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A REPORT ON COMPARATIVE ANALYSIS OF HOUSING LOAN SCHEMES OF HDFC LTD. WITH OTHER FINANCIAL INSTITUTIONS AND FINANCIAL ANALYSIS OF HDFC LTD

FOR THE YEAR 2008-09 & 2009-10

SUBMITTED TO: SUBMITTED BY:MR. PRABHUJEEV BAJAJ GOURAV SHARMAMARKETING HEAD, MBA 3rd (Finance)HDFC LTD.,CHANDIGARH 94512236916

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2010

HDFC

CHANDIGARH

ACKNOWLEDGEMENT

It gives me immense pleasure to express my deep sense of Gratitude to Miss Mandeep Mahendru, coordinator, for her valuable guidance and consistent supervision throughout the course.

I am highly indebted to Mr. Prabhujeev Bajaj, Marketing Head, HDFC LTD. Chandigarh for his very personalized and invaluable help, advice, guidance and encouragement which culminated in this project. His constructive comments and contributions had been of immense help for giving a tangible shape to this project. It was a real value added experience for having worked under his stewardship. At last, I am thankful to all respondents who cooperated with me by providing information for the compilation of this project.

I am extremely thankful to Prof. Anupam Gupta, Faculty Guide, GIAN JYOTI INSTITUTE OF MANAGEMENT AND TECHNOLOGY, for her timely guidance and support throughout the Final Report work. In the course of carrying out the Project work. Finally I am indebted to our other faculty members, my friends who gave their full-fledged co-operation for successful completion of my project. It was an indeed a learning experience for me.

Name of the Student: Gourav SharmaEnrollment No.: 94512236916

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ABSTRACT

During My summer internship in HDFC LTD., Chandigarh, I was assigned a project regarding Home Loans. This project has been completed in parts. First part consists of comparative study of “Comparative Study of Home Loans provided by HDFC LTD. With other financial institutions” and the second part was “Financial Analysis of HDFC LTD. For the financial years 2008-09 and 2009-10 “

This was a step wise process including collection of data, Company Profile, Product Features, Analysis of data, and finally concluding the data while putting some suggestions. The whole study was done with a view that it would help HDFC maintain its expansion path and improvise their schemes to perform better than other financial institutions.

It was the best platform being provided as it has increased my horizons and has given me the opportunity to apply my theoretical knowledge and managerial concepts practically in the real business.

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DECLARATION

I, Gourav Sharma, student of “Gian Jyoti Institute of Management & Technology” hereby declare that I have completed this project on title of “Comparative Analysis of Housing Loan Schemes of HDFC LTD. with other Financial Institutes and Financial Analysis of HDFC LTD. for the year 2008-09 & 2009-10” is an authentic work done by me and it is my own hard work and effort under the guidance of Mr. Prabhujeev Bajaj, Marketing Head, HDFC LTD. Chandigarh in the academic year 2009-2011. I declare that the information submitted is true and original to best of my knowledge.

DATE____________ Gourav Sharma

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Table of Contents

CHAPTERS PAGE NO.

1. INTRODUCTION……………………………………………..6-9

2. COMPANY PROFILE……………………………………….10-15

3. OBJECTIVE OF STUDY……………………………………16-17

4. PROCEDURE OF HOME LOAN…………………………...18-29

5. MARKET PLAYERS………………………………………...30-36

6. RESEARCH METHODOLOGY…………………………….37-38

7. DATA ANALYSIS AND INTERPRETATION…………….39-40

- COMPARATIVE ANALYSIS……………………………..41-52

- FINANCIAL ANALYSIS…………………………………..53-76

8. LIMITATIONS OF STUDY…………………………………77-78

9. SUGGESTIONS AND RECOMDENTATIONS……………79-80

10. WEBLIOGRAPHY………………………………………….81-82

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CHAPTER 1

HDFC Ltd.

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INTRODUCTION:

HDFC was incorporated in 1977 with the primary objective of meeting a social need - that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

Their objective, from the beginning, has been to enhance residential housing stock and promote home ownership.

Now, their offerings range from hassle-free home loans and deposit products, to property related services and a training facility. They also offer specialized financial services to their customer base through partnerships with some of the best financial institutions worldwide.

Business Objectives :

Helping Indians experience the joy of home ownership.

The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership.

Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

As they found out nearly three decades ago, in 1977, the solution for success is customer satisfaction. All you need is the courage to innovate, the skill to understand your clientele and the desire to give them your best. Today, nearly three million satisfied customers whose dream they helped realize, stand testimony to their success.

Housing Finance Sector:

Against the milieu of rapid urbanization and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organization (NBO), the total demand for housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million man-years of direct employment and another 15 million man-years of indirect employment.

Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), the National Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms.

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Organizational Goals:

HDFC's main goals are to:

Develop close relationships with individual households, Maintain its position as the premier housing finance institution in the country, Transform ideas into viable and creative solutions, Provide consistently high returns to shareholders, and To grow through diversification by leveraging off the existing client base.

HDFC Founder:

MAN WITH A MISSION: Hasmukhbhai Parekh

If ever there was a man with a mission it was Hasmukhbhai Parekh, their Founder and Chairman-Emeritus, who left this earthly abode on November 18, 1994.

Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass - a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure on the Indian financial scene.

In 1956 he began his lifelong financial affair with the economic world, as General Manager of the newly-formed Industrial Credit and Investment Corporation of India (ICICI). He rose to become Chairman and continued so till his retirement in 1972.

At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more illustrious than his first. His vision for mortgage finance for housing gave birth to the Housing Development Finance Corporation - it was a trend-setter for housing finance in the whole Asian continent.

He was a true development banker. His building up HDFC without any government assistance is itself a brilliant chapter in financial history. His wisdom and warmth drew people from all walks of life to him, for advice, guidance and inspiration soft spoken man of few words, Mr. Parekh nevertheless held strong and definite views with a quiet conviction. He was always concerned with building bridges, improving and encouraging communication between people.

Organization & Management:

HDFC is a professionally managed organization with a board of directors consisting of eminent persons, professionals who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to stakeholders.

HDFC has a staff strength of 1490 (as on 31st March, 2009), which includes professionals from the fields of finance, law, accountancy, engineering and marketing. Click here for details of Senior Management.

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CHAPTER 2

HDFC HOME LOAN PRODUCTS

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1) Home Loan2) Home Improvement Loan3) Home Extension Loan4) Land purchase loan5) Short Term Bridging Loan6) Loan to Professionals for Non Residential Premises7) Home Equity Loan

HOME LOANHDFC offers loans to individuals to purchase (fresh/resale) or construct houses. Home loan be applied individually or jointly. Proposed owner of the property will have to be co-applicants. However the co-applicants need not to be the co-owners.

PURPOSE

Purchase of flat, row house, bungalow from developers. Existing freehold properties. Property in an existing or proposed cooperative society or apartment. Self construction.

MAXIMUM LOAN

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85% of the cost of property (including the cost of land) and based on the repayment capacity of the customers.

MAXIMUM TERM

20 years subject to the retirement age.

ELIGIBILITY

Salaried employees Self employed professionals Self employed businessman Applicants can either be Resident or Non-Resident Age of the applicant should not be more than 65 years

HOME IMPROVEMENT LOAN

Home improvement loan facilitates internal and external repairs and other structural improvements like paintings, water proofing, plumbing and electric works, tilling and flooring, grills and aluminium windows.

PURPOSE

External repairs Tilling & flooring

Internal & external flooring Waterproofing and roofing

Plumbing & electric work Grills & aluminium windows

Construction of underground/ upper water tank

Paving of compound walls (with stone/tiles etc)

Bore well Waterproofing on terrace

MAXIMUM LOANS

For Existing customers : 100% of the cost of improvement For New customers : 85% of the cost of improvement

MAXIMUM TERM

15 years subject to retirement age.

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HOME EXTENSION LOAN

Home extention loan facilitates the extension of an existing dwelling unit. This type of loan makes it convinient to extend or add space to home.

PURPOSE

This loan is specifically for the extension purpopse. Be it an additional room, a larger bathroom or even enclosing an open balcony.

MAXIMUM LOAN

85% of the cost of extention.

MAXIMUM TERM

20 years subject to retirement age.

LAND PURCHASE LOAN

PURPOSE

HDFC Land purchase loan is a convenient loan facility to purchase land, whether it be to build a house or an investment.

MAXIMUM LOAN

85% of cost of land and based upon the repayment capacity of the customer.

MAXIMUM TERM

15 years subject to customer retirement age.

SHORT TERM BRIDGING LOAN

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PURPOSE

Short Term Bridging loan makes customer realize their dreams of buying a bigger and better home and give them time to sell their existing property to pay off the loan. This is a short term loan to help customers with the interim period between the sale of their old homes and the purchase of a new home. Customers repay the loan by paying monthlyinstallment or interest on the loan with the lump sum payments within 2 years. Hence customers gets 2 years to sell the property repay the loan.

MAXIMUM LOAN

90% of the cost of new property

MAXIMUM TERM : 2 years

LOAN TO PROFESSIONALS FOR NON RESIDENTIAL PREMISES This loan facilitates professional to purchase and construct their own office premises or even renovate their existing office premises.

PURPOSE

Purchase Constuction Improvement of office

MAXIMUM LOAN

85% of the cost of property

MAXIMUM TERM

15 years subject to customer retirement age.

HOME EQUITY LOANS

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HDFC Home equity loans helps to encash the present market value of the property by taking a loan by mortgaging the property.

PURPOSE

Higher eduation of the children Marriage expenses Medical expenses Business purpose

MAXIMUM LOAN

For Existing customers: 60% of the market value and present loan outstanding.

For new customers: 50% of the market value of the property.

MAXIMUM TERMS

PROPERTY TYPE REPAYMENT OPTION NO. OF YEARS

Residential EMI Based 15

Non Residential EMI Based 10

Residential & Non Residential Simple Interest 2

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CHAPTER 3

MAJOR OBJECTIVES

To know about the HDFC home loan and its products.

To have the first hand information on loan procedure, sanctioning and disbursement in HDFC ltd.

To compare the performance of HDFC with other market players.

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To study about the financial position for the financial year 2009-10 in comparison with position in financial year 2008-09.

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CHAPTER 4

STAGES OF HOME LOAN

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Login Scanning Data EntryApplication

The representation shown above is not a perfect copy of the actual process. This is because these stages are taking place simultaneously and one application is being taken care for by the experienced employees of both HDFC Ltd service centre. Also the applicant may be asked to send information or may be asked questions regarding his requirement and/or his documents for his own convenience

Hence the loan application may or may not shuttle through different stages

APPLICATION STAGE

This is the stage where the Application Form first reaches the concerned Service Centre/ workstation. Here all the documents in the application are reviewed by the experienced staff present at the workstation. The HDFC Ltd employee who reviews the file checks to see whether all documents are present and in their proper place, if the documents are duly filled, not fake, attested by authority and present in order. In case any document is missing the applicant is contacted electronically or by mail or by telephone and requested for the document to be submitted. This exercise is called FOLLOW UP. The credit appraisal of the loan application starts at this stage. The workstation employees compute the gross salary, IIR, FOIR, Loan Eligibility ratio etc. The credit worthiness of the applicant is calculated here.

It is also at this stage that the QUICK DATA ENTRY of the loan application is done to create a serial no. of the application. After that another page appears and more data is entered .It is now that a special and unique LOAN A/C NO. is created under which all the loan processes will be carried out. The number that has been generated is communicated to the applicant by means of a letter and/or electronic communication. The system of electronically recording the data helps to create ready reference, a proof ,helps in quick and easy processing of the data. It also helps to very easily and quickly share data with other employees of HDFC.

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Recommendation

Over (ROVR)

Double Checking

Over (DCOVR)Sanctioning

Disbursement of the loan

After Sales Services

The next and important processing performed at the workstation is that of filling up a document known as the INTERVIEW SHEET for processing individual loans. It contains various simple entries like

1.Name of borrower

2. Name of co-borrower

3. Income details

4. Family background and permanent address etc

5. Gross Salary

6. Rental

7. Other incomes

8. Obligations

9. Remarks: This column contains the various findings that the employee has found out after thorough review of the applicants documents such as bank statement, salary slip etc.

Hence the interview sheet contains the important findings which the employee has

Collected after careful review of the various documents .The interview sheet helps

to cut corners and helps save time by not having other employees to go through the

documents again and again .It hence acts as a source of quick reference.

After all this has been performed well enough the loan application will be arranged

in a file and all it will be given its loan a/c no which also acts as its file no..

The file is now ready to be sent to the HUB (Senior Officers) where further processing will take place. Next step is scanning of the documents.

SCANNING

In this stage the various important documents of the applicant are scanned. This helps to create their electronic copy which acts as a ready reference, a proof, and can also be shared and utilized by other employees of HDFC Ltd.

DATA ENTRY

The file has been sent to the bank head office or the HUB .At HUB there are many experts with their own specializations. These officials review the various parts of the file again and perform many specialized tasks.

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Data entry is also one of these tasks .This entry is much more different and complex as compared to the earlier performed Quick Data Entry. An exhaustive amount and type of information has to be entered into the ILPS system ranging from Personal Details, Employment Details to Property Rate History and Customer Interactions.

RECOMMENDATION OVER (ROVR)

The Recommendation over is also referred to as the First Appraisal. At this stage certain specially appointed persons have been given the responsibility of recommending a loan

These people have to take special care of reviewing every document, and all the small details that need to be considered before considering the loan application to be valid.

After this the file is sent to another specially appointed person as explained below. At this stage if any correction or mistake is present it can be sent back to the workstation.

DOUBLE CHECKING OVER

As the name suggests at this stage a specially appointed person will double check all the past proceedings. They will examine the Loan file for any discrepancies, any missing and /or misplaced documents, the Credit Appraisal results, etc.

This is a very important stage and must be handled with exceptional care. This is because a mistake at this stage can cause a great loss to the company. The Double checker is responsible for the ultimate sanctioning of the loan .If any mistake is done at this stage there is no going back and hence no protection. HDFC takes great care while appointing double checkers .They should have completed a select number of years with the company and should have shown exemplary performance and must possess experience.

SANCTIONING

An authorized sanctioning authority within HDFC itself will review the remarks of Double Checker. If it considers the loan suitable to be sanctioned it gives it approval . After it has given its approval stamp the ILPS system will automatically send a letter to the Applicant that his loan has been sanctioned. After this approval the Applicant can go to whichever Service Centre to get his loan disbursed.

SPECIAL CASE

A special case can arise if the applicant has not mentioned the property for which he wants to take a loan. In that case the applicant can let the case be remain pending . This means that the Applicants loan request will be considered to be complete even though he has not decided the property. However the Applicant is expected to finalize the property in a short time

A Property Address is necessary to:

1. Get the loan disbursed2. Process the Legal and Technical Appraisal of the property and its Papers.

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DISBURSEMENT

The last and final stage in the Home Loan process is that of disbursement. After the sanctioning has taken place the applicant becomes a registered customer of HDFC Ltd .He/She can now take the disbursement of the loan from any of the various service centre of HDFC .The loan shall be disbursed in one Lump sum or in suitable installments to be decided by HDFC with reference to the need and/or progress of construction. The borrower hereby acknowledges the receipt of the loan disbursed as indicated in the receipt.

CREDIT APPRAISAL

Credit appraisal is one of the most important and significant step in the Home Loan process. In case of home loans we either create new accounts or maintain pre existing ones. Credit appraisal is however a part of sanctioning new loans or enhancing the existing one.

Credit Appraisal starts from the moment, the documents for Loan from the customers has taken, which is then sent to back office for processing which is called HUB.

CATEGORIES

In case of Credit appraisal there are three main categories:

1. SALARIED PERSON

Here the Credit Appraisal is done for a salaried person .HDFC try to compute the credit worthiness of a salaried person .It means that the person should be employed as an employee in a recognized organization. The organization may be public or private. The person must have proof to prove his employment like credit documents etc.

2. SELF EMPLOYED PERSON

The nature of Credit Appraisal done for a self employed applicant is slightly more complex. This is due to the presence of enormous bank statements as well as transactions involved in business. As conducting Business in modern times is a capital intensive process the bank statements of self employed persons are large and much more complex. The statement runs into a large number of pages due to the multiple numbers of transactions. Apart from that their income statements are also quite complex due to presence of many components.

Hence in the case of a self employed person demanding a loan the credit appraisal has to be done very carefully .For this very purpose HDFC Ltd has appointed Specialized Credit Appraisers and a specialized Self employed Committee. These consist mainly of Chartered Accountants. They handle the important job of appraising the credit worthiness of the self employed applicants.

3. SELF EMPLOYED PROFESSIONAL

The self employed professionals include people like Doctors, Chartered accountants , Engineers etc. Only HDFC recognizes these professionals as a separate category and has

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hence developed a comparatively smoother procedure for their Credit Appraisal and sanctioning of loan.

PRECAUTIONS

The credit appraisal is an important step for both the borrower and HDFC .Hence it necessary to take all precautions.

All calculations must be done with correct figures. The data entry in the system must match the actual data. Also care should be taken in places like the decimals and rounding off. The data entries should not be going outside the space provided to them.

The source of the data should be mentioned so that another person may easily verify the facts and figures

Sometimes it may happen that the Applicant has intentionally or by mistake not mentioned the full status of his obligations. The common situation in this case areA. He has not revealed of any loan that he may be paying off from an

undisclosed bank account in any other bankB. He is not disclosing information related to any defaults, Revolving accounts

such as Debit card, Credit card etc.

In these conditions it is difficult to correctly compute the credit worthiness of the person. As a result an unscrupulous element might get a loan .This will lead to loss to both HDFC and its honest customers.

The precaution taken by HDFC in this case is that it contacts CIBIL (Credit Bureau of India Ltd) which is the mega Repository of financial data in India .HDFC electronically requests CIBIL to reveal information it possesses pertaining to the persons financial obligations. CIBIL passes on the information by means of a fax containing all revolving accounts, loans and liabilities.

TERMS AND CONDITIONS OF HDFC HOME LOANS

HDFC has always been market oriented and dynamic with respect resource mobilisation as well as lending programme. It provides loans to meet all requirements of the customers to make their house a home. However following are the conditions which are to be met by the customer before applying for a loan.

LOAN AMOUNT CONDITIONS

HDFC finances upto 85% maximum of cost of property (agreement value + stamp duty + registration charges)

Repayment capacity takrs into consideration factors such as income, assets, qualifications, number of dependents, spouse income, liabilities, stability and continuity of occupation and saving history.

The loan amount of the individual is also subject to Instalment to Income Ratio (IIR) which is 40% and Fixed Obligation Income Ratio (FOIR) which is 45%.

Maximum loan amount to an individual connot exceed Rs 1crore.

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SUPPORTING DOCUMENTS

First of all when a customer came all documents are checked by the workstation which are directly in contact with the customers. Necessary documents required are as follows.

FOR ALL APLICANTS

1. Allotment letter of the co-operative society /association of apartment owners.2. Copy of the approved drawings of proposed construction /purchase /extention.3. Agreement of sale /sales deed /detailed cost estimate cost from architect.4. If an applicant have been present employment /business or profession for less than a

year, mention on a separate sheet details of occupation for previous five years , giving position held, reasons for change and period of the same.

5. Applicable proceesing fees.6. Residence proof and Identity Proof.

RESIDENCE PROOF IDENTITY PROOF

Ration Card Driving License

Passport Passport

Bank Account Statement Pan Card

Voters Identity Card Voters Identity Card

Letter from recognized public authority Identity Card issued by Employer(if employed in state/central Govt.)

7. Certificate of loan outstanding issued by the lender ( for refinance cases only)8. Any other information regarding your repayment capacity that is necessary and will

assist HDFC in appraising the loan proposal.

EMPLOYED CASE

1. Verification of Employment Form with only Part I filled in.2. Latest original salary slip/salary certificate showing all deductions.3. If a job is transferable, permanent address where correspondence relating to the

applicant can be mailed.4. A letter from employer agreeing to deduct the EMI towards repayment of the loan

from applicant salary. This will expedite the processing of loan application.5. Updated original Bank Passbook/ or Bank Statement for the last six months.6. Photocopy of Form 16 (issued by the employer) for the last assesment year.

SELF EMPLOYED

1.Balance Sheet , Profit & loss and ITR for the last three years.

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2. Business Profile.

3. Copies of individual Tax Challans for the last three years.

4. Copy of advance Tax Challan (if any).

5. Updated original Bank Passbook/ or Bank Statement for the last twelve months.

CREDIT APPRAISAL

After the documents are checked by the workstation, documents are rechecked by the Senior Officer as well as File Credit Investigation Department (FCI) prepares income sheet and check all documents of the file. After credit appraisal loan is approved an disbursed to the conditions or requirement.

RATE OF INTEREST TILL 30 JUNE,2010 (DUAL RATE)

Till 30 June, 2010 all applications received will be locked by Dual rate.

SLAB RATE OF INTEREST

Till March 2011 8.25%

Till March 2012 9%

Next Floating rate PLR – 4.75%

RATE OF INTEREST

SLAB HOUSING LOAN

PLOT LOAN

EQUITY LOAN FIXED RATE OF INTEREST

Upto 30 lakhs 8.75% 9.25%

30-50 lakhs 9% 9.5%

Above 50 lakhs 9.25% 9.75%

PROCESSING FEES AND OTHER CHARGES

A processing fees of 1% of the loan amount is charged from the applicant which includes all the fees and the charges at the time of sanctioning of the loan application. Service tax is also applicable and will be charged on the fees collected.

REPAYMENT

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Loan against property -11.25% Fixed rate -14%

Loan is repaid in EMI comprising principal and interest. EMI commences from the first of the month following the month in which the disbursement of the loan has been completed. Due date of payment of first EMI is the 5th day of the month following such month.

Interest is paid on the portion of the loan disbursed which is called Pre-EMI. Pre-EMI interest is payable every month from the date of each disbursement upto the date of the commencement of EMI. Customer may opt to pay the EMI’s by direct deduction from their monthly salary. They can also issue post dated cheques and can also issue standing instruction to their bankers or can pay the installment at any of the HDFC collection centers.

FLEXIBILITY IN REPAYMENT

Following are the repayment option features being offered by HDFC to their customers:

Step up Repayment Facility (SURF): This scheme help young executive to take a bigger loan today based on an increase in their future income, this will help executives to buy a bigger home today. In this EMI’s of the customer increases in future.

Flexible Loan Installment Plan (FLIP): Often customers, parents and their children wish to purchase property together. The parents are near to retirement and their children just started their work. This option help customers to combine their income and take a long term home loan wherein the installment reduces after the retirement.

Tranching: To help the customers save their interest, HDFC introduced a special facility known as Tranching. In this customer has the option to start their EMI’s even before the full disbursement of the loan. By this facility customer can repays their loan faster.

PREPAYMENT FACILITY

Customer can repay the loan ahead of schedule by making part or full prepayment. If the prepayment is made within three years of the first disbursement, early redetmption charges of 2% of the amount being prepaid is payable, but if prepayment is made after three years then no charges is charged by HDFC.

DISBURSEMENT OF THE LOAN

HDFC disbursed the loan after the property has been technically appraised, all legal documentation has been completed. The loan will be disbursed in full or in suitable instalments (normally not exceeding three in number) taking into account the requirements of the funds and progress of construction.

Practical example to explain how banks arrive at eligibility of home loan applicants

Vijay is a maintenance engineer with a private firm. His monthly takehome salary is around Rs 35,000. With many public sector banks offering singledigit interest rates, Vijay feels this is the best time to invest in his dream house. A two-bedroom house on the outskirts costs about Rs 16 lakhs. Will any banker lend him this money? Is he eligible for a home loan of Rs 16 lakhs?

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There are numerous factors that banks take into consideration when computing your loan

eligibility. Age of the applicant, his salary, repayment/credit history, savings, profession, location of property, health condition and other debts have a direct bearing on the loan amount sanctioned. Some professions are categorised as negative or risky by the lenders. People in such professions may find it difficult to get a loan sanctioned. On the contrary, some jobs are considered more stable with lesser probability of default. They are on the preferred list of most lenders.

It is imperative that the property an applicant wishes to purchase falls within the geographical limits as defined by the bank. As a thumb rule, banks will lend to applicants who can set aside 40 percent of their monthly income towards their home loan repayments. Based on this, an individual's loan eligibility is calculated. It is assumed that a person who earns more can set aside more money towards his EMI repayments.

How does a bank compute your loan eligibility?

Most loan eligibility calculators available on the Internet are based on a formula. The home loan eligibility, in lakhs, is arrived at by dividing the amount available for the loan repayment with the borrower by the loan installment per lakh for the given tenure .

The simplest way to increase your loan eligibility is by increasing the loan tenure. Consider Vijay's case. At 9 percent rate of interest and for a tenure of 10 years, banks will sanction him not more that Rs 12 lakhs. However, for a greater tenure of 20 years his loan amount shoots up to Rs 18 lakhs. However, the longer the tenure of the loan, greater is the cost of borrowing .

Applying jointly, with your parent or spouse, increases your loan eligibility. The incomes of both applicants are combined when computing the loan eligibility. You can almost double your loan eligibility with a joint loan .

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CHAPTER 5

OTHER MARKET PLAYERS

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1. State Bank of India2. ICICI Bank3. Axis Bank

SBI -STATE BANK OF INDIA

State Bank of India(SBI), the country largest and oldest commercial bank with a branch network of over 11000 branches and six associate banks located even in the remotest parts of India. SBI offers a wide range of banking products and services to corporate and retail customers.

SBI HOME LOAN

PURPOSE

Purchase/Constuction of a house/flat Purchase of a plot of land for constrution of house. Extention/ Repair/ Renovation or Alteration of an existing house/flat Purchase of Furnishings and Consumer Durables as a part of project cost. Takeover of an existing loan from other Banks/Housing Finance Companies.

ELIGIBILITY

Minimum Age – 18 years as on the date of sanction. Maximum Age – For a home loan borrower is fixed at 70 years i.e the age by

which the loan should be fully repaid. There should be availability of sufficient, regular and continuous source of income

for serving the loan repayment.DOCUMENTS

Two photographs of each applicant/gurrantor. Proof of residence of each applicant/gurrantor. Copy of PAN Card for identity proof. Latest & original salary slip of employees/ Business proof for businessman. Two years IT Returns /Form 16 for employees and three years IT Return with

computation sheets for busineesman/Self Employed. Balance sheet for last three years for business man. Six months salary account statements for employees and savings account

statement for Businessman/self employed. Copy of Agreement to Sale. Copy of Registry of house/ plot/flat plus old registries. Copy of Allotment letter/Re-allotment letter of House/plot/Flat. Latest Jamabandi of Plot/Flat/House, Builders approval letter to develop the

project and copy of license. Latest Non Encumbrance Certificate of Plot/Flat/House. Copy of approved Map/ approved site plan of builder.

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Estimate cost of constuction from Govt. Approved Architect for construction/ Renovation cases.

List of documents held with other Bank from whom Housing loan is to be taken over.

SECURITY

Equitable Mortgage of the property. Other tangible security of adequate value like NSCs, Life Insurance Policies etc, if

the property cannot be mortgaged.

RATE OF INTEREST

YEAR RATE OF INTEREST

1st Year 8%

2nd Year 9%

3rd Year 9%

PROCESSING FEES

A processing fees of .50% of the loan amount is charged from the applicant which includes all the fees and the charges at the time of sanctioning of the loan application. Service tax is also applicable and will be charged on the fees collected.

MAXIMUM REPAYMENT PERIOD

For Applicants upto 45 years of age: 25 years

For Applicants above 45 years of age: 15 years

PREPAYMENT

Customer can repay the loan ahead of schedule by making part or full prepayment.

Prepayment Charges – If paid from own source – nil

In other case – 2% on principal amount prepaid.

DISBURSEMENT

In lump sum direct in favour of the builder/ seller in respect of outright purchase. In case of constuction of house/flat etc, depending upon the actual progress of work.

ICICI-INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA

32

ICICI Bank ( Industrial Credit and Investment Corporation of India) is a major banking and financial services organization in India. It is the 4th largest bank in India and the largest private sector bank in India by market capitalization. The bank also has a network of 2014+ branches (as on 31 March 2010) and about 5219 ATMs in India and presence in 19 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and specialization subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit cards in India. ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended March 31, 2010.

HOME LOAN Home loans are provided to individualsto own a residential property.

ICICI Bank offers easy home loan for

First purchase in ready constuction. Under constuction property. Purchase in Resale case. Self construction – extention of existing living space.

DOCUMENTS

EMPLOYED SELF EMPLOYED

Duly complete application Form with one passport size photograph

Duly complete application Form with one passport size photograph

Identity, Residence and Age proof Identity, Residence and Age proof

Fee Cheque Income tax return/ Computation of total income/ Auditors report/ Balance Sheet/ Profit Account certified by Chartered Accountant for last two years( 3 years for home equity)

Signature Verification Proof Signature Verification Proof

Last three months salary slip Business Profile

Form 16 Board Resolution in case of a company

Bank Statement for last six months from salary Account

Bank Statement for last six months from operating Account

Repayment track record of existing loan/ loan closure letter

Repayment track record of existing loan/ loan closure letter

33

ELIGIBILITY

Loan must terminate before or when the borrower turns 65 years of age or before retirement whichever is earlier.

Minimum Age – 25 years of age. Applicant must be Self employed or Employed with a regular source of income. In case of Indian Resident both Self Employed or Employed can apply for loan but in

case of Non Resident only Employed can avail a loan. The loan amount can be upto 80% of the cost of property.

RATE OF INTEREST

YEARS UPTO 30 LAKHS ABOVE 30 LAKHS FIXED RATE

1ST Year 8.75% 8.75%

2nd Year 9% 9.25%

3rd Year 9% 9.25%

PROCESSING FEES

A processing fee of .5% of the loan amount is charged from the applicant which includes all the fees and the charges at the time of sanctioning of the loan application. Service tax is also applicable and will be charged on the fees collected. .25% fee is negotiable if applicant is an existing customer.

PREPAYMENT CHARGES

There is no charge on part of prepayment but in case of full prepayment – 2% of the principal outstanding at the time of foreclosure is charged by ICICI Bank.

AXIS BANK

Axis Bank Ltd was incorporated in the year 1994 as ‘UTI Bank Ltd’ which provided corporate and retail banking products and was the first private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. At present the bank is the third largest private sector bank comprising of 1000 branch offices and extension counters and 4055 ATMs.

Axis bank was formed as UTI when it was incorporated in 1994 when government of India allowed private players in the banking sector. The bank was sponsored together by the administrator of the specified undertaking of the Unit Trust of India, Life Insurance Corporation (LIC) And General Insurance Corporation Ltd and its subsidiaries namely National Insurance Company Ltd, New India Insurance Company, The Oriental Insurance

34

Fixed rate – 16%

Corporation and the United Insurance Company Ltd. However the name of the UTI was changed because of the disagreement on terms and conditions of th bank authority over certain stipulations including royalty charged over the name from UTI AMC. The bank was also wanted to have a new name from its Pan-Indian as well as international business perspective. So from July 30,2007 onwards the UTI Bank was named as Axis Bank.

DOCUMENTS

EMPLOYED SELF EMPLOYED

Application Form with photograph Application Form with photograph

Identity and Residence proof Identity and Residence proof

Latest salary slip Education qualification certificate and proof of business existence

Form 16 Business profile and last three years profit & loss and balance sheet

Last six months bank statement Last six months bank statement

Processing fees Processing fees

RATE OF INTEREST

INCOME SLAB RATE OF INTEREST

Upto 30 lakhs 8.75%

Above 30 lakhs 9.25%

REPAYMENT TERM

Monthly EMI’s

FOR 25 YEARS – 822 per lakh




ELIGIBILITY

Loan amount offered for both employed and self employed is Rs 1lakh to 50 lakhs. Minimum Age – 24 years of age.

35

Loan must terminate before or when the borrower turns 60 years of age or before retirement whichever is earlier.

The loan amount can be upto 85% of the cost of property. Applicant must be Self employed or Employed with a regular source of income.

PROCESSING FEES

A processing fee of .5% of the loan amount is charged from the applicant plus service tax as applicable.

PREPAYMENT CHARGES

Axis Bank do not charge any prepayment charges from its customers.

36

CHAPTER 6

RESEARCH METHODOLOGY

37

SCOPE OF THE STUDY :

The study focuses on prevailing rate of interest, percentage of funding, tenure of home loan, fee etc being charged by other banks in comparison to HDFC.

From this study, HDFC can identify the difference between the schemes and charges charged in comparison to with its competitors. Hence HDFC can change their schemes to perform better than other banks and can attract more customers. The present study focuses on analyzing the balance sheet and profit and loss statement of HDFC for the last two years.

METHODS OF COLLECTION OF DATA

For the project number one i.e. The Comparative Study of Home Loans provided by HDFC LTD. With other financial institutions various banks like SBI, ICICI, AXIS Bank etc. were surveyed. The whole procedure of the disbursement of loan, various schemes, interests rates etc. Factors were obtained from various banks. The whole data was the organized in excel files and later on considering all the factors the whole data was analyzed. SECONDARY DATA

Secondary data refers to the one which has already been collected by someone else .The secondary data was collected from the office account records and annual report of the company. Secondary data sources for this study are:

Websites of HDFC and other financial institutions Pamphlets/Brochures/Magazines Annual report Newspaper/ Articles Mangers of different banks deal in housing loans.

PRIMARY DATA

Primary data is collected from different banks of Chandigarh (shown above as Major Players) regarding the comparative analysis of housing loan schemes offered by different financial institutions.

.

38

CHAPTER 7

DATA ANALYSIS AND FINDINGS

A) Comparison of home loans

39

The comparative study of HDFC home loan products and process was conducted with similar services offered by other financial institutions. The study was done on the leading market players like ICICI, SBI, AXIS Bank etc. The study illustrates prevailing rate of interests, percentage of funding, tenure of home loan and fees , documentation and repayment options features etc being launched in other banks .

From this study, HDFC can identify the difference between their schemes and charges charged by other banks. Therefore this can help HDFC to change their schemes accordingly so as to perform better than other financial institutions.

B) Financial Analysis

The study of Balance Sheet and Profit and loss A/c of HDFC Ltd. for two years i.e. 2008-09 and 2009-10.The financial statements for these two years help me out in preparation of Ratio Analysis and Cash Flow Statement of HDFC Ltd.

From this study of Ratio Analysis and Cash Flow Statements to interpret the results that the future of HDFC Ltd. is bright.

40

CHAPTER 7(A)

41

BUSINESS PROFILE(for self employed people)

BANKS STATE BANK OF INDIA

IDBI BANK UBI ICICI BANK

DOCUMENTS 1. SALES DEED 2. MUTATION 3. LEGAL SEARCH REPORT(BANK ADVOCATE) 4. DESIGN & ESTIMATE (ARCHITECT) 5. VALUATION REPORT 6. ITR (LAST 3 YEARS) 7.BALANCE SHEET & P/L (LAST 3 YEARS) 8. BANK STATEMENT (CURRENT & SAVINGS, 6 MONTHS) 9. BUSINESS PROFILE 10. ID PROOF 11. RESIDENCE PROOF 12. PHOTOS 13. PROPERTY PAPERS

ITR & BALANCE SHEET &P/L (LAST 2 YEARS) & OTHERS SAME

ALL SAME ALL SAME

RATE OF INTEREST

UPTO 30 LAC – 8.75%30- 50 LACS – 9%> 50 LACS – 9.25%

UPTO 30 LAC – 8.75%30- 50 LACS – 9%> 50 LACS – 9.25%

UPTO 5 YEARS – 9%5 – 10 YEARS – 9.25%10-15 YEARS – 9.5%15- 25 YEARS – 9.5%

UPTO 30 LACS1st YEAR – 8.25%2nd YEAR – 9%3rd YEAR – 9%

MORE THAN 30 LACS1st YEAR – 8.25%2nd YEAR– 9.25%

42

3rd YEAR – 9.25

PROCESSING FEES

0.5% OF LOAN TAKEN

1% OF LOAN TAKEN (.5% NEGOTIABLE FOR GOVT EMPLOYEES)

0.5% OF LOAN TAKEN + 1500 LAWYERS FEES (NOT NEGOTIABLE)

0.5% OF LOAN TAKEN ( IF LOAN ALREADY EXIST THEN NEGOTIABLE .25%)

REPAYMENT TERMS

A. MAX 60% OF NET INCOME B.BELOW 55 YEARS -MAX 20 YEARS REPAYMENT PERIOD OR 65 YEARS

BELOW 55 YEARS -MAX 20 YEARS REPAYMENT PERIOD OR 65 YEARS OF AGE

FOR FLAT/PLOT MAX YEARS - 20 YEARS CONSTRUCTION MAX YEARS - 10 YEARS

MAX 20 YEARS OR 60 YEARS OF AGE

ELIGIBILITY OF LOAN AMOUNT

85% of the cost of property OR 4 times the amount of income (Avg of 3 years' income)

85% of the cost of property ( below 30 lakhs) OR 80% of the cost of property (above 30 lakhs)

GROSS INCOME - 4 TIMES MAX NET INCOME - 5 TIMES & MAX AMOUNT - 50 LACS & FOR ( 7 METROS)- 100 LACS

85% of the cost of property OR 100% of the amount of registry.

OWN SOURCE NIL NIL ( AFTER 6 MONTHS)

90% PREPAYMENT ANYTIME STARTING FROM THE NEXT MONTH OF THE LOAN. 12 EMI TO RUN AFTER THAT.

REFINANCE 2% 2%

INSURANCE OF THE PROPERTY

YES (OPTIONAL)

YES (OPTIONAL)

NO YES (OPTIONAL)

AREAS OF FUNDING

Any area inside or outside tricity the condition being it should not have been given on GPA or through Share transfer


NOT OUTSIDE THE TRICITY


GURRANTOR Guarantor is required(one who is an Income Tax

NOT REQUIRED

DEPENDS UPON CASE

NOT REQUIRED

43

Assessee and he/she has to have an account in State bank of india)

ADDITIONAL SECURITY

N/A DEPENDS UPON CASE

DEPENDS UPON CASE

N/A

44

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BUSINESS PROFILE(for self employed people)BANKS AXIS BANK BANK OF INDIA HDFC Ltd.DOCUMENTS ALL SAME 1.PHOTOGRAPHS

2.IDENYITY PROOF 3.LOCAL ADDRESS PROOF 4.BANK STATEMENT (LAST 6 MONTHS) 5.ITR (LAST 3 YEARS) 6.BALANCE SHEET & P/L (LAST 3 YEARS) 7.PROOF OF WORTH 8.SALE AGRREMENT 9.COPY OF APPROVED MAP. 10ESTIMATION OF CONSTRUCTION. 11. COPY OF TITLE DEED & PREVIOUS TITLE DEED

1.BALANCE SHEET , P & L AND ITR (LAST THREE YEARS) 2. BUSINESS PROFILE 3. COPIES OF INDIVIDUAL TAX CHALLANS FOR THE LAST THREE YEARS. 4. COPY OF ADVANCE TAX CHALLAN (IF ANY) 5.BANK STATEMENT ( LAST 12 MONTHS)

RATE OF INTEREST

UPTO 30 LACS - 8.75%ABOVE 30 LACS – 9.25%

PROCESSING FEES

0.5% OF LOAN TAKEN

.55% OF THE LOAN AMOUNT

1% OF LOAN AMOUNT

REPAYMENT TERMS

MONTHLY EMI FOR 25 YEARS - 822 FOR 20 YEARS - 884 FOR 15 YEARS

15 YEARS - 1029 PER LACS 10 YEARS - 1267 PER LACS

MAX TO 20 YEARS

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- 999 FOR 10 YEARS – 1253

ELIGIBILITY OF LOAN AMOUNT

85% OF THE COST OF PROPERTY OR 55% OF THE NET INCOME

75% OF THE COST OF PROPERTY OR 4 TIMES LAST THREE YEARS AVERAGE ANNUAL INCOME

A. IIR (INCOME INSTALMENT RATIO) = EMI/GROSS INCOME MAX 40%, IN CASE MORE EMI REDUCE B. FOIR = ALL OBLIGATION/GROSS INCOME , MAX TO 35%

OWN SOURCEREFINANCE NIL NILINSURANCE OF THE PROPERTY

NIL 0.65% YES (OPTIONAL)

AREAS OF FUNDING

YES (OPTIONAL)

REQUIRED FOR BUILDING NOT FOR LAND

APPROVED PROJECTS ONLY & FLATS TRANSFERABLE ON GPA & ALSO FUNDED WITH ADDITIONAL SECURITY i.e 1.5 TIMES THE GPA PROPERTY

GURRANTOR Any area inside or outside tricity the condition being it should not have been given on GPA or through Share transfer

Any area inside or outside tricity the condition being it should not have been given on GPA

DEPENDS UPON CASE

ADDITIONAL SECURITY

NOT REQUIRED

LOCAL GURRANTOR IN CAES OF OUTSIDE TRICITY, MIGHT REQUIRE KEEPING THE PROPERTY INTO CONSIDERATION

DEPENDS UPON CASE

46

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COMPARATIVE ANALYSIS OF VARIOUS BANKS FOR HOME LOANS (for employed people)

47

←

STANDARD CHART.

BANK OF INDIA. HDFC LIMITED

Maximum loan amount 75% of the cost of the property

75% of the cost of Property or four times the avg income of last three years


Rate of interest: ( FLOATING )

below 30 lakhs 8.5% floating 9.25%(for 10 years n above)

till 30th june all applications received can be locked in under dual rate. March 2011 - 8.25%, Till March 2012 - 9% 3rd year onwards Floating rate( PLR-4.75%) housing loan: upto 30 lakhs- 8.75%, 30 - 50 lakhs -9%, above 50 lakhs - 9.25% Plot loan: Upto 30 lakhs - 9.25%, 30 - 50 lakhs - 9.5%, above 50 lakhs - 9.75% following loans are given when the person has home loan Equit loan ( loan against property) 11.25% top up loan - 10.25% education

30 lakhs - 50 lakhs 9% ( for below 10 years)

more than 50 lakhs

48

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loan - upto 30 lakhs - 9.75%, 30 - 50 lakhs -10%, above 50 lakhs - 10.25%

Processing charges 0.55% 1% of the loan amount

Pre-payment charges: 51,229.20 fixed: 2% if the amount being repaid is more than 25% of the opening balance adjustable: 2% if the amount being repaid is more than 25% 0f the opening balance and is paid within 3 years of the date of first disbursement.

own source NilRefinance 0.65%Broken Interest Charges

Additional security in case of GPA not required in case of GPA

Insurance of the property required for building

required for building not for land

optional

Area of funding anywhere except GPA any area but the project has to be approved by the MC. GPA property is also financed but with an additional security of 1.5 times the cost of the GPA property.

Guarantor depends on case to case

local guarantor in case of outside tricity. Might require a

depends on case to case

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guarantor in tricity keeping property into consideration.

Resale of the property Additional documents sale agreement, copy

of the title deed and previous title deeds, copy of the approved map duly signed, estimation of the construction/ renovation cost, any other statutory permission as required by the local authority.

area to be approved by MC

DOCUMENTS REQUIRED:

(1)Income tax return with computation (years)

3 3 3

(2)Balance sheet and Income statement (years)

3 3 3

(3) Six months bank statement

√ √ √

(4) Residence proof √ √ √(5) Pan card √ √ √(6)Landline bill original √ √ √(7) Business Profile not required not required √(8) Property paper √ √ √(9) Passport size photograph √ √(applicant +

guarantor)√

(10) R C Photocopies not required not required not required

COMPARATIVE ANALYSIS OF VARIOUS BANKS FOR HOME LOANS (for employed

50

←

people)

STATE BANK OF INDIA

AXIS BANK

IDBI BANK ICICI BANK

Maximum loan amount

85% of the cost of property OR 4 times the amount of income (Avg of 3 years' income)


85% of the cost of property ( below 30 lakhs) OR 80% of the cost of property (above 30 lakhs)

85% of the cost of property OR 100% of the amount of registry.

Rate of interest: ( FLOATING )below 30 lakhs 8.75% 8.75% 8.75% 8.25% for

first year; 9% for second year; 9.25% onwards

30 lakhs - 50 lakhs 9% 9% 9% 8.25% for first year; 9% for second year; 9.25% onwards

more than 50 lakhs 9.25% 9.25% 9.25% 8.25% for first year; 9% for second year; 9.25% onwards

Processing charges 0.50% 0.50% 1% (negotiable)(.50% for govt

0.5% ; 0.25%( if loan already existing)

Pre-payment charges: 90% prepayment anytime starting from the next month of the loan. 12 EMIs to

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run after that.

own source Nil nil nil (after 6 months)

Refinance 2% nil 2%

Broken Interest Charges

√

Additional security not required not required

depends upon the case

not required

Insurance of the property

Yes yes optional not required

Area of funding Any area inside or outside tricity the condition being it should not have been given on GPA or through Share transfer

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Guarantor Guarantor is required(one who is an Income Tax Assessee and he/she has to have an account in State bank of india)

Not required

yes in case of business,no in case of salaried

not required

Resale of the property Allowed allowed allowed with security

allowed

Additional documents Registered Sale deed, Mutation copy, map and estimate approved by the authority

Not required

depends upon the case

Map and Area to be approved by the MC

DOCUMENTS REQUIRED:(1)Income tax return with computation (years)

3 3 2 3

(2)Balance sheet and Income statement (years)

3 3 2 3

(3) Six months bank statement

√ √ √ √

(4) Residence proof √ √ √ √

(5) Pan card √ √ √ √(6)Local Address Proof

not required not required

not required √

(7) Business Profile √ not required

√ √

(8) Property paper √ √ √ √(9) Passport size photograph

√ √ √ √

53

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CHAPTER 7(B)

HOUSING DEVELOPMENT FINANCE CORPORATION

54

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RATIO ANALYSIS

for year ending March 31, 2010

1.CURRENT RATIO: CURRENT ASSETS/CURRENT LIABILITIES

For the Year 2009-10

Rs.53,59,17,46,262 = 2.018:1

Rs.26,56,16,40,847

For the year 2008-09

Rs.18,76,16,65,268 = 0.651:1

Rs.28,83,36,87,487

Note: 1.Current Assets Are Taken Except Loans And Advances

2. Current Liabilities Are Taken Except Provisions

2.ABSOLUTE LIQUID RATIO: ABSOLUTE LIQUID ASSESTS/CURRENT

LIABILITIES


Rs.5,22,41,47,60,065- Rs.5,85,606

Rs.26,56,16,40,847

= Rs.52,24,08,90,459 = 1.97:1

Rs.26,56,16,40,847


Rs.17,18,48,32,905 = 0.338:1

Rs.28,83,36,87,487

Note: 1.Absolute Liquid Assets =Cash And Bank Balance Except Cash With RBI

2. Current Liabilities Are Taken Except Provisions

55

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3.RATIOS OF LONG TERM DEBT TO SHAREHOLDERS’ FUND: LONGTERM DEBT/SHAREHOLDERS’ FUND


Rs.8,77,71,97,08,058 = 5.78:1

Rs.1,51,97,65,86,590


Rs.7,59,54,90,10,918 = 5.78:1

Rs.1,31,37,38,78,513

Note: 1.Long Term Debt Are Taken Except Following:

A) Short Term Foreign Currency Borrowings From BanksB) Unsecured Foreign Currency Convertible BondsC) Loans From Scheduled Banks (Unsecured)-Short TermD) Commercial Paper(Unsecured)E) Interest Accrued And Due 2. Shareholders’ Fund=Share Capital + Reserves And Surplus

4.PROPRIETORY RATIO: SHAREHOLDERS’ FUND/TOTAL ASSETS


Rs.1,51,97,65,86,590 .

Rs.11,17,62,96,74,904+ Rs.48,78,46,89,701

= Rs.1,51,97,65,86,590 = 0.130:1

Rs.11,66,41,43,64,605


Rs.1,31,37,38,78,513 .

56

←

Rs.9,69,93,46,86,387+ Rs.46,63,44,72,308

= Rs.1,31,37,38,78,513 = 0.129:1

Rs.10,16,56,91,58,695

Note: 1.Shareholders’ Fund=Share Capital As Per Schedule 1 + Reserves And

Surplus As Per Schedule 2

2. Total Assets= Loans And Advances As Per Schedule4 + Investment As Per

Schedule 5 + Current Assets, Loans And Advances Schedule 6 +

Fixed Assets As Per Schedule 8

5.FUNDED DEBT TO TOTAL CAPITALIZATION: FUNDED DEBT / TOTAL CAPITALIZATION * 100


Rs.9,65,65,30,88,314 = 0.864:1

Rs.11,17,62,96,74,904


Rs.8,38,56,08,07,874 = 0.865:1

Rs.9,69,93,46,86,387

Note: 1.Funded Debt= Loans As Per Schedule 3

2. Total Capitalization =Share Capital As Per Schedule 1+ Reserve And Surplus As Per Schedule 2+ Loans As Per Schedule 3

6.DEBT/EQUITY RATIO: OUTSIDERS’ FUND/SHAREHOLDERS’ FUND

OR

EXTERNAL EQUITIES/INTERNAL EQUITIES


57

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Rs.9,65,65,30,88,314 = 6.35:1

Rs.1,51,97,65,86,590


Rs.8,38,56,08,07,874 = 6.39:1

Rs.1,31,37,38,78,513

Note: 1. Outsiders’ Fund= Loans As Per Schedule 3

2. Shareholders’ Fund=Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2

7.SOLVENCY RATIO: TOTAL LIABILITIES TO OUTSIDERS/TOTAL ASSETS


Rs.9,92,21,47,29,161 = 0.851:1

Rs.11,66,41,43,64,605


Rs.8,67,39,44,95,361 = 0.853:1

Rs.10,16,56,91,58,695

Note: 1.Total Liabilities To Outsiders= Loan Funds As Per Schedule 3 +Current Liabilities And Provisions As Per Schedule 7 (Except Provisions Under Schedule 7)

2. Total Assets= Loans And Advances As Per Schedule 4 + Investment As Per

Schedule 5 + Current Assets, Loans And Advances Schedule 6 +

Fixed Assets As Per Schedule 8

8.FIXED ASSETS TO NET WORTH RATIO: FIXED ASSTS (AFTER DEP.)/SHAREHOLDERS’ FUND

58

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Rs.2,22,11,41,613 = 0.0146:1

Rs.1,51,97,65,86,590


Rs 2,03,40,51,342 = 0.0155:1

Rs 1,31,37,38,78,513

Note:1.Fixed Assets= Net Block As Per Schedule 8


9.FIXED ASSET RATIO:

OR

FIXED ASSET TO LONG TERM FUNDS: FIXED ASSTS (AFTER DEP.)/TOTAL LONG TERM FUNDS


Rs.2,22,14,11,613 = 0.0022:1

Rs.10,29,69,62,94,648


Rs.2,03,40,51,342 = 0.0023:1

Rs.8,90,92,28,89,431

Note: 1.Fixed Assets= Net Block As Per Schedule 8

2.Total Long Term Funds= Share Capital As Per Schedule 1+ Reserves And Surplus As Per Schedule 2+ Loan Funds As Per Schedule 3

But Loan Funds Are Taken Except Following:

A)Short Term Foreign Currency Borrowings From Banks

B)Unsecured Foreign Currency Convertible Bonds

59

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C)Loans From Scheduled Banks (Unsecured)-Short Term

D)Commercial Paper(Unsecured)

E)Interest Accrued And Due

10.RATIO OF CUURENT ASSETS TO PROPRIETORS’ FUND: CURRENT ASSETS/SHAREHOLDERS’ FUNDS


Rs.53,59,17,46,262 = 3.354:1

Rs.1,51,97,65,86,590


Rs.18,76,16,65,268 = 0.143:1

Rs.1,31,37,38,78,513

Note: .1.Current Assets Are Taken Except Loans And Advances


11.RETURN ON SHAREHOLDERS’ INVESTMENT OR NET WORTH: NET PROFIT AFTER INTEREST AND TAX/SHAREHOLDERS’ FUND*100


Rs.28,26,48,98,200*100 =18.60%

Rs.1,51,97,65,86,590


Rs.22,82,54,27,543*100 =17.37%

Rs.1,31,37,38,78,51

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Note:1.Net Profit = Net Profit After Interest And Tax Taken As Per Profit And Loss Account.


12.EARNING PER SHARE (EPS): EARNING AVAILABLE TO EQUITY SHAREHOLDER/NUMBER OF EQUITY SHARES


Rs.28,26,48,98,200 =Rs.98.45 Per Share

28,71,10,222 Shares


Rs.22,82,54,27,543 =Rs.80.24 Per Share

28,44,53,910 Shares

Note:1.Earning Available To Equity Shareholders’= Net Profit After Interest And Tax Taken As Per Profit And Loss Account.

2.Number Of Equity Shares= No. Of. Equity Shares Are Given In Share Capital As Per Schedule 1

13.DIVIDEND PER SHARE: PROPOSED DIVIDEND/NUMBER OF EQUITY SHARES


Rs.10,33,59,67,992 = Rs.36 per Share

28,71,10,222 Shares


Rs.8,53,36,17,300 = Rs.30 per Share

28,44,53,910 Shares

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Note:1.Proposed Dividend Is Taken As Per Profit And Loss Account.


14.DIVIDEND YIELD RATIO: DIVIDEND PER SHARE/MARKET PER SHARE


Rs.36*100 = 1.25%

Rs. 2876


Rs.30*100 = 1.12%

Rs. 2686

Note: 1. Dividend Per Share Is Taken As Per Above Calculations.

2.Market Price Per Share Is Taken As Per Balance Sheet.

15.DIVIDEND PAYOUT RATIO: DIVIDEND PER SHARE/EARNING PER SHARE


Rs.36*100 = 36.57%

Rs.98.45


Rs.30*100 = 37.39%

Rs.80.24

Note: 1. Dividend Per Share Is Taken As Per Above Calculations.

2.Earning Per Share Is Taken As Per Above Calculations.

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16.PRICE EARNING RATIO: MARKET PRICE PER SHARE/EARNING PER SHARE


Rs.2876 = 29.21:1

Rs.98.45


Rs.2686 = 33.47:1

Rs.80.24

Note: 1.Market Price Per Share Is Taken As Per Balance Sheet.

2.Earning Per Share Is Taken As Per Above Calculations.

17.RATIO OF FIXED ASSET TO FUNDED DEBT: FIXED ASSETS (AFTER DEP.)/FUNDED DEBT


Rs.2,22,11,41,613 = 0.0025:1

Rs.8,77,71,97,08,058


Rs.2,03,40,51,342 = 0.0027:1

Rs.7,59,54,90,10,918

Note: 1.Fixed Assets= Net Block As Per Schedule 8

2.Funded Debt= Loans As Per Schedule 3

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18.RATIO OF FIXED ASSET TO FUNDED DEBT: FIXED ASSETS (BEFORE DEP.)/FUNDED DEBT


Rs.5,24,45,57,998 = 0.0060:1

Rs.8,77,71,97,08,058


Rs.4,93,85,23,820 = 0.0065:1

Rs.7,59,54,90,10,918

Note: 1.Fixed Assets= Gross Block As Per Schedule 8

2.Funded Debt= Loans As Per Schedule 3

19.RATIO OF RESERVE TO EQUITY CAPITAL: RESERVES AND SURPLUS/EQUITY CAPITAL


Rs.1,49,10,55,23,520*100 = 98.11%

Rs.1,51,97,65,86,590


Rs.1,28,52,93,78,563*100 = 97.80%

Rs.1,31,37,38,78,513

Note:1.Reserve And Surplus Are Taken Per Schedule 2 Of The Balance Sheet.

2. Equity Capital=Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2

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20.RATIO OF CURRENT LIABILITIES TO PROPRIETORS’ FUND: CURRENT LIABILITIES/ PROPRIETORS’ FUND


Rs.26,56,16,40,847 = 0.175:1

Rs.1,51,97,65,86,590


Rs.28,83,36,87,487 = 0.219:1

Rs.1,31,37,38,78,513

Note: 1. Current Liabilities Are Taken Except Provisions

2. Proprietors’ Fund=Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2

21.TOTAL INVESTMENT TO LONG TERM LIABILITIES: SHAREHOLDERS’ FUND + LONG TERM LIABILITIES/LONG TERM LIABILITIES’


Rs.1,51,97,65,86,590+ Rs.8,77,71,97,08,058

Rs.8,77,71,97,08,058

= 1.173:1


Rs.1,31,37,38,78,513+ Rs.7,59,54,90,10,918

Rs.7,59,54,90,10,918

= 1.1729:1

Note: 1. Shareholders’ Fund=Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2

2.Long Term Liabilities Are Taken Except Following:

A)Short Term Foreign Currency Borrowings From Banks

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B)Unsecured Foreign Currency Convertible Bonds

C)Loans From Scheduled Banks (Unsecured)-Short Term

D)Commercial Paper(Unsecured)

E)Interest Accrued And Due

22.FREE RESERVES PER SHARE: ALL FREE RESERVES/ NO. OF EQUITY

SHARES


Rs.44,15,89,06,746+ Rs.9,52,45,78,000

28,71,10,222

= Rs.53,68,34,84,746 = Rs.186.97 per share

28,71,10,222


Rs.37,20,87,54,723+ Rs.5,20,45,78,000

28,44,53,910

= Rs.42,41,33,32,723 = Rs.149.10 per share

28,44,53,910

Note:1.Free Reserves= General Reserve As Per Schedule 2+ Balance Of Profit And Loss Account As Per Schedule 2


23.RETURN ON GROSS CAPITAL EMPLOYED:NET PROFIT AFTER TAX and PREFERENCE DIVIDEND/GROSS CAPITAL EMPLOYED*100

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Rs. 28,26,48,98,200*100 = 18.60%

Rs. 1,51,97,65,86,590


Rs. 22,82,52,27,543*100 = 17.37%

Rs. 1,31,37,38,78,513

Note: 1.Net Profit = Net Profit After Tax And Preference Dividend Taken As Per Profit And Loss Account.

2. Preference Dividend Is Nil Because There Are No Preference Shares

3. Gross Capital Employed= Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2

24.RETURN ON NET CAPITAL EMPLOYED:NET PROFIT AFTER TAX and PREFERENCE DIVIDEND/NET CAPITAL EMPLOYED*100


Rs. 28,26,48,98,200*100 = 22.54%

Rs. 1,25,41,49,45,743


Rs. 22,82,52,27,543*100 = 22.26%

Rs. 1,02,54,01,91,026

Note: 1.Net Profit = Net Profit After Interest And Tax Taken As Per Profit And Loss Account.

2. Preference Dividend Is Nil Because There Are No Preference Shares

3. Net Capital Employed= Share Capital As Per Schedule 1 + Reserves And Surplus As Per Schedule 2 – Current Liabilities As Per Schedule 7 Except Provisions.

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Ratios Of HDFC LTD. For The Financial Year

Year

2009-10

Year

2008-09

1.Current Ratio 2.018:1 0.651:1

2. Absolute Liquid Ratio 0.338:1 0.338:1

3.Ratios Of Long Term Debt To Shareholders’ Fund 5.78:1 5.78:1

4. Proprietary Ratio 0.130:1 0.129:1

5. Funded Debt To Total Capitalization 0.864:1 0.865:1

6. Debt/Equity Ratio 6.35:1 6.39:1

7. Solvency Ratio 0.851:1 0.853:1

8. Fixed Assets To Net Worth Ratio 0.0146:1 0.0155:1

9. Fixed Asset Ratio 0.0022:1 0.0023:1

10. Ratio Of Current Assets To Proprietors’ Fund 3.354:1 0.143:1

11. Return On Shareholders’ Investment Or Net Worth (In %Age) 18.6 17.37

12. Earning Per Share (EPS) (In Rs.) 98.45 80.24

13. Dividend Per Share (In Rs.) 36 30

14. Dividend Yield Ratio (In %Age) 1.25 1.12

15. Dividend Payout Ratio 36.57 37.39

16. Price Earning Ratio 29.21 33.47

17. Ratio Of Fixed Asset To Funded Debt 0.0025:1 0.0027:1

18. Ratio Of Fixed Asset To Funded Debt 0.0060:1 0.0065:1

19. Ratio Of Reserve To Equity Capital (In %Age) 98.11 97.8

20. Ratio Of Current Liabilities To Proprietors’ Fund 0.175:1 0.219:1

21. Total Investment To Long Term Liabilities 1.173:1 1.1729:1

22. Free Reserves Per Share Rs. 186.97 Rs. 149.10

23.Return On Gross Capital Employed 18.60% 17.37%

24. Return On Net Capital Employed 22.54% 22.26%

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HOUSING DEVELOPMENT FINANCE CORPORATION

RATIO ANALYSIS

for year ending March 31, 2010

Investment Valuation Ratios:

1. Dividend per Share

Dividend is the return to shareholders for their investment in the company. Higher the dividend, higher the satisfaction & thus higher the confidence. In the given case of HDFC, in year 2010 & 2009, The Company has provided dividend of Rs. 36 & Rs. 30 per share against face value of Rs. 10 per share. This proves that the company has paid dividend at rate of 360% & 300% in year 2010 & 2009 resp. this shows company is making huge profits & investors are also satisfied.

2. Free Reserves per Share

It shows the amount of free reserves available per share. In the given case, in year 2010 & 2009, the free reserves per share are Rs. 186.97 & Rs. 149.10 resp. which shows company has surplus money to use in case of any contingent & other liabilities.

3. Ratio of Reserves to Equity Capital

This ratio shows how much reserves are available against equity capital. Higher the percentage, higher the satisfaction of shareholders & thus higher the stability. In the case of HDFC, in Year 2010 & 2009, the percentage was 98.11% & 97.80%. This shows that the company’s ratio has increased & the stability has also been increased because of higher reserves available with the company.

Profitability Ratios:

1. Fixed Assets Ratio & Fixed Assets to Net Worth Ratio

These ratios show the relationship of fixed assets with Long Term Funds & Share Holders Funds. In Year 2010 & 2009 the fixed assets ratio was 0.0022:1 & 0.0023:1 resp while fixed assets to net worth ratio was 0.0146:1& 0.0155:1. This shows in 2010 both ratios have been decreased as compared to Year 2009. This is a bad situation for the company.

2. Ratio of Current Assets to Proprietors Funds

This ratio shows that how much current assets are there to cover the proprietors’ funds. Higher the ratio higher the solvency. In the case of HDFC, this ratio in Year 2010 & 2009 was 3.354:1 & 0.143:1resp. As we can see that ratio has increased from Year 2009 to 2010 which shows company’s future is bright.

3. Ratio of Current Liabilities to Proprietors’ Fund

This ratio shows the number of times current liabilities are to the proprietors’ funds. Lower the ratio is beneficial for the company. In Year 2010 & 2009, it was 0.175:1 & 0.219:1. This shows that ratio has decreased from 2009 to 2010 which is good for the company.

4. Total Investment to Long Term Liability Ratio

This ratio shows that how much Long Term Liabilities are covered with our Investments. Higher the ratio means higher the capacity of company to pay back the Long Term

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Liabilities. In the given case of HDFC, the ratio in Year 2010 & 2009 was 1.173:1 & 1.1729:1. In both years the ratio is almost same, we can say that the company is in good condition because it is able to cover its long term liabilities with its investments.

5. Return on Gross Capital Employed & Return On Net Capital Employed

These ratios establish the relationship between Profits & Capital Employed. It is the primary ratio to measure the overall profitability of the company. Higher the ratio means higher the efficiency of the company. In the given case, in year 2010 & 2009, Return on Gross Capital Employed was 18.60% & 17.37% resp while Return on Net Capital Employed was 22.54% & 22.26% resp which show higher efficiency of the company, the company is highly efficient.

6. Return on Net Worth

This ratio establishes the relationship between Profits after interest & taxes & Net Worth. It is the primary ratio to measure the overall profitability of the company. Higher the ratio means higher the efficiency of the company. In the given case, in year 2010 & 2009, the ratio is 18.60% & 17.37% which shows high efficiency of the company.

Liquidity & Solvency Ratios:

1. Current Ratio

As per rule of thumb, the best current ratio is 2:1, this means current assets should be twice of current liabilities but in case of HDFC, the current ratios in year 2010 & 2009 are 2.018:1 & 0.651:1 resp. this shows that company has excess current assets over current liabilities, which shows high working capital.

2. Absolute Liquid Ratio

As per rule of thumb, the best quick ratio is 1:1, this means absolute liquid assets should be equal to current liabilities but in case of HDFC, the liquid ratios in year 2010 & 2009 are 0.338:1 & 0.338:1 resp. this shows that company has less liquid assets over current liabilities. This proves that company has enough assets which can be easily converted into cash.

Debt Coverage Ratios:

1. Ratios of Long Term Debt to Shareholders’ Fund

This ratio shows the claims of outsiders to the funds. In case of HDFC, Ratios of Long Term Debt to Shareholders’ Fund in year 2010 & 2009 are 5.78:1 & 5.78:1 resp. which shows that the claims are more than the funds; this is a bad situation for the company.

Long Term Solvency Ratios

1. Ratio of Fixed Asset (after dep.) To Funded Debt & Ratio Of Fixed Asset (before dep.) To Funded Debt

These ratios show the relationship of Fixed Assets with the Funded Debt. Higher the ratio higher the chances of stability because in case of failure fixed assets will cover the funded debt. In the given case, in year 2010 & 2009 the Ratio Of Fixed Asset (after dep.) To Funded Debt is 0.0025:1 & 0.0027:1 resp. while Ratio of Fixed Asset (before dep.) To Funded Debt is 0.0060:1 & 0.0065:1 resp. which shows that company assets are much less than the funded debt.

2. Proprietary Ratio:

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This ratio shows the relationship of shareholder funds with hat of total assets. In the case of HDFC, in year 2010 & 2009 it was 0.130:1 & 0.129:1 resp. which shows no more difference between both two years.

3 Debt Equity Ratios

This ratio shows the claims of outsiders to the claims of owners i.e. shareholders. In case of HDFC, the debt equity ratio in 2010 & 2009 are 6.35 & 6.39 resp. which shows that the claims are more than the equity; this is a bad situation for the company.

4. Funded Debt to Total Capitalization:

This ratio shows the claims of outsiders to the claims of total capital. In case of HDFC, the funded debt to total capitalization ratio in 2010 & 2009 are 0.864:1 & 0.865:1 resp. which shows that the claims are less than the total capital; this is a good situation for the company. & company’s future is bright.

5. Solvency Ratio

This ratio shows the solvency of the company by comparing total liability to outsiders with total assets. In HDFC case, this ratio in 2010 & 2009 was 0.851:1 & 0.853:1. As we have seen the ratio has increased from year 2009 t6o 2010, this shows company’s status is nice.

Cash Flow Indicator Ratios:

1. Dividend Payout Ratio Net Profit

This ratio shows the ratio of dividend paid out of profits. Higher the ratio higher the investors satisfaction & interest. This is very beneficial for the company because company can’t loose confidence of investors. In the given case, in year 2010 & 2009, the ratios are 36.57 & 37.39 resp., which are very high. This shows company is capable to give higher returns to its investors.

2. Dividend Yield Ratio

This ratio shows the ratio of Dividend Paid Per Share & Market Price Per Share. Higher the ratio higher the investors satisfaction. In the case of HDFC, in year 2010 & 2009, the ratio was 1.25% & 1.12%. As the ratio this year has increased this shows company’s higher profitability.

3. Price Earning Ratio

This ratio shows how many times the Market Price of Share is of the Earnings per Share. In HDFC case in Year 2010 & 2009 the ratio was 29.21 & 33.47 resp. which shows that this this year there are more earnings as compared to last year.

4. Earnings per Share

It represents the earnings of shareholders from the company in the year. Higher the earnings per share, higher the confidence of shareholders & higher the company’s reputation. In the given case, in year 2010 & 2009, the earnings per share are 98.45 & 80.24 resp., which shows high returns to shareholders. Hence, company is highly stable.

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CONCLUSION

I have studied the attached Balance Sheet of HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (“the Corporation”) as at March 31, 2010,

The Profit and Loss Account and the Cash Flow Statement of the Corporation for the year ended on that date, both annexed thereto & have made an interpretation of the company via ratio analysis.

I have come to the conclusion that the company is on the high level of success. It is growing day by day. Its long term as well as short term stability is solid. It is capable of generating more & more returns in coming future. After analyzing, I have no doubt that if in coming future any contingent liability raises before company, it is able to face the challenge. Moreover the investors & creditors (short & Long Term) both are satisfied by the company because it is declaring high profits & returns & repaying creditors in time.

So, the company’s future is Bright.

Cash Flow Statement of HDFC LTD. for the year ended March 31,2010

Current Year

(2009-10)

Previous year

(2008-09)

Rupees Rupees

A] CASH FLOW FROM OPERTAING ACTIVITIES

Profit Before Tax 39159898200 32190427543

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Adjustment For:

Depreciation And Amortization 182023071 174563928

Provision For Contingencies 580000000 500000000

(Gains)/Loss On Translation Of Foreign Currency Monetary Assets

And Liabilities And Mark To Market Derivatives -295703919 2611652309

Employee Stock Option Expense(Net Of Options Exercised) -43790 -48969

Provisions For Employees Benefits 80382284 110954902

Profit On Sale Of Investments -2248303068 -252300208

Surplus From Deployment In Cash Management Schemes Of Mutual Funds -1898442216 -1579731748

Profit In Sale Of Fixed Assets (Net) -4587887 -5874605

Operating Profit Before Working Capital Changes 35555222675 33749643152

Adjustments For:

Current Assets -840719487 -2821781029

Current Liabilities 552821112 6652700403

Cash Generated From Operations 35267324300 37580562526

Advance Tax Paid -11010619403 -9781572839

Net Cash From Operations 24256704897 27798989687

Loans Disbursed(Net) -128772620312 -117632036043

Corporate Deposits 7189413000 2336673400

Net Cash Used In Operating Activities -97326502415 -87496372956

B] CASH FLOW FROM INVESTING ACTIVITIES

Purchase Of Fixed Assets -348309049 -123665189

Sale Of Fixed Assets 10708086 32160579

-337600963 -91504610

Investment In Subsidiaries -2863800000 -4155000000

Investment In Cash Management Schemes Of Mutual Funds -1349455987700 870590000000

Other Investments -89046447459 -10706949930

Sale Proceeds Of Investments:

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In Cash Management Schemes Of Mutual Funds 1388598000886 848904287525

In Other Companies And Properties 54228732324 2493273220

Net Cash From/(Used)In Investing Activities 1122897088 -34145893795

C] CASH FLOW FROM FINANCING ACTIVITIES

Share Capital- Equity 26563120 4159250

QIP Warrants 3012269150 -

Securities Premium 3242077645 510876154

Securities Issue Expenses -64147933 -

Borrowings 135154524943 13853013535653

Dividend Paid- Equity Shares -85368106520 -7105985821

Tax Paid On Dividend -1255798590 -1066273179

Shelter Assistance Reserve- Utilization -84845183 -52159522

Net Cash From Financing Activities 131493832532 130820752535

Net Increase In Cash And Cash Equivalents 35290227205 9178485784

Cash And Cash Equivalents As At The Beginning Of The Year[As Per Note 8(i)] 16956082911 7777597127

Cash And Cash Equivalents As At The End Of The Year[As Per Note 8(i)]

52246310116

==========

16956082911

==========

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CHAPTER 8

LIMITATIONS:

Every study conducted may have certain shortcomings and unfortunately mine is also a similar case. A few errors have crept in despite mine best efforts to avoid them but it is expected that still mine study and findings are very much relevant.

An error may have been due to the samples taken not conforming to the actual population; this is because the sample was a convenience sample.

Certain questions which are not properly responded by the Respondents. Personal bias or personal error of the interviewer might also have crept in, some

cases, while interpreting the respondents. There are several customers who don’t show proper interest in filling the questioner as they

feel that they won’t get any benefit after filling the questioners and it’s just a waste of time for them.

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COMMON PROBLEMS FACED BY HDFC HOME LOAN CUSTOMERS:

Rejection at the first stage due to incompatibility between the borrower’s qualifications and lenders requirements. It could be the age criteria, income criteria, improper documents, the institution not being able to verify the customer’s details properly etc.

With every application form for home loans, HDFC require about 0.25% to 1% of the loan amount to be submitted as the processing fees. The processing fees are generally non-refundable. In simple words this means that for whatever reasons, if the institution finds that customer doesn’t deserve the home loan this fee won’t be returned.

Another limitation is that desired loan is usually not sanctioned. The loan amount sanctioned is mostly based on repayment capacity of the borrower. The monthly income, financial history or other unpaid loans with the borrower, past payment record, credit card usage history, if any bounced cheque, average balance with the banks, total years in employment etc. . These factors all clubbed together help in the institution to decide whether it will be able to recover its money satisfactorily or not.

The interest rate dilemma Another major limitation is Difference in property valuation. The company has its

own experts for legal, technical and financial appraisal of the property in question. It evaluates the property on its established parameters and assigns a value to it .This value can be significantly lower than the price the customer quoted for the property. This can cause a significant gap between what is needed and what the company is willing to lend.

Another is the Title deeds and NOC Documentation Problem. The Title deeds and NOC Documents have to be furnished in the bank’s format. Borrower’s who don’t provide them in proper format, will ruin the entire exercise and won’t get any loan.

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CHAPTER 9

SUGGESTIONS AND RECOMMENDATIONS

All one need is the courage to innovate, the skill to understand clientele and the desire to give them the best .Likewise following are some of the suggestions which would help HDFC in improvising their working styles and performance.

Most of the customers face problems regarding the rate of interest. HDFC must inform its customers about the change in ROI, It automatically changes but there is decrease in rate of interest , it doesn’t change automatically.

Any change in the policies must be intimated to all the customers .HDFC should provide proper information to its customers.

There is lot of formalities in the loan disbursement process .Too much documentation is done . Customer is no aware of all the formalities. Therefore paperwork should be more friendly and clear .

Customers should be given proper information about EMI. They are generally not told how their EMI are calculated they should know EMI is calculated and of what amount.

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After sale service is an issue of concern. Customers facing problems are not attended on time. Employees are generally cooperative only when the loan is sanctioned and disbursed. Therefore after sale service should be improved up to the satisfaction level of the customer.

Website of HDFC should give more options and features to customers so that they get maximum information sitting at home

Employees of HDFC should be more prompt towards customer’s grievances and problems

HDFC should provide personalized services to customers. Comparative pricing in terms of lower interest rates and front end changes should be

adopted. Company should enter into tie ups with reputed builders and development authorities. HDFC should increase their reach by penetrating into rural and semi urban areas .They

should also capitalize on present customer base by generating referrals Aggressive marketing and great publicity through newspapers, hoarding, websites and

other medias should be done.

CHAPTER 10

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Webliography

www.wikipedia.org www.google.com www.hdfc.com www.ansalapi.com www.moneycontrol.com www.hdfcbank.com www.hdfcinsurance.com www.hdfcfund.com www.hdfcergo.com www.hdfcrealty.com www.credila.com

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http://www.credila.com/

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Balance Sheet as at March 31,2010

Schedule March 31,2009

Rupees Rupees Rupees

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS

Share Capital 1 2871063070 2844499950

Reserves and Surplus 2 149105523520 128529378563

151976586590 131373878513

LOAN FUNDS 3 965653088314 838560807874

1117629674904 969334686387

APPLICATION OF FUNDS

LOANS 4 979669905923 851981057761

INVESTMENTS 5 107274545227 104687498861

DEFERRED TAX ASSEST[Note 26] 2857280715 2158210179

CURRENT ASSETS, LOANS AND ADVANCES 6 74391491127 55708340552

Less: CURRENT LIABILITIES AND PROVISIONS 7 48784689701 46634472308

NET CURRENT ASSESTS 25606801426 9073868244

FIXED ASSESTS 8

Gross Block 5244557998 4938523820

Less: Depreciation 3023416385 2904472478

Net Block 2221141613 2034051342

1117629674904 969934686387

Notes Forming Part of Accounts 14

Significant Accounting Policies 15

Schedule 1 To 15 Annexed Hereto Form Part of Balance Sheet and Profit And Loss Account

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