the specified tie nors.

• 7orward copy of sanction letter to the borrower also either by ail or e)ail.

/.-? STP AND S4OT@

STP

"egent$eople who wish to invest oney in banking activities

arget groupiddle incoe group individuals, '&!s, corporates

$ositioningBank with !nternational product and services served the

!ndian way

S4OT Anal'sis

1. 2ne of the biggest naes in public sector banking

>



"trength

. &o. of services and products offered by the bank

:. #B" ipleentation in its branches

A. !nternational presence adds to the credibility

?eakness

1. (esser branches across the country when copared with

"B! and $&B

. Cue to focus on international branches, local focus

soeties gets diluted

2pportunity

1. !nternational branches give scope to expand in other

econoies

. Expansion in the rural areas to include the unbanked and

underbanked

:. BoB #aps can contribute ore to the revenues

hreats

1. &ew banking licenses by *B!

. 7oreign banks

COMPETITORS@

• "tate Bank 2f !ndia

• $un%ab &ational Bank

• "tate Bank 2f ysore

• "tate Bank of Bikaner and 6aipur

• #anara Bank

• #orporation Bank

• 2riental Bank of coerce

• Bank of !ndia

• Jnion Bank of !ndia



CHAPTER THREE

*O( DESCRIPTION AND FUNCTIONAL PROFILE

8



o study about the housing loans ) what are the reasons for default of hoe loans and

how they can be prevented i.e. suggestions for iproveent.

1.- PURPOSE OF THE STUDY

Pri$ar'@

he ain purpose of the study is to study in depth about hoe loans ) why defaults arises

and how it can be prevented.

S"ondar'/• o study about how *(7 works.

• o study about various other products that *(7 deals with

• o learn about who all can take hoe loans and what is the eligibility criteria

• o learn about what all pro%ects are approved and can be given hoe loan

• o learn how to do pre)credit of the hoe loan

• o know the reasons for default and give

suggestions for iproveent

1./ LIMITATIONS OF THE STUDY

he data availability is proprietary and not readily shared for disseination.

he staff although are very helpful but are not able to give uch of their tie due to

their own %ob constraints.

he study is not very difficult but any concepts could not be covered as they are not

approachable.

9



he study is being done keeping in ind the policies of the 'ead 2ffice.

1.1 METHODOLOGY

!n order to learn and observe the practical applicability and feasibility of various theories

and concepts, the following sources are being used/

$riary "ources of !nforation

Ciscussions with the pro%ect guide and staff ebers.

Ciscussions with departent head.

"econdary "ources of !nforation

*B! guidelines regulating the activities of the banks

Banks #redit policy and related circulars and guidelines issued by the bank.

*esearch papers, power point presentations and $C7 files prepared by the bank

and its related officials.

"tudy of proposals and anuals

?ebsite of Bank of Baroda and other net sources

CHAPTER FOUR

:0



LEARNING EXPERIENCE AND INSIGHTS GAINED

he ob%ective of y study was to learn about the 'ousing (oans) reasons for default and

what are the easures that can be suggested to iprove. 4lso learnt about what are the

different types of product that bank is offering to its custoers and its features, what is

the process of appraisal of the loan and how to calculate the eligibility of the custoer.

3.- PRODUCTS UNDER (ARODA HOME LOAN

Bank of Baroda offers a wide variety of hoe loans to its custoers which includes/





3. 'oe (oan to "taff under $ublic "chee3!. 5olden 6ubilee *ural 'ousing 7inance

3.-.-. (ARODA HOME LOAN TO INDIVIDUAL 5R"sid"n! Indian6

-. Pur9os"@ !t includes what is the purpose for which bank can give loans to its

custoers/

7or construction of new dwelling building unit and purchase of new

residential house -flat

7or purchase of old dwelling unit not ore than = years

:1



7or purchase of plot of land, sub%ect to the condition that a house will be

constructed thereon within : years or up to the period allowed by

Cevelopent authority, whichever is earlier, fro the date of purchase of the

plot, without resorting of penal interest

7or repayent of a loan already availed fro any other Bank-'ousing 7inance

#opany and -or other sources provided docuentary evidence are produced

7or existing of the existing house to/ 2ur existing hoe loan borrowers, &ew

borrowers, Borrowers who have availed 'oe loans fro other

banks-'ousing 7inance #opanies

7or reiburseent pay back of expenses incurred for houses- flats

constructed-purchased recently fro own sources for good clients selectively

/. Ag" o% !#" (orro0"r/ he iniu and axiu age of the borrower upto which

the bank gives loan to its custoers

iniu age of the borrower to who that bank can give the loan, should

not be less than 1 years and that of co)borrower should be) 18 years

axiu age of the borrower is 0 years, sub%ect to availability of sufficient

regular and continuous source of incoe and other conditions

2therwise, retireent age for salaried person and >= years for others

:. he axiu aount of loan that can be given to the borrowers are/

*s. :00 (acs for Jrban and etro Branches

*s. 100 (acs for *ural and "ei Jrban Branches

3. Ino$" Cri!"ria@ he axiu aount of loan should not exceed the following/

In as" o% salari"d 9"rsons@

:



MONTHLY INCOME ELIGI(ILITY AMOUNT OF LOAN

Jp to 0,000 :> ties of onthly gross incoe

ore than 0,000 K up to 1 (ac A8 ties of onthly gross incoeore than 1 (ac =A ties of onthly gross incoe

5ii6 In as" o% o!#"rs li)" 9ro%"ssionals8 s"l%B"$9lo'"d or &usin"ss 9"rsons8

= ies of average annual incoe last three years.

>. R"9a'ing Ca9ai!'@

In as" o% salari"d 9"rsons@

MONTHLY INCOME

TOTAL DEDUCTIONS NOT TO

EXCEED 5inluding 9ro9os"d EMI6

Jp to 0000-) A0@

ore than 0,000 K up to =0,000-) =0@ 4bove =0,000-) >0@

/. In as" o% o!#"rs@

ANNUAL INCOME


EXCEED 5inluding 9ro9os"d EMI6Jp to ,A0,000-) =0@

4bove ,A0,000-) K up to 1 (ac >0@

4bove 1 (acs ;

::



?. Margin@ !t is a certain aount of oney, which bank keeps with then which depends

upon the loan aounts, which are as follows/

(24& 42J& $J*$2"E 4*5!&

(oans upto 0 lacs

$urchase of plot 10@

'ouse-flat already constructed

for own resources

10@

4ll other cases 10@

(oans above 0-) lacs

K upto =-) (acs

$urchase of plot 0@


for own resources

0@

4ll other cases 0@

(oans above =-) lacs

$urchase of plot =@


for own resources

=@

4ll other cases =@

Bank does not include stap duty, registration charges, other docuentation charges and

other expenses like (ife !nsurance preiu on the cost of house property calculate

argin.

:A



. Ra!" o% In!"r"s!@ he rate of interest on which the bank gives loan are of two types

asunder/

i 7ixed !nterest *ate 2ption/

he 7ixed !nterest *ate option stands withdrawn and no loan shall be granted at the fixed

rate option.

ii 7loating !nterest *ate 2ption/

7loating interest rates are linked to Base *ate and will undergo change as and when the

Bank will revise floating rate or Base *ate.

<. R"9a'$"n! P"riod/

he repayent period is the period within which the borrower has to return the

loan back and it should not exceed :0 years, which will also include the

oratoriu period the tie when the borrower is not paying the E!s or the period of delay

:. Mora!oriu$ P"riod/ 4 oratoriu period is a waiting tie which is given to the

borrower before which repayent by way of E!s begins

axiu :> onths asunder/

18 onth oratoriu period for under construction 'ouses and building up

to the th floor, therefore > onths additional oratoriu per floor sub%ect to

a axiu of :> onths

or 2ne onth after copletion of house -taking possession of flat-house,

whichever is earlier.

:=



3.-./. (ARODA HOME LOAN TO NRIsPIOsOCIs

-. Eligi&ili!'@

$rincipal applicant should be eployed in a regular %ob abroad at reputed

!ndian-foreign copany, organi<ation or governent departent holding a valid

%ob contract -work perit for a iniu period for the past yearsL or

ust be eployed -self eployed or having a business unit and staying aboard

for at least for year

ust have iniu gross annual incoe e+uivalent to *s.=.oo (acs per annu

personal guarantee of spouse-faily eber residing in !ndia shall be obtained. !f

spouse is also residing abroad, personal guarantee of one-two person residing in

!ndia having ade+uate worth shall be obtained

/.Ag"@

iniu age of the borrower to who that bank can give loan ,should not be

less than 1 years and that of co)borrower should be) 18 years

axiu age of the borrower plus repayent period should not be beyond

retireent age or >= years whichever is earlier

1. Mini$u$ A$oun!@ the iniu aount that a borrower can be given is/

7or purchase of new -old house-flat or construction -flat/ *s. = (acs

7or repairs-renovation-extension/ *s 1 lacs

:>



A.Mai$u$ A$oun!@ the axiu aount that a borrower can be given is/

7or purchase of new-old house-flat or construction of house-flat *s.=00 (acs

7or etro urban BranchesL *s 100 (acs for "ei Jrban-*ural Branches

7or repairs-renovations-extensions/ *s. = (acs

7or purchase of plot of land/ *s. =0 (acs

>. Ino$" Cri!"ria@

he axiu aount of loan should not exceed the following/

• !n case of salaried persons if the salary is upto *s 1 lacs /

A8 ties of onthly incoe average.

.

• !n case of others like professionals, self)eployed or business persons

A ties of average last two years annual incoe.

?. R"9a'ing Ca9ai!'@

he loan aount will be deterined by assessing the repaying capacity of the applicant

with reference to his-her incoe and other factors such as the profile of the eployer, the

stability of his-her business, nuber of dependents, credit history and the position of his

assets and liabilities.

1. !n case of salaried persons/

MONTHLY INCOME TOTAL DEDUCTIONS NOT TO


Jp to 0,000-) A0@

:



ore than 0,000-) and up to =0,000-) =0@

4bove =0,000-) >0@

!!. !n case of others $rofessionals, self)eployed and business persons/

MONTHLY INCOME


EXCEED5inluding 9ro9os"d EMI6

Jp to ,A0,000-) =0@

4bove ,A0,000-) and up to 1 (acs >0@

4bove 1 lacs 0@

:. Margin@

(24& 42J& $J*$2"E *E3!"EC 4*5!&

(oans up to 0 lacs

$urchase of plot 10@


for own resources

10@

4ll other cases 10@

(oans above 0-) lacs

K up to =-) (acs

$urchase of plot 0@'ouse-flat already constructed

for own resources

0@

4ll other cases 0@

:8



(oans above =-) lacs

$urchase of plot =@


for own resources

=@

4ll other cases =@

10. R"9a'$"n! P"riod @

The axiu tie that is given to the borrower to repay the loan is 1= years

which also includes the oratoriu period.

11. Mora!oriu$ P"riod/

• 7or construction of new house)one onth after copletion of the house sub%ect to

axiu period of 1 onths fro the date of first disburseent

• 7or purchase of new-old house-flat)one onth after taking possession sub%ect to

axiu of : onths fro the dates of first disburseent

• !n case of repairs -renovation-extension, repayent to coence one onth after

copletion of renovation -extension-repair work sub%ect to axiu oratoriu

up to > onths

3.-.1 (ARODA HOME IMPROVEMENT LOAN

-.Pur9os"@

• 7or repair-renovation-iproveent-extension of existing house

:9



• $urchase of furniture-fixture-furnishing-other gadgets such as fans, geysers, air

conditioner, water filters, air filters, heaters, etc.

• $roperty under litigation or in poor condition should not be for financing

• he house should be older than := years. *esidual life of the house ay be

iniu repayent period plus = years to be certified by approved

architect-valuer

/.Eligi&ili!'@ his includes the borrowers who are +ualified to take loan/

• 4ll individuals resident !ndians singly or %ointly owing a dwelling unit in their

nae

• 'indu Jndivided 7aily'J7, &on *esident !ndian &*!s and staff ebers

are not eligible for this category

• akeover of the (oans for repair-renovation-iproveent taken fro other banks-

'oe 7inance #opany'7#s

1.Ag"@

he axiu and iniu age up to which the bank can give loan and the

age before which the borrower has to repay the loan is/

• iniu age of the borrower should be 1 years

• axiu age of the borrower plus repayent period should not be

beyond retireent for salaried and >= years in case of others

A0



3. R"9a'$"n! Ca9ai!'

!. !n case of salaried persons/



Jp to 0,000-) A0@

ore than 0,000-) and up to =0,000-) =0@

4bove =0,000-) >0@

!!. !n case of others $rofessionals-self)eployed-business persons etc./

MONTHLY INCOME


EXCEED5inluding 9ro9os"d EMI6

Jp to ,A0,000-) =0@

4bove ,A0,000-) and up to 1 (acs >0@

4bove 1 lacs 0@

>. Margin@

= @ of $ro%ect #ost which includes/)

P Estiated cost of repairing - renovation - extension

P cost of furniture - fixture - furnishing - other gadgets

?. Ra!" o% in!"r"s!.

Base *ate Q .=0 @

A1



. R"9a'$"n! P"riod@

• he axiu tie which is given to the borrowers in this category is 10 years by

E+uated onthly !nstallents.

• oratoriu period of )>) onths or one onth after copletion of

repair-renovation work whichever is earlier.

• !n case of salaried persons drawing pension, the repayent period can be

extended up to >= years of the age sub%ect to the condition that total deduction

including E! of this loan should not be ore than >0@ of the pension. !n case

total deduction exceeds >0@ of the pension, the borrower to deposit ade+uate

aount in the loan account so as to reduce the outstanding aount of loan to the

extent which can be served within >0@ of the pension.

!n exceptional cases, this ter ay be extended beyond above age liit if borrower

pledges 7C*s - &"#s - 5ovt. "ecurity etc. of ade+uate value to ensure continuity of

incoe for repayent of loan installent with interest if sanctioning authority is satisfied

about the sae.

3.-.3. (ARODA ADDITIONAL ASSURED ADVANCE 5AAA6

Baroda 4dditional 4ssured 4dvance 444 is a op)up (oan facility extended to 'oe

(oan Borrowers for any purpose except speculative-illegal purpose. he facility is

granted against the security of extension of E+uitable ortgage of 'ouse

$roperty already ortgaged to secure 'oe (oans and can be availed to a axiu of =

ties during the entire tenure of 'oe (oan.

Cetailed product features of the "chee are as under/

A



- T'9" o% %aili!'

• er (oan - Ceand (oan as per total period of loan

• "eparate (oan a-c is to be opened

• Borrowers nae to be siilar nae-s as per 'oe (oan

/ Pur9os" o% loan

• 4ny purpose excluding speculative or illegal purpose

1 Eligi&ili!'

• 4ll Existing 'oe (oan Borrowers including &*!s -$!2s, "taff and Ex)staff

ebers availed hoe loan under public schee as well as "taff 'ousing

(oans whose conduct of the account is good and the account is classified

"tandard.

• here is no adverse feature - 4uditors-!nspecting 2fficers rearks in existing

'oe (oan a-c

• he facility can also be considered when an account is taken over fro other

banks- 'oe finance #opany'7#s.

3 Mai$u$ Ag"

• 4ge of the borrower Q tenure of 444 loan should not exceed 0 years

• 4ge of the borrower Q tenure of 444 loan should not exceed >= years 7or

&*!s-$!2s-2#!s

> Li$i!@

he axiu and iniu aount that can be given to the borrower is/

A:



• iniu R1-) (ac

• axiu R00-) (acs

.

? Margin@

=@ of *esidual 3alue of 'ouse $roperty after deducting 1=0@ of outstanding loan

aount of Existing 'oe (oan.

< Ra!" o% In!"r"s!@ he interest rate which bank will charge fro the borrowers is/

1.=0@ over Base *ate

:. R"9a'ing a9ai!'@

• here should be a coensurate increase in take hoe salary- incoe of the

borrower when 444 facility is considered.

• he total deductions existing 'oe (oan and 444 loan should not exceed >0@

of gross incoe.

• Borrower to subit necessary papers in support of incoe

3.-.>. HOME LOAN TO STAFF MEM(ERS UNDER PU(LIC SCHEME

-6 Eligi&ili!' Cri!"ria@

#onfired eployee of the bank including part tie eployee.

/6 Pur9os"@

AA



• #onstructing a new dwelling unit or for purchasing a plot sub%ect to a condition

that a house will be constructed thereon within three years of such purchase.

• $urchasing new dwelling unit or old dwelling unit not ore than 1= years old.

•

Bridging the gap after availing "taff 'ousing (oan - "uppleental 'ousing(oan.

• $urchasing - constructing a second dwelling unit.

• *epairs - *enovation - Extension of existing house - flat.

• *epayent of loan already availed fro a 'oe 7inance #opany and - or

other institutional sources- other sources, sub%ect to production of docuentary

evidence.

16 Mai$u$ A$oun!@

• 7or purchase of plot/ *s 10 lacs.

• 7or purchase new - old dwelling unit -construction of house / *s = lacs.

• *epairs, renovation and Extension/ *s = lacs.

.

36 Margin@

i 7or repairs, renovation and extension of existing dwelling units/ =@.

>6 R"9a'ing Ca9ai!'@

I. In as" o% salari"d 9"rsons/


A=




Jp to 0,000-) A0@

ore than 0,000-) and up to =0,000-) =0@

4bove =0,000-) >0@

?6 Ra!" o% In!"r"s!@

• *ate of interest will be sae as applicable under public schee.

• he staff is eligible for concession of 0.=@ in rate of interest sub%ected to the

condition that effective rate of interest should not go below Base *ate.

6 R"9a'$"n! P"riod@

• he borrower has to repay the loan Jp to = years which also includes the

oratoriu period

• oratoriu period will be reckoned fro the date of first disburseent and will

not exceed 18 onths or 1 onths after copletion of house - flat whichever isearlier.

• he repayent schedule should be fixed on a realistic anner taking into account

the repayent capacity of the staff eber, which should norally be around

:0@ of his incoe.

• axiu 4ge of borrower during which loan to be repaid/

he branches ay allow axiu repayent period up to = years, however,

period of repayent should not exceeds beyond >= years of the age of borrower

3.-.? GOLDEN *U(ILEE RURAL HOUSING FINANCE SCHEME 5G*RHF6

A>



"E*3!#E

-. O&+"!i,"@

• o extend financial assistance for construction ,purchase ,repairs or extension of

dwelling units in *ural 4reas the population of which does not exceed =0000.

/. Pur9os"@

• 7or construction of new dwelling units, ac+uisition of new dwelling units not

older than 0 years, repair, renovation or extension of existing house, takeover of

loan already availed fro any Bank-'7# and for construction of dwelling units

cu far house on agriculture land for the purpose of residence and storage of

far e+uipents-ipleents and far produces.

1. Eligi&ili!'@

• 4ny individual residing in *ural area with population not exceeding =0000 and

having sufficient repayent capacity.

3.Mai$u$ Li$i!/ *s100.00 (acs and *s 1.00 (ac for repair-renovation of existing

dwelling unit.

3. Margin@ 10@ on pro%ect cost

3./ CALCULATION OF HOME LOAN

1. MARGIN

#ost of property S 80@ or =@ or 90@

. ELIGI(ILITY@

a

A



&6

0: Fears of 4vg. 4nnual !ncoe S =

1 . REPAYING CAPACITY@

A8

5*2"" 2&'(F

!&#2E

S :>

J$2 0,000-)

S A8

ore than 0,000 upto 1, 00,000

S =A

ore than 1,00,000

"E(7)E$(2FEC-$*27E""!2&4(



"E*3!#Ea

Faount after calculating above O !. ax QE! Q "al. Ceductions T M

M U E!-(ac T B loan aount

3. AGE@

ax :0 years

"alaried person ))) up to retireent age

2ther then salaried))) up to >=

A9

5*2"" 2&'(F!&#2E

A0@

up to 0,000-)

=0@

ore than 0,000up to =0,000-)

>0@

ore than =0,000-)



3.1 LOAN APPRAISAL PROCESS@

1. 7irstly, hoe loan leads are generated, i.e. people who are interested in taking a loan,

through various sources like/

a Branches

b "ales tea

c 2nline

. he *(7 checks whether the pro%ect is approved by the bank or not. if the pro%ect is

approved by the bank then only the officers will carry forward the incoing lead.

:. 4fter getting the leads the sales executive collects all the docuents fro the party is

collected and its eligibility for a loan is checked.

A. hen the sales executive does the inspection of the workplace, private property and

residence and Gnow your #ustoers GF# is done.

• 2nce the concerned person of the branch is satisfied with the inforation

furnished by the borrower that the proposal for the loan is worth consideration,

he should inspect the place to check the authenticity of the inforation supplied.

!nspection can bring into light certain factors which are not revealed by the ere

study of financial stateents. Even in case of new units, inspection of factory site

is necessary.

•

he assets of the concern which are proposed to be charged should be verified physically and the title of the borrowers on the sae should be exained

• "uch an inspection can focus on the unfavorable aspects or weaknesses of the unit

and can help to a large extent in aking an assessent of the proposal.

=0



=. he after the sales tea is done with their work, the #$# tea does the following/

a $re credit

b (egal and valuation of the property is done with the help of advocates.

c !ncoe ax *eturn !* verification of the party ids is done

d 4ppraisal is prepared sanction note/

e $"* is done by the head of the *(7

he work of *(7 ends here

A he file is sent to the respective branches.

= 4ll the docuentation is done and finally the branches ake the disburseent of the

loan to the party.

3.3 NPA

• ?hat is &$4V

&on $erforing 4ssets eans a loan or an account of the borrower, which has

been classified by a bank or financial institution as sub)standard, doubtful or

loss asset, in accordance with the directions or guidelines relating to asset

classification issued by *B!

(oan or an advance where interest and- or installent of principal reain

overdue for a period of ore than 90 days in respect of a ter loan.

3.3.-.MANAGEMENT OF NPA AS AT 1-.;1./;-3 5DELHI METRO REGION II6

=1



Cetails of *etail 2utstanding and &$4 as on :1.:.01A

&o. of 4-c otal

4dvances

#r.

&$4 a-c

&$4 Bal

o-s #r. &$4@

-.Housing Loan /11 3--.:/ /- 3.3 -.->

.Edu. (oan>8= 0.10 > 0.90 A.A>

:. #ar (oan:A 11.=A A 1.1A 0.9

A.raders (oanA9 =8.89 9 .8= 1.10

=. 4dvance 4gainst

ortgage

:9 1=.0> 1 0. 0.=8

>.$oersonal (oan=>9 A.A

0.== 1.==

.2thers 0 8.18 0.90 0.0:

otal *etail

100 11>.18 199 11.00 0.90

"egents &o. of 4-c otal advances &$4 4-c &$4 4ount

=



?hole sale Banking

10>.08 1 99.A0

"E :>= 108.> 110 >1.A

R"!ails -;/; -/-?.-- -:: --.;;

4griculture 1:> 1:.0= 1 0.0A

24( :8A.00 : 1.19

3.> DEFAULT@

• he default on the loan occurs because of any reasons. here are basically two

categories of default /

4ill%ul d"%aul!/ !t eans when the borrower intentionally did not pay

his-her payent to the lender for the purpose for which the loan was

given to hi-her

Cefinition of willful default which is given by *B!/

he ter Wwillful defaultW has been redefined in supersession of the earlier definition as

under/

4 Wwillful defaultW would be deeed to have occurred if any of the following events is

noted/)

a he unit has defaulted in eeting its payent - repayent obligations to the lender

even when it has the capacity to honor the said obligations.

=:



b he unit has defaulted in eeting its payent - repayent obligations to the lender

and has not utili<ed the finance fro the lender for the specific purposes for which

finance was availed of but has diverted the funds for other purposes.

c he unit has defaulted in eeting its payent - repayent obligations to the lender

and has siphoned off the funds so that the funds have not been utili<ed for the specific

purpose for which finance was availed of, nor are the funds available with the unit in the

for of other assets.

d he unit has defaulted in eeting its payent - repayent obligations to the lender

and has also disposed off or reoved the ovable fixed assets or iovable property

given by hi or it for the purpose of securing a ter loan without the knowledge of the

bank-lender.

Un0illing D"%aul!/ !t eans when the borrower has no intention to default but

due to certain circustances default takes place

3.? REASONS FOR DEFAULT@ !t includes/

I6 4illingl'

a #ases of fraud include providing wrong inforation and subission of fictitious

docuents of the property.

b 4t the tie of inspection the party ay bribe the officer and the officer ay subit the

wrong report.

c !f the borrower is a regular taker of the loan so it ight be possible the bank will not

check her-his papers properly and the applicant ight do default.

d he applicant ight give the wrong salary slip to the bank.

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e he applicant ight the eployee to fill the applicants for so that he-she in the future

can clai that the inforation provided is wrong and ! have not written.

f he applicant ight include the builder with hi-her and can show wrong property at

the tie of inspection.

g ?hen the borrower does not have a prior relationship with a bank so the bank does not

know uch about the borrower, this can also lead to default.

II6 Un0illingl'

a !f the person has lost his-her %ob and is not able to pay the E!s.

b here is any edical eergency in the house and the borrower is not able to pay the

interest of the loan.

c he borrower has taken a loan for a second hoe where he-she does not want to live

i.e. for investent purpose and if he-she is unable to pay because of any reason, the

person norally leaves the loan because they are not attached to that hoe.

d #ustoers borrowing oney for a second hoe i.e for investent purpose tend to

default during an econoic slowdown.

e !f after soe tie the borrower feels that the rate of interest is too high and he-she is

not able to pay because of any reason.

f !f the borrower has taken a loan on the interest rate, which was less than but have

arisen during the year and he-she is the only person earning in the faily and the

borrower is not able to pay the E!s.

==



g !f the borrower died due to sudden death and there are not any resources left in the

faily to pay, so this is also one of the reason for default

h 7ailure of the business of the borrower can also be one of the reasons for default of

his-her loan.

i !t could be a case of divorce. hen there is an eotionally devastating event that

affects how a person operates in their everyday life. here ay be a change in living

situation for both parties with a breakdown in counication, a ripe situation to cause a

credit default.

% 4 sub)prie ortgage is a loan offered by a lender say a bank like !#!#! Bank or "B!

to a borrower with a poor credit history eaning s-he has defaulted on her-his financial

coitents in the past against the security of her-his house property.

"uch borrowers are called sub)prie borrowers.

"ince the risk of default in such cases is high, these loans are offered at relatively higher

interest rates copared to loans offered to people with a good repayent track record.

'owever, these sub)prie ortgage loans are relatively uch cheaper than copletely

unsecured loans credit cards or personal loans to the sae profile of borrowers.

3. MEASURES TA2EN (Y GOVERNMENT@ 7ew easures are taken by the

governent which includes /

3..-. A&ou! T#" Sar%a"si A!@

• he full for of "4*74E"! 4ct as we know is "ecuritisation and *econstruction

of 7inancial 4ssets and Enforceent of "ecurity !nterest 4ct, 00.

=>



• Banks utili<e this act as an effective tool for bad loans &$4 recovery. !t is

possible where non)perforing assets are backed by securities charged to the

Bank by way of hypothecation or ortgage or assignent.

• Jpon loan default, banks can sei<e the securities except agricultural land

without intervention of the court. "4*74E"! is effective only for secured loans

where bank can enforce the underlying security eg hypothecation, pledge and

ortgages. !n such cases, court intervention is not necessary, unless the security is

invalid or fraudulent.

• 'owever, if the asset in +uestion is an unsecured asset, the bank would have to

ove the court to file civil case against the defaulters.

'ow it worksV

• he "4*74E"! 4ct, 00 gives powers of Wsei<e and desistW to banks. Banks can

give a notice in writing to the defaulting borrower re+uiring it to discharge its

liabilities within >0 days.

• !f the borrower fails to coply with the notice, the Bank ay take recourse to one

or ore of the following easures/

• ake possession of the security for the loan

•

"ale or lease or assign the right over the security

• anage the sae or appoint any person to anage the sae

=



he "4*74E"! 4ct also provides for the establishent of 4sset *econstruction

#opanies 4*#s regulated by *B! to ac+uire assets fro banks and financial

institutions. he 4ct provides for sale of financial assets by banks and financial

institutions to asset reconstruction copanies 4*#s. *B! has issued guidelines to

banks on the process to be followed for sales of financial assets to 4*#s.

Background of the act

• he previous legislation enacted for recovery of the default loans was *ecovery

of Cebts due to Banks and 7inancial institutions 4ct ,199:. his act was passed

after the recoendations of the &arsiha #oittee ) ! were subitted to the

governent. his act had created the forus such as Cebt *ecovery ribunals and

Cebt *ecovery 4ppellate ribunals for expeditious ad%udication of disputes with

regard to ever increasing non)recovered dues. 'owever, there were several

loopholes in the act and these loopholes were is)used by the borrowers as well

as the lawyers. his led to the governent introspect the act and this another

coittee under r. 4ndhyaru%ina was appointed to exaine banking sector

refors and consideration to changes in the legal syste .

• his coittee recoended to enact a new legislation for the establishent of

securitisation and reconstruction copanies and to epower the banks and

financial institutions to take possession of the &on perforing assets.

hus, via the "arfaesi act, for the first tie, the secured creditors were epowered to

recover their dues without the intervention of the court.

• 'owever, as soon as the act was passed, its ipleentation was challenged in the

court and this delayed its coing into force for years. !n the ardia #heicals

=8



v. Jnion of !ndia, the "upree #ourt upheld the validity of the "4*74E"! act

was upheld.

*ights of Borrowers

he above observations ake it clear that the "474E"! act was able to provide the

effective easures to the secured creditors to recover their long standing dues fro

the &on perforing assets, yet the rights of the borrowers could not be ignored, and

have been duly incorporated in the law.

• he borrowers can at any tie before the sale is concluded, reit the dues and

avoid losing the security.

• !n case any unhealthy-illegal act is done by the 4uthorised 2fficer, he will be

liable for penal conse+uences.

• he borrowers will be entitled to get copensation for such acts.

• 7or redressing the grievances, the borrowers can approach firstly the C* and

thereafter the C*4 in appeal. he liitation period is A= days and :0 days

respectively

Pr"Bondi!ions

he 4ct stipulates four conditions for enforcing the rights by a creditor.

• he debt is secured

• he debt has been classified as an &$4 by the banks

• he outstanding dues are one lakh and above and ore than 0@ of the principal

loan aount and interest there on.

• he security to be enforced is not an 4gricultural land

3../ PENAL MEASURES (Y R(I@

=9



!n order to prevent the access to the capital arkets by the wilful defaulters, a copy of the

list of wilful defaulters non)suit filed accounts and list of wilful defaulters suit filed

accounts are forwarded to "EB! by *B! and #redit !nforation Bureau !ndia (td.

#!B!( respectively.

he following easures should be initiated by the banks and 7!s against the wilful

defaulters identified as per the definition indicated at paragraph .1 above/

a &o additional facilities should be granted by any bank - 7! to the listed wilful

defaulters. !n addition, the entrepreneurs - prooters of copanies where banks - 7!s

have identified siphoning - diversion of funds, isrepresentation, falsification of accounts

and fraudulent transactions should be debarred fro institutional finance fro the

scheduled coercial banks, Cevelopent 7inancial !nstitutions, 5overnent owned

&B7#s, investent institutions etc. for floating new ventures for a period of = years fro

the date the nae of the wilful defaulter is published in the list of wilful defaulters by the

*B!.

b he legal process, wherever warranted, against the borrowers - guarantors and

foreclosure of recovery of dues should be initiated expeditiously. he lenders ay initiate

criinal proceedings against wilful defaulters, wherever necessary.

c ?herever possible, the banks and 7!s should adopt a proactive approach for a change

of anageent of the wilfully defaulting borrower unit.

d 4 covenant in the loan agreeents, with the copanies in which the banks - notified

7!s have significant stake, should be incorporated by the banks - 7!s to the effect that the

borrowing copany should not induct a person who is a prooter or director on the

Board of a copany which has been identified as a wilful defaulter, such a person is

found to be on the Board of the borrower copany, it would take expeditious and

effective steps for reoval of the person fro its Board.

>0



CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

>.- CONCLUSION

4s while proceeding to study 'oe loan, and gaining an insight about how the *etail

(oan 7actory *(7 works ! learnt about what are the guidelines that has to follow while

sanctioning the loan to the borrowers.

!t is also iportant to look for whether the bank is giving loan under the perissible

liits of the bank. hese liits are decided by the head office of B2B.

4ll the list of the guidelines is entioned and which all pro%ects for the hoe are

approved are also given to the brain. !f there is any deviations fro the guidelines

entioned in the process of sanctioning the loan, then these deviations are approved by

the head office of B2B.

?hile studying about the hoe loan sanctioning process, ! cae to know that the

borrower is rated on certain paraeters. hese ratings are known as credit rating. he

borrower is rated on 10 paraeters which has a total score of 1>8 out of which 98 is ax.

>./ SUGGESTIONS FOR IMPROVEMENT

a. GF# should be done properly

>1



b. he (awyers who are doing valuation and legal ust be genuine and the

report subitted by the should be checked.c. ?hen the lead is subitted by the branches they should not interfere with the

working of *(7.

d. he application for should be filled by the applicant so that in future she-hedoesnt clai that the inforation given in the for is not correct.

e. $hysical inspection of the property should be done by the concerned eber.

f. Cetailed checking of all the docuents of the property and salary or business

ust be done.

g. Before giving the hoe loan the offices should check the details of the

property in the #E*"4!.

h. he trustworthiness of the builder should be checked before giving the loan.

i. he regional or <onal or branches should not interfere with the working of the

*(7 and let the do the work according to the guidelines and not under pressure on anyone

%. he officer going for inspection should be good at his-her work.k. !nspection of the property should be done on the regular basis.

l. &ot only inspection of the residence but also inspection at his-her work place

should be done properly.

. !f the borrower does not have any relationship with the bank the bank should

be ore careful while doing all the docuentation, inspections and GF#.

>



(I(LIOGRAPHY

In!"rn"!

http/--en.wikipedia.org-wiki-BankXofXBaroda

http/--www.oneycontrol.co-copany)facts-bankofbaroda-history-B2B

http/--www.bankofbaroda.co.in-aboutus.asp

http/--www.bankofbaroda.co-hindi-fin-finXchairanXspeech.asp

http/--www.slideshare.net-harish9:A00-bank)of)baroda)harish

http/--www.business)standard.co-article-finance-defaults)on)second)hoe)loans)

increase)11:10010088X1.htl

final proejct report yoshita tolani

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