uploadedfile_130415154212791664

PROJECT REPORT

ON

“HOME LOANS IN ICICI”

Project Report Submitted Towards The PartialFulfillment For Award Of The Degree Of Masters of Business Administration

(2008-2010)

Submitted ToBySHARMAFaculty Guide MBA-4th

Submitted

ROHITSem

ASIA PACIFIC

1

MATHURA ROAD, NEW DELHI

2

CONTENTS

Acknowledgement

Executive Summary

Chapter 1 – Introduction

Chapter 2 – Products

Chapter 3 – Objectives and Rationale of the Project

Chapter 4 – Review of Literature

4.1 Business Process

4.2 Types of Appraisal

4.3 Property Documentation

4.4 Know Your Customer Compliance

4.5 Repayment Track Record based lending

Chapter 5 – Research Methodology

5.1 Research Design

3

5.2 Sample Design

5.3 Research Tools and Questionnaire

5.4 Analysis

a) Porter’s five forces model

B) SWOT Analysis

c) Comparative study of ICICI Bank Ltd and HDFC

Chapter 6 – Research Findings

Chapter 7 – Summary and Conclusion

Bibliography

4

ACKNOWLEDGEMENT

I am obliged to all the people which includes my managers and mentors and my

colleagues for co-operation during the internship. My increased spectrum of knowledge

in this field is the result of their content supervision and direction that has helped me to

absorb relevant and high quality information.

I would like to thank my faculty guide Ms. sharma for her guidance and enriching my

thoughts in this field from different perspectives.

I would like to thank all my respondents without whose cooperation my study/project

would not have been possible/complete.

Last but not the least, I feel indebted to all those persons and organizations who/which

have provided helped me directly or indirectly in successful completion of this study.

rohit

5

Executive Summary

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.

A year equates a century, knowledge compresses time and the information technology

sweeps the world, gathering momentum with each new application, soaring towards fresh

goal, rapidly opening vistas hitherto unknown. Here we are, in the 21st century….Years

that catapults us towards new challenges at every stage of endeavor. It gives us good

reason for aiming high.

Keeping the above philosophy in mind, this project is carried out with an objective to

identify the basic needs of the applicants and the process of Home Loans in ICICI Bank

Ltd.

The various areas covered in the report are:

6

Business Process of Home loans

Types of Appraisal

Property Documentation

Know your customer compliances

Repayment Track Record lending

The final outcome of the report is to find out the number of the applicants who have

applied for bank loans in the month of June and the analysis of the population applying

for Home Loans through the sample size 40.

The report includes the various products that are introduced by the bank such as Home

Loans, Loan against property, Land Loan, Property OD, Lease Rental Discounting,

Balance Transfer, etc. It consists of questionnaire which helped to analyze the final

outcome of the report.

7

Introduction

ICICI Bank is India’s No. 1 Home Loans Provider. At ICICI Bank Home Loans, it offers

unbeatable benefits to ensure that the customers get the best deal without any hassles.

And ICICI Bank makes it extremely easy for them by offering

•

•

•

•

•

Attractive loan interest rates

Home loan amounts starting from Rs.2 lakhs

Term loans up to 20 years

Free Personal Accident Insurance

Insurance options for your home loan at attractive premium

With varied offering of house loans and home finance, ICICI Bank Home Loans gives an

opportunity to select the perfect loan as per the needs of the customers who can choose

from:

•

•

•

•

•

•

Adjustable Rate Home Loan

Fixed Rate Home Loan

Part fixed, Part Floating Rate Home Loan

Smart fix Home Loan

Money Saver Home Loan and also

Balance Transfer of your existing home loan from other banks.

8

And the other categories that the customers can avail are :

Land Loans

Office Premises Loans

Home Improvement Loan and

Home Loan for NRI.Customers can also leverage their existing property to get

Loan against Property

Property Overdraft or Lease Rental Discounting.

All of these are available on an adjustable rate or a fixed rate.

Challenges in the growth path

The housing finance industry is going to observe polarization of the players

For survival, the Housing Finance Institution should have -:

Good investment in people and system

Should have strong Business Origination process in place

Excellent Credit Appraisal Skills

Monitoring the Systems in place

Strong Collection mechanism in place

HFI’s survival can be at stake

9

ICICI Bank

RCLG(Retail Customer Liability Group)

RAPG(Retail Assets Product Group)

RCLG deals in Accounts i.e.,Current, savings and fixed.It looks after the liability side ofthe bank that constitutes thewithdrawals and deposits of thecustomer.

Salesdepartment

COPS / CAMCredit department

OperationsDepartment

CollectionDepartment

Sales ManagerCredit ManagerDMA / DSACPA (Credit(Direct marketing Processing AnalystAgency/ direct salesAgent)

Area Operations ManagerCollectionCustomer Account Manager ManagerDEO (Data Entry Operator)

Sales Department – It basically search the customer who is in need of loan and pitches

the different kinds of customer accordingly.

Credit Department – It is responsible for Credit Documentation, Profile check, Legal

and Technical reports of the customer and his property.

10

Operations Department – It is responsible for punching end to end. It does NDC

according to the RBI norms and performs after sales services. It collects the Post Dated

Cheques.

Collection Department – It functions at the time when any customer is in default.

19th February 1999………The launch of ICICI Bank Home Loans

Scenario then

New to the business

Formidable competition

End to End delivery of the product through the DMA being done for the first time

Ambitious growth plans

Home loans – Highlights

Customer base (as on march 2005):

Year-to-Date……….276756 (Sanction cases)

Life-to-Date………..687364 (Sanction cases)

Book Size (as on March 2005) – Rs.33175.20 crores

Disbursement (YTD)….Rs.18871.00 crores

11

Now – Year 2007

1000 + locations

845 + Direct marketing Agencies

10000 + FOS across the country

Centralized Call Centers covering all major states and cities

Leveraging corporate relationships

Cross sell initiatives: leveraging customer centric data warehouse infrastructure.

Polarization – Future Scenario

Weak HFI with high cost of funds & poor system would end up as DSA sourcing

business in the market.

HFIs with low cost of funds but poor system may turn out to be buyers of MBS

HFI with good systems in place but with high cost of funds need to look at

Securitization.

HFIs with Low cost funds and good systems would be the major players.

Low margins & High delinquency can increase the lending rate to

cover the cost of operations.

Can force the HFIs to re-look at its business model.

12

Products and Documentation

Products: We Offer:-

Products – Home Loan & XSELL

1. Home Loans (HL) & Variance

MV Lending

Smart Fixed

Part Fixed & Part floating

Fixed ROI with MMC

EMI in under construction stage

Max Money – SURF

2. Money Saver

3. Home Improvement Loan (HIL)

4. Land Loans (LL)

5. Office Premises Loan (OPL)

6. Balance Transfer (BT)

7. Top – Up Loan

13

8. Cross Sell to Auto loans

9. No Income Proof Loan (NIP)

Products – LAP / OD

Loan Against Property (LAP)

Property OD (Residential / Commercial)

Income Surrogate Banking Product

Lease Rental Discounting (LRD)

New product introduced on June 4, 2007

Lap on Land

Features :-

1. There must be a plot number. The plot must be properly demarcated by fencing or

boundary wall.

14

2. There must be change in transaction within last 10 years. The title must be

changed.

3. Land usage must be residential. Commercial, agricultural or industrialized land is

not considered.

4. It should be DLA or Municipal approved.

5. The loan amount can be between 7- 50 lakhs

Low Loan To Value i.e., 16.25 % ROI on 30 % LTV

16.50 % ROI on 35 % LTV

6. Minimum Plot Area must be 800 square feet

Maximum can be 10000 square feet.

7. Tenure for repaying the loan would be 10 years.

8. Case can be made on Income Basis or Repayment Track Record (RTR) of all

kinds of loans i.e., auto loans, medical equipment loans, personal loans.

9. LAP on Land can be given to all kinds of customers – Salaried, Self Employed

Non Professional (SENP) & Self employed Professional (SEP).

15

Home Loans : Key Features

Purpose : To purchase, construct or extend new or existing flat / house

Loan to value (LTV) ratio is 85 %. This includes stamp duty, registration charges

and amenities.

Amenities on Stamp paper : We can add Maximum of 20% of Agreement value.

Maximum Tenor : 20 years (15 years for SENP retail & non – retail)

Only for first sale builder properties.

Loan amount : From Rs.2 lac to Rs. 3 Crore

Validity of Loan Approvals : 6 months from the date of Sanction Letter.

LTV Norms

In case of Resale :

A) If COP = MV, Loan Amount = 85% of COP (LTV 85%)

B) If COP > MV, Loan Amount = 85% of MV (LTV 85%)

Example : COP : Rs.25 Lacs & MV : Rs.20 lacs

Loan Amount : Rs.17 lacs

C) If COP < MV, Loan Amount = 80% of MV subject to 100% of COP

Example : COP : Rs.20 lacs & MV : Rs.25 lacs

Loan Amount : Rs.20 lacs

16

LTV Norms > Rs.100 lacs

Cap based on COP

For Property value > Rs.100 lacs & <=Rs.200 lacs, the max LTV will be 80 %.

Property value > Rs.200 lacs, the max LTV will be 75%

Cap based on MV

For Property value > Rs.100 lacs & <= Rs.200 lacs, the max LTV will be 75%

Property value > Rs.200 lacs, the max LTV will be 70%

Also Valuation will be mandatory for all cases > Rs. 100 lacs.

17

MV Lending LTV Norms

MV Lending

To bridge customers requirements between circle rates specified by sub-registrar and

transaction value. For example transaction in certain sectors are as given below

Location

Delhi

Banglore

% of MV

25 – 40 %

60 – 65 %

LTV Based on the lower of the two : In case of purchase in ready / resale cases

1.Lower of the TWO

1. 80 % of the Market Valuation if the property is valued up to Rs.50 lacs

65 % of the Market Valuation if the property is valued at more than Rs.50 lacs

(Lower of 2 valuations done will determine market valuation).

2.100 % of agreement value / sale deed (with stamp duty paid) + stamp duty +

registration + society transfer charges + state electricity board connection charges +

amenities agreement (without stamp duty )

The cost of Amenities should not exceed 200 % of (Agreement Value / Sale Deed +

Stamp Duty + Registration charges).

18

If Amenities Agreement is not on stamp paper, then that component of the loan amount

would be done as Top Up loan with norms of Home Loans.

However, the overall restriction of 80 % / 65 % or 100 %, as mentioned, would apply.

03 Years Fixed – Smart Fixed

03 Years fixed gives option to customer to look at fixed rate for the first 03 years and

subsequently the product moves into floating reference rates

Fixed from the first date of disbursement based on weighted average rate of

interst.

At the end of 03 years it will move to FRR on immediate reset date which could

be 03 years to 03 years and 03 months.

Products : Home Loan & BT + Top-up & MV lending possible

Margins for FRR set at the time of Sanction.

19

Part Fixed & Part Floating

Customer can opt for combination of them.

02 separate tranches would be given on the same date.

Amount under each category decided at the time of sanction itsef.

Combination of two should be minimum of Rs.1 lac and each tranch should be of

Rs.50000/-

Products : HL / LL / NRI / OPL / HIL / LAP (R&C)

Not applicable to MV Lending or all loans with two tranches.

Process

02 separate application forms

02 LAN numbers for the loans

Common Sanction Letter

Common HLD

Common I/T certificate on cross linking of files.

Prepayment on each tranche possible but foreclosure on completion of both the

loans.

Eligibility

Based on the combination of the loan EMI for the other loan would be considered

as FOIR for calculation purpose.

20

Fixed with MMC

A new product variant for Home Loans with a variation in Fixed rate of interest with

Money Market Conditions (Fixed MMC)

Salient features :-

Fixed MMC rates can be offered for Home Loans & Balance Transfer of Home

Loans only.

Fixed MMC rates can be offered only to Resident Indians. Thus, Home Loans

with Fixed MMC rate cannot be offered to NRIs

The Fixed MMC rate can be offered only for new sanctions. Conversion from

fixed ROI to Fixed MMC rate and vice versa would not be allowed.

All Fixed MMC rate loans would be booked under the following scheme Finnone/

APS :

a) Individual Home Loan with Fixed MMC

b) BT of HL with Fixed MMC

New format of the sanction letter for Home loans with Fixed MMC

A new Home Loan Document (agreement) with the following mentioned on the

top cover “With Money Market Condition Clause for Fixed Rate of Interest.”

21

EMI Under Construction

Purpose : Commence EMI in under Construction Project.

Target Segment : Home Loans to Resident Indian

Features :

Offered to APF Projects.

Customers pay EMI from the first disbursement on total sanctioned amount.

EMI remains constant with term changing

Disbursed amount keeps changing

Disbursed amount not more than Sanctioned amount.

Subsequent disbursement would be at the end of the month.

EMI Under Construction : Example

Sanctioned amountROITenorEMI1st DisbursementReduced TenurePrincipal O/s At the end of 03 months2nd Disbursement after 03 monthsBalance Tenure

Rs. 10.00 lacs7.5 %240 monthsRs.8056/-Rs.5 lacs79 monthsRs.485114.00Rs.2 lacs240 – 3 = 237

O/s principal = Rs. 485114.00 + 200000.00 = 685114/-

22

EMIRevised TenureFull & Final after 03 monthsBalance Principal O/sRevised TenureMaximum Tenure

Rs.8056.00124 months

673721 + 300000 = 973721/-233 months240 – 6 = 234

23

Step – Up Repayment Facility (SURF)

Concept – SURF

The tenor is divided in three parts ; viz.

a) Primary

b) Secondary

c) Tertiary

The installments will increase beginning from the least in Primary & the highest

in Tertiary.

Installment in Primary period to cover interest, in the current rate scenario –

Rs.625/-per lacs

Types of SURF

Category I

Category II

Category I

Monthly Income > Rs.25000/-

Applicant is employee of Select Corporate (i.e., Category 0 and Category 1

worksite list)

Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts.

Should NOT be a Self Employed Non- Professional.

24

Category II

Monthly Income > 15000/-

Should NOT be employee of Pvt. Ltd Companies, Prop. Concerns, Trusts.

Should NOT be a Self Employed Non- Professional

Benefits :SURF

Enhanced Eligibility

Opting for SURF could raise the eligibility by up to 30% above the eligibility in a

normal repayment pattern.

Ex. Term – 20 yrs , ROI – 7.5% , Income pm – 25000/- , Normal eligibility –

Rs.17.07 lacs , Enhanced Eligibilty – Rs.22.14 lacs & Increase in Eligibility 30%.

Easy Installments in Primary period, lower strain on cash flows.

25

Features : SURF

Eligible Entities (Only Individuals)

a) Salaried

b) Self Employed Professional

Eligible not Eligible Products:

a) Only Home Loans (Top Ups not permitted)

b) BT of Home Loans shall also not be permitted SURF

Term possible – 15-20 years (both terms included)

Not Eligible :

a) Self Employed Non Professional

b) Employees of Pvt. Ltd Companies, Prop. Concerns, Trusts.

Rate of Interest – Only Adjustable Rate Loans

Deviations / Re – schedulements

a) No Deviations permitted

b) No Re – Schedulements permitted.

Documents – SURF

Sanction Letter – Automated Sanction Letter capable of generating SURF letter.

Agreements

a) Normal loan Agreement

b) Amendatory Agreement

26

Income Tax Benefits

IT Certificate to show both ; Interest payable & Actual Interest paid.

In case if Negative Amortization :

a) No IT benefit available on capitalized interest – Sec 24 (b)

b) No IT benefit available on re-payment on capitalized interest – sec 80C

Part Pre-Payments – Adjustments will be made first towards the capitalized

portion.

27

Land Loans : Key Features

Purpose : To acquire a site / plot of land for residential use

Maximum Tenor : 20 years (15 years for SENP retail & 10 years for SENP non-retail)

LTV Ratio : 85% of the cost, if allotment is directly from Development Authority

75%of the cost, if purchase from Development / Resale / Society

Fee : Same as Home Loan

Amount of Loan : Rs.2 lacs to 50 lacs

In HUB & Spoke Locations

Land Loans + Construction

LTV would be 85% of Land + Estimated Construcction

Provided land has been purchased in last one year OR 100% of estimated construction

based on technical report which is lower.

28

In Spoke Loactions

Only land loan would not be financed.

Land Loan + Construction would be considered.

First disbursement would happen only after the construction has reached plinth

level.

75% of land cost can be given provided land has been purchased in the last 01

year.

In HUB locations for Land + Construction

Disbursement for land would be done.

Case would be Pre EMI

In case the applicant avoids construction the scheme ID should be changed

To avoid giving I/T benefits certificate on the case

29

Office Premises Loan : Key Features

Purpose : To purchase / construct office premises

Maximum Tenor : Resident Indian

SENP Retail = 15 years.

SENP Non Retail = 10 years.

LTV Ratio :

85% of the cost of property for doctors.

60% of the cost of property for others.

Fee : Processing and Administrative fee of 0.5% each

Amount of Loan : From 2 lacs to 1 crore.

Eligible Entities :

Professionally Qualified Self Employed Individuals & only Qualified Chemist

NRIs

Other Norms :

Minimum 3 years Experience as Practicing Professional

Loan available for improvement of office premises

30

Maximum of 30% of the cost of the property.

LAP / Home Equity Loan

Loan Against Property : Key Features

Purpose : For Marriage, Business, Education, Medical Treatment, Purchase of Property,

etc.

Maximum Tenor : 15 years (10 years for SENP)

LTV Ratio : 45% for commercial and 60% for Residential

LTV + FOIR (Non retail) : Subject to maximum of 120% for residential and 105% for

commercial with no LTV deviation.

FOIR for Salaried : 50% & SENP Retail : 55%

Amount of Loan : From Rs. 5 lacs to 100 lacs

Eligible Entities : Salaried, SEP & SENP

Minimum value of property : Rs. 7 Lacs across all cities.

Other norms : Loan can be availed only against the self occupied property.

31

Balance Transfer

Balance Transfer : Key Features

Purpose : Take over of housing loans taken from other HFC / Bank at a higher rate than

current rate.

Tenor : Maximum term not to exceed as applicable under product category OR

Residual age of property as determined by the site engineer

LTV : 85%


Amount of Loan : Outstanding principal amount of the existing loan + prepayment

charges + fee payable to ICICI HFC subject to applicable LTV norm, calculated on the

cost of property.

Disbursal to be in favor of HFCs / Banks whose loan is being prepaid.

Repayment track record for the last twelve months to be verified.

Documents Required : Pre Sanction

32

Outstanding Principal statement from existing HFC / Bank

Declaration-cum-Undertaking of legal documents submitted with earlier HFC /

Bank

Legal verification

Letter to the builder / society / DA as per letter drafted by ICICI HFC

Documents Required : Pre Disbursal

Letter of Authority & Power of Attorney in favor of ICICI representative to

collect original docs & mortgage release letter from HFC / Bank.

Cases Pending with Sub Registar : BT applications where property title

documents are pending will not be accepted.

Documents Required : Post Disbursal

Original receipt required from HFC / Bank for the amount disbursed

Mortgage release letter & No dues letter required.

Original title deeds as per list provided.

Acknowledged copy of notice sent by the legal agency of ICICI to the

landowner.

BT OF EMPLOYER LOAN WOULD BE RESTRICTED TO CENTRAL % STATE

GOVERNMENT.

33

Top Up Loan

Purpose : To purchase of Consumer Durable, Vehicle, Furnishing of Home, Family

Vacation, Daughter’s Marriage, Child’s Education Or any other personal requirement of

the borrower.

Maximum Tenor : as per individual product norms


Amount of Loan : Rs.50000 to 20 lacs

Validity of loan approval : 3 months from date of sanction.

Entitled Borrowers : Borrowers for the Top up loan must be the same as the existing

ICICI loan

Security of Loan : Extension of mortgage on the property financed.

Top Up Loan is offered on following products :

Home loan

Balance Transfer – Home Loans

Balance Transfer – NRP

NRP

(Loan available on fully disbursed cases & NIL post disbursement pending documents)

35

Home Improvement Loan

Purpose : Improvement of residential premises.

Maximum Tenor : 15 years

LTV Ratio : 70% of the estimate subject to

45% of the market valuation of property prior to fianancing


Amount of Loan : From Rs.1 lac to 50 lacs

Eligible Entities :

Salaried

SEP

SENP

Eligible Improvements : Being completed within 12 months from the date of first

disbursement

Property has to be occupied by at least 1 applicant to the loan.

36

Lease Rental Discounting

Purpose : Enable the consumer to raise funds (and increase liquidity) against future

expected funds from property leased out by him.

Maximum Tenor : 9 years (subject to balance lease period)

LTV Ratio : 50% of market valuation subject to

85% of the NPV of furure expected rentals discounted at the applicable ROI

( net of TDS)

Eligible Entities :

Salaried

SEP

SENP (Non – Retail)

Amount of Loan : From Rs.10 lacs to 1 crore

37

No Income Proof Loan

Purpose : To purchase, construct or extend new or existing flat / house

Eligible Entities : Self Employed Individuals only

Fee : Admin fee of 0.5% & proc fee of 0.5%

Amount of Loan : from Rs.2 lac to 50 lacs

LTV Ratio : For loan amount > Rs.25 lacs, LTV 60% of COP or 65% of MV (whichever

is lower)

For loan amount < Rs.25 lacs,

MethodMV (%)COP (%)

Documentation :

I4075

II5070

III6065

IV6560

Proof of continuity of business – 05 years

Bank Statements – 6 months (verification required)

a) Current Account

b) Savings Account

Out Cheque returns – not more than 06 in 06 months.

Stop Payment returns – 02 in least 06 months

38

Maximum number of transactions 10 per month

EMI not to exceed 10% of the average monthly bank credits for the last 06

months

Average balance on 10th, 20th & 30th for last 06 months should be greater than 02

times EMI.

Client / Supplier References -2

Copy of title document

RTR of 12 months – if EMI of existing loan is more than 25% of the proposed

EMI

OCR : By Cheque prior to disbursement & No PDD

No deviations permitted.

39

Income Surrogate Banking Product

Purpose : Surrogate product for Home Equity Loan

Target customers with good banking record.

Lap – Income Surrogate Banking Product

1. Approved Borrower Entities – Resident Indians (SEP & SENP)

2. Loan Amount

Min. – Rs.5 lacs

Max. – Rs.30 lacs

3. Term – Max.10 years (Term should not exceed property’s residual age)

4. Loan type – Fixed and Floating.

5. Min Property Value – Rs. 15 lacs (as per technical valuation)across all

cities.

6. LTV

i)

ii)

Residential property – 35%

Commercial property – 25%

7. Bank Statement

i) Photocopies of updated bank statements for the last one year –

from current a/c of the firm / company.

ii) Photocopies of updated bank statements for the last one year –

from current a/c / savings a/c of the individual applicants and co-

applicants.

8. Client reference required 3 large creditors.

40

9. Business to have continuity for the last 3 years.

10. Personal discussion is mandatory.

11. CC accounts – EMI to be less than or equal to 10% of the inward flow into

the bank a/c in last 6 months.

12. Other accounts – EMI to be less than or equal to 15% of the inward flow

into the bank a/c and average balance to be more than 1.5times the EMI in

the last 6 months.

41

Adjustable Rate Home Loan

Purpose : Facility of variable ROI

Eligible Entities : Existing and new customers

Eligible Products :

Home loan

Land Loan

NRI

OPL

LAP

BT

Top Up

Max. term of Loan : 20 years for Salaried and SEP

15 years for SENP

Monthly reducing

Date of change : 1st day of each quarter (as per calendar year)

EMI shall remain constant, except in the following three instances :

42

1. Negative amortization

2. Term of loan exceeding : 30 yrs for salaried & self employed

20 yrs for SENP

3. Term of loan exceeding : Retirement age for salaried.

65 years for self employed applicants whose income is

considered for eligibility.

Switching of Rates Between Switch fees ICICI Bank

PortfolioFixed to fixedFixed to floatingFloating to fixedFloating to floatingChange in ROI on account

of change in Tenor Fixed to

fixed

1.75%1.75%1.75%0.5%1.75%

Others

1.75%1.75%1.75%1.75%1.75%

43

THIRD PARTY PRODUCT

Icici Home Finance – Loan Shield with ICICI Lombard

Loan Shield – For Resident Indian

Loan Shield for a period of 05 years.

Loan care Insurance

Property Insurance offered free – one year in case of commercial property.

Maximum Cover : Rs.1050000

Minimum Age : 20 years

Maximum Age : 50 years ( loan cover ends at 55 years)

Loan Care is maximum of 05 years

Property Insurance : Same Tenure & cover commences after completion of work

Feature : Based on Medical declaration no medical check up.

Loan Shield

Loan Care Features : Salaried & Self Employed

1. Default due to Death : Principal o/s paid

2. Permanent disability due to accident : Principal o/s repaid

3. Critical illness leading to hospitalization and loss of income

In case of Salaried only 12 EMIs would be covered

44

Unemployment due to retrenchment

1. Closure of unit due to financial health or M&A

2. Closure due to action by Public Authority.

3. Termination from job due to ill health.

Any illness pre-existing or repoted within 90 days or loss of job within 90 days not

covered.

Salaried employees would be paid maximum of 03 monthly EMIs in case of default.

Policy ends on attaining at the age of 55 years

Policy ends with closure of loan account.

No refund of premium on part prepayment

Part Premium refund in case of full closure

Claim settlement in 21 days.

45

Home Assure – Prudential (Group Policy)

Customer Segment : Individuals opting for Single premium

Age Group : 18 to 60 years ( Maximum on attaining 70 yrs)

Sum Assured : Rs. 25000/-To Home Loan scheme

Product Feature

No medical examination upto Rs.15 lakhs

Death Cover : principal o/s as per the sanction letter

Part / Under Construction : Cover can take 0/1/2 + tenure of the loan.

Joint Cover Possible provided both are earning

Cover would cease on Full closure or BT

Surrender Value : 70% of single Premium ( Balance Term / Policy Term)

Exclusions : No claim within 45 days

No claim due to suicide within 01 year

46

OBJECTIVES AND RATIONALE OF THE PROJECT

Main objective:

To find out the utility of Home Loans in general public and analyze the number of

customers applying for Home Loans in ICICI. To learn the process of Home Loans.

The basic necessity of general public is food, clothing and SHELTER. So , for the

fulfillment of the last need ICICI has introduced many products according to the

status of the applicant.

Economic Growth of the country is predicted by its Infrastructure and Real Estate.

Therefore, ICICI has made easy by granting loans by easy methods and normal

rates.

Home loans are of big amounts therefore, it comprises of many important

documents and deeds which have to be studied with due importance.

Government is concentrating on one important aspect that every person should

have his/ her own house through home loans which facilitates deduction in

Income Tax.

All the NBFCs are interested in granting Home Loans because it is of large

amount .

It is the only type of loan which is coordinated and continued from the time of

money lenders to NBFCs.

47

Personal Objective :

I choose this project in order to have the detailed study of the topic Home Loans

as it comprises of many formalities and legal deeds.

To have the practical knowledge because in future every second person will be in

need of Home Loans

ICICI Bank specializes in Home Loans so to gain knowledge regarding career

prospects.

It helps in calculating Income and eligibility of the customer, Study of ITRs,

Legal and Technical study of any property and even profile check.

48

REVIEW OF LITERATURE

THE BUSINESS PROCESS – THE ICICI WAY

Business model

ICICI HFC currently functions through four sales channels :

a) DMA Network

b) Counselor Teams

c) Relationship Managers

d) ICICI bank Branches

All channels function independently of each other

Processing and appraisals are done in house and on-site to reduce TAT’s

Role of the DMA / DME / COUNSELOR

The face of ICICI Bank Home Loans

Representing everything that ICICI HFC promises

a) Superior service

b) Excellent products

c) End to end solutions

The person who has to ensure that we fulfill every promise that we make to the

customer

A consultant and guide to the customer

49

Risk Containment Unit (RCU) Process

Purpose – Control frauds entering the system

a) Pre-Sanction Stage

b) Pre-Disbursement Stage

Pre sanction stage verifies files based on triggers.

The files are either

a) Screened – No triggers found. Allowing credit process to continue

b) Sampled – Implying verification required with source of document

c) Credit Referred – Based on Credit Manager request

Pre – Disbursement Stage verifies property document.

Field Investigation (FI) Process

Purpose – Collection process of ensuring customer verification

a) Residence FI

b) Employment FI

c) Tele FI of both residence and office

Property verification

This FI Shoot is done of all the applicants and co-applicants. The office FI is

done of all the co applicants who’s income is considered.

Operation Process

50

Sanction Process

b) NDC Check

c) Data Entry in Finnone

d) Storage of sanctioned files

Disbursement Process

a) NDC Check

b) Date Entry in Finnone

c) Preparation of Cheque

d) Storage of Dockets

Sanction Process

Normally, it would take 4-7 days for the sanction process from the date of receipt of

all the documents at IHFC

The customer calls the bank

Bank’s representative visits the customer and explains the loan product

Now customer provides the bank with Income and Personal documents as

listed in the brochure

Again the representative visits the customer to validate information

Documents are credit appraised and decision taken on the sanction of the loan

Bank delivers the offer letter along with a list of legal documents required.

51

CUSTOMER

DMA/COUNSELLOR

BSM

RO FIRE FI

RCUFI AGENCY

RECEIVES FI

BCM

COPS DEDUP

Disbursement ProcessNormally, it would take 4-7 days for the disbursement process from the date of

receipt of all the documents at IHFC

The customer calls the bank for disbursement

Bank’s representative visits the customer and collects the Legal Documents.

Loan Documents and PDC’s from the customer.

An IHFC lawyer vets the legal documents.

An IHFC Site Engineer visits the property to verify stage of construction.

Disbursement cheque is prepared.

The disbursement cheque is delivered to the customer.

52

Customer

DMA

RO

BCM

Fires and Receive Legal and Technical Sales

department

53

Firstly, starts the work of Relationship Officer

Purpose : To provide Single Point contact to the customer and handhold him through the

process of Enrolment, Sanction and Disbursement.

Enrolment

Ensure entry of new DME leads and updation of existing leads in CMS

Make Welcome Call to customers for all new logins

Ensure Welcome Letter is sent to all new customers at the time of login.

Sanction

Resolve with customer all enquiries raised by CPA / BCM on the Sanction file

Make Sanction Call to all customersand inform them regarding all disbursement

documents required and take DID.

Attach Annexure containing list of disbursement documents with all Sancction

Letters

Disbursement

Ask the customer regarding Express Disbursement during Welcome Call

Inform customer about the pending documents, if any, as per the legal report and

set DME appointment.

Make a Disbursement call to customer to inform him that the disbursement

cheque is ready

Introduce Call Centre to the customer during the disbursement call

54

Next is Branch Credit Manager

Purpose : To provide credit decision for snction and disbursement in order that the

commitment to the customer on turnaround time is fulfilled

Sanction

Check the Sanction file for Credit compliance and eligibility norms and authorize

sanction

Coordinate with the higher authority for the cases that require approval

Disbursement

Scrutinize complete docket and DM and authorize disbursement

Ensure completion and clearing of dockets put on hold by branch operations

Coordinate with the outsourced agency for collection of PDDs

Impart training to Back office and DMEs regarding policy and process changes

55

What is Contact Management System ?

It is a Lead Management System.

It appointments the Scheduler.

Records all touch points with customer.

Acts as a reminder for all follow –ups.

56

Flowchart

Add Contact

Leads With DMA

Fix AppointmentRemainder for Customer

Update Diary

Take a Print of Schedule

NO

DME MeetsTheCustomer

YES

NOCustomerInterested

YES

Close DME Collects Documents and Returns the DSR to the Back Office

NO AllDocuments Collected

YES

Sanction Process

57

Benefits of CMS

Availability of Information

Structured Planning

Ensures no loss of leads

Online feedback to Call Center and Marketing Manager

Increase in Productivity

Better service to the customer.

Introduction to Credit

Why is Credit essential ?

It is important to evaluate cases for credit so as to have a quality portfolio, remove frauds,

have control checks to see the performance of the portfolio

Whom do we want to fund ?

Anyone who will

Repay all the installments

Repay installments on time

58

Things to look at in credit

Ability to Pay Intention to Pay

How do we judge it ?

Income received by the customer

Disposable Income

Other sources of income

Possibility of Cash income

Petrol pump owners, doctors, etc.

Industry Trends

Background of Individual

Previous Repayments

a) Car loans

b) Housing loans

c) Credit cards loans

d) Cellular repayments

Income can always be window dressed

Income Document Analysis

59

In case of salaried look at Fixed & Variable Income

Compare Gross Income and Net Income

Savings in Social Security Funds

b) Mandatory contribution

c) Additional Contribution

d) Withdrawals in Social Security Funds

Contribution towards other savings

Deduction or payment of all obligations

Look at Form – 16 for Annual benefits & any obligations too.

In case of Self Employed / Non Proffesional

Comprehensive look at ITRs of last 3 years

Computation of Income

Balance Sheet and P& L certified by C.A

Stability of Income

In case of Salaried

Look at the Organization employed with

The Industry in which it operates

Skill set and Educational Qualification

No. of years in the Organization / Industry

60

In case of Self Employed

Family business or start-up

Business volume vis a vis Industry Standard

Understanding of industry structure/ Forces operating

Health of Bank Statement

Verification of Bank Statement

In salary case, number of credits to be checked – Fixed & Variable

In business case, check the average balance for liquidity

Large credit or debit entries

Recurring debits on account of loan repayment

b) Inward Cheque bounces

c) Outward Cheque bounces

d) Verify with debtors or creditors list to know

e) The impact on business

Stop Payment Instruction

Minimum Balance charges

61

Family Background

Family

No. of dependents

Age of dependents to understand the expenses

Additional earnings of family members – cash flow

Dependence of parents / family members staying in hometown

Any ancestral or self owned property

Family dependent on salary income or diversified income i.e., rental, agriculture,

business, small savings

Family reference / Business reference

As per the norms maximum should be 5

Applicants Lifestyles – match between Income & Savings & Expenses

Habits like excessive drinking – Reference check

Family members with medical history

b) Claims made under various Income Tax Benefit

c) Any banking transaction showing payments

d) Information provided by FOS / FI / Personal Visit

Appreciation of Insurance

a) Family medical cover is a good indication

b) Life Insurance – Planning for the Future of the family

62

Geographical Restrictions

Customer Residence / Property not in Negative Area. Customer does not belong to

Negative Profile category. Customer Residence / Property not beyond Geographical

limits.

In case customer working outside Geo limit

Property to be purchased should be within Goe limits

Immediate family member to be within Geo limit & to be taken as co- applicant

PDC to be issued from Bank Account to be in Geo limit

Waiver of FI subject to positive office tele – check & residence FI of family

member (within Geo limit

63

Customer Profile

Where applicant and co-applicants income are combined, the minimum income

per applicant should be Rs.4000/- pm

Work site is further classified as : Category 0 & Category 1

Employees working with Trust should be approved & noted by the Policy & Risk.

Employees working with Private Ltd.Companies

AGE

a) Minimum Age – 21 years

b) Maximum Age – 65 years OR retirement, whichever is Earlier.(The

maximum age at the time of completion of loan)

There will be cases where the co-applicant who is the owner of the property does

not fit into the above categories. In these situations the age criteria is relaxed as

follows:

a) Min Age – 18 years (At Loan origination )

b) Max Age – 70 years at application or 80 yrs (at loan maturity )

64

Customer Profile

SAL SEP SENP NRI

WORK SITE OTHERS

CASH Pvt.Ltd

Income not below 7K in othercities.Income not below 9K in Metrotown. (Banglore, Delhi, Chennai, Mumbai)

Age Proof Passport

Driving license

Life Insurance Policy

Birth Certificate

Election ID

School leaving certificate

Employee ID (only for PSU / Govt.employees)

PAN Card

SSC / HSC Admit Card

SSC / HSC Mark Sheet

65

School / College passing Certificate (printed format with personal details of the

applicant handwritten are acceptable)

Salary slip (if date of birth is mentioned)

Domicile certificate

Age proof is waived for all applicants whose income is not considered for eligibility.

However, age proof is mandatory for applicants below 20 years age & above 65

years, even if his/her income is not considered for eligibility.

Negative Profile

Daily wage laborers / Mathadi Workers

Drivers and conductors of SRTC/ Taxi drivers/ Auto Rickshaw Drivers/

Commercial Vehicles Drivers

HUF

Anti Social Elements

Politicians

Mine and Quarry workers

Firma engaged in parcel movement

Plantation / Time Share Companies

Employees of Chit fund/ Stock Broking/ Investment Companies

Class 4 employees

66

Garment Exporters

Employees of BIFR Companies

Watchmen

Security Services- Companies and their Employees

Stock Brokers

Real estate agents

Tour Operators

Cable Operators

Employees of NBFC’s below AA rating

Film stars

Employees of Dot Com Companies

Bar Owners

Builders

Additional Documentation for Specific Cases

Cash salary – One Additional Proof required

Form 16/ ITR/ PF Statement / Appointment Letter / Increment Letter

Job confirmation proof for applicants less than 23 years

If Existing Loans are not being considered – proof for the same.

Annual benefits - Form 16 / Appointment Letter / Increment Letter / Employer

certificate.

67

Documents Required

Salaried

Application Form with photo

6 months Bank statements ( 3 months for work site )

Not more than 02 or 01 cheque bounces in case of normal and worksite cases

respectively

KYC Documentation (Address / Identity / Signature)

Age Proof

Latest Salary Slip / Certificate – 4 salary slips for variable salary

Form16

Processing Fee Cheque

Mode of Repayment

EMI

Post Dated Cheques

Auto Debit

ECS

Deduction at Source (only for salaried)

Pre EMI

Post Dated Cheques

Auto Debit

69

Payment Cycle

1st and 10th of every month

Now the work starts in Operations Department:

The file logins from the Credit Department to Operations Department with 2 types

of documents

a) Customer related documents

b) Bank related Documents / Mandatory Documents

Customer Documents consist of his Bank Statements, latest ITRs, Financial

Statements, PAN No., Id Proof, DOB Proof, etc.

Bank related documents are

a) Application form – In Application Form all compulsory fields should be

filled up by the customer with no overwriting.

All the data entry should be done by the DEO.

b) Dedup – It is a software which has all the past data of all the customers

who have applied for home loans previously which helps trace any

defaulter.

c) FI / TVR – This is done by the bank to verify the residence and telephone

number of the applicant in order to avoid any fraud beforehand.

70

NDC is done by the DEO as per the NDC checklist.

Final NDC is done by CAM

If there is any discrepancy the file is sent to Credit Department for re-credit with

reasons of hold.

Publishing of hold cases is done in MIS at the end of every day.

If the file is clear and there is no discrepancy, then the data is entered in finnone

by DEO.(Finnone is a software based on oracle which is the master of storing all

the entries and transactions done on daily bases)

Now, CAM authorizes the transaction i.e., Maker – Checker which means the

CAM will check the transactions and authorize them finally.

Finally when the case is clear, a Loan Account Number (LAN) is generated which

is the primary key to identify the case for the bank.

Now, at the end of the day the files are dispatched to Regional Operations.

After sales services performed by Operations Department:

Request of Statement of Accounts.

Request for Repayment Schedule.

Swap of Cheques.

Conversion (condition change in agreement)

Foreclosure

Part Payment

71

NOC + Document Collection

At the time of Sanction:

When the file reaches the Regional Operations it is login at two places:

a) Processing Cell

b) Storage Cell

In processing cell

a) Firstly, the processing cheque is pulled out.

b) Banking of Cheque is done

c) Finally the cheque is released.

If the cheque is clear, entry is done in the account otherwise, the case is rejected.

In Storage Cell, the papers are divided in two types

a) Customer papers which are retained till the term of loan is completed.

b) Bank papers are shedded after some time i.e.,3 years or so.

Now the sanction is clear and processing fee is released.

At the time of Disbursement:

The docket is login from Credit to Operations Department. Docket is an important

envelop containing different papers.

Types of Disbursement:

a) Full & Final Disbursement - Eg. Applicant sanctioned loan of amount 5

72

lacs and disbursement is done as and when the PF cheque is released.

b) First & Subsequent Disbursement – Eg. Applicant first Sanctions for

purchase and then subsequently for construction so, the amount is

granted in installments.

c) Enhancement / Reduction – Eg. Applicant if in future decides to

increase or decrease the amount of loan sanctioned, then again the

file of increased amount has to be sanctioned. And in case of reduction

the amount id directly deducted.

d) Back to Back Disbursement – Eg. It is done in the case of High Net

Individual (HNI) who takes loan more than 20 lacs. In this type of

Disbursement the file and docket both are done side by side.

Contents of Docket :

Loan Agreement – There are 2 copies of loan agreement, one for the abnk and the

second for the customer (including the stamp papers with stamp duty as per

respective State Stamp Act.

Disbursement Memo – It captures the entry of all financial details & entry is done

in Finnone.

Legal & Technical Deviation Sheet – This is signed by the person who takes all

the liabilities regarding the loan granted.

73

Cheque Submission Form – It is for the acknowledgment taken from the customer

as per how many cheques have been issued and received and the entries are done

so as to avoid any future misunderstanding between the bank and the customer.

Disbursement Request Form – It is necessary as to know on whose name the loan

is applied and granted. And where to pay.

Pop Sheet – It contains all the contents of the docket to avoid misplacement of

any important paper. And entry is done again.

Over The Counter Sheet (OTC) – It is to exchange the deed with the cheque.

PDC Pouch / Pre EMI Pouch – It contains all the entries of cheque details.

Cheque Acknowlegement – Its purpose is to take cheque acknowledgement from

the customers.

Legal Report – It consists of Non Encumbrance Certificate (NEC) + record of 13

years of the property which is mortgaged.

Technical Report – It shows the valuation of the property and the estimate taken

by the architecture.

Punching Process:

Financial details are entered by Disbursement Memo.

Property Details are entered with the help of Legal Report.

Technical Details by Technical Report,

And all other contents are checked, verified and entered with the help of Pop

Sheet.

Finally the cheque is cut and directly handover to the customer or through Over

74

the counter (OTC)

And the Docket is dispatched to Regional Operations (RO) / Central

Operations (CO).

Post Disbursal Documents:

Banking of Cheques

Realization of Cheques.

75

Types of Appraisals

There are basic two types of appraisals done to investigate about the cases that are logged

into the bank:

Technical Appraisal

Construction Structure

Load Bearing Wall Structure

Entire Load on Walls

Cost of Construction Lower

Prevalent in Small Towns

RCC Frame Structure – Reinforced Concrete Cement

Entire Load on Columns and Beams

Construction of Commercial and Residential Complex

High Usage of Equipment

Mixed Structure

An Overview

Methods of Valuation

Approach for Valuation

76

Market

Income

Cost

Methods of Valuation

Method of Comparison

Income Approach to Valuation

Summation or Cost Method

Residual Method

Method of Comparison

Property Rate is worked out on other similar properties that have been sold in near

past.

Circle Rates are compared.

Broker Feedback is compared.

No Standard Formula to work out value of property.

Factors vary from locality to locality.

77

Things to Observe while visiting a site:

Distance from Bus Stop and Railway Station

Accessibility of Site, Infrastructure Facility

Availability of Municipal Transport.

Development of Surrounding Area.

Building wise details of Construction.

Look out for Deviations.

Check Quality of Construction & Structural soundness.

Verify Amenities & Assess their True Value through Materials at site.

How Do We Fund ?

Structure Base

a) Load Bearing or RCC

b) Bungalow or Flat

Builder

a) Track Record

b) Projects Completed

c) Category A,B,C (Matrix)

Lending

a) Stage of Construction

b) Cost Involved

c) Security

78

Adherence to Process

Technical Executive

Check on the progress of the work.

Check on activity levels – on or Not

Arrive at cost incurred by Seeing Completed Structures.

Amenities in and around the Site.

Quality of Construction

Accessibility

Negative Area

Plan Validation

a) Check Frauds

b) Set Back Check – measure from Plinth (Has to measure)

c) Check whether it Confirm Building Plans

Authentic Valuation of the property (to be dealt in details)

What is to be checked at the Site and From whom

Building Rules – Critical Rules (please provide hand outs of the critical building

rules)

79

APF Process

Revised APF Process

Sourcing DMA / BSM

Technical Manager

Fire Legal

Fire Technical

APF Process – Advantages

Entire legal and technical due diligence is done in one single stroke.

Monitoring is on project wise unlike unit wise.

It is a win win situation for the developer – customer – bank.

Retrieval of project details is easy.

Total Value of the property and amount of constructed area coming up in the

market is known.

Market Share of ICICI and project wise market share can be evaluated.

Tracking of property prices becomes easier

Exposure level per project can be evaluated.

Double funding on the project can be reduced

Better control

Better TAT

Generating huge database of property rates across India.

80

Turn Around Time / Amenities Valuation

For Normal Technical Report – 24 hours

For APF reports – 05 days

Communication should be perfect, in case plans not received.

No site visits without building plans

No amenities valuation unless actually verified at the site.

Valuation not to include Stamp Duty and Registration Charges or Water and

Electricity Charges.

Legal Appraisal

Appraisal for Home Finance

Appraisal Process for Home Finance has two distinct stages:

Sanction Stage

Relates to Credit Appraisal for the individuals.

Disbursement Stage

Legal appraisal of the property financed

81

Technical appraisal of the property financed.

Legal Appraisal

Transfer of Property

Living person conveys his interest , right or title to one or more person(s)

Person includes Individual, Association of persons, Partnership, Company or

Trust.

Transfer of property must be done by a written registered document.

Sale for a value exceeding Rs.100/- requires registration.

Transfer of Property may happen by

Inheritance

Gift

Government Allotment

Purchase

Exchange

Partition

Release

Transfer of Tiltle Deed

Sale Deed

82

Agreement for Sale

Allotment letter

Lease deed

Gift Deed

Probated Will

Develop Agreement

Deed of Exchange

Deed of partition

Release Deed

Concept of Contract

There has to be an offer and acceptance

Creation of an agreement

To be valid contract there should be NO coercion, undue influence, fraud,

misrepresentation or mistake.

Competence to Contract

The person should not be a minor.

He should be of sound mind.

Minor to be represented by Guardian and can transfer property with the

permission of Court.

83


Classification into two parts:

1. Types of Transactions

2. Classification of Documents

Transaction type

Builder

Society

Development Boards / Authorities

Self Construction

Resale Transaction

Classification of Documents

Land Related Documents

Government Land Records

Plans and Permissions

Individual Title Documents

85


Situation : Purchase from BuilderLand Related DocumentsSale Deed / Partnership Deed / Development Agreement, POAGovernment Land RecordsExtracts from Registrars office, Mutation EntriesPlans And PermissionsApproved Plans and Permission, ULCA permission, Tax receipts, Commencement certificate, Occupation certificate, Land use certificate, Building permission.Individual Title DocumentsAgreement for Sale, RR, Letter to Sub Registrar, NOC to mortgage, OCR

Situation : Allotment from Development AuthorityLand Related DocumentsNAGovernment Land RecordsNAPlans & PermissionNAIndividual Title DocumentsAllotment Letter, OCR, NOC / PTM from DA, Unit Layout, Sale Deed / Lease Deed

Situation : Purchase from SocietyLand Related DocumentsSale / Lease Deed in favor of Society, Bye Laws, Society Registration Certificate.Government Land RecordsExtracts from Registrars office Mutation EntriesPlans & PermissionApproved plans, NA permission, ULCA permission, Tax Receipts, CC, OC, Land use certificate, Building permission.Individual Title DocumentsAllotment Letter, agreement for Sale, RR, Letter to Sub registrar, NOC from Society, OCR, Share Certificate.

86

Situation : Self ConstructionLand Related DocumentsGovernment Land Records

Plans & Permission

Individual Title Documents

Same as individual title documentsExtracts from Registrars officeMutation EntriesApproved plans, NA permission, ULCA permission,Tax Receipts, Commencement Certificate, OccupationCertificate, Land use certificate, Building permission,Possession Certificate, Location Certificate.Sale Deed of the land, RR, Letter to Sub registrarprevious title documents, Land Layout.

Situation : Purchase on ResaleLand Related DocumentsAs per the applicable transactionGovernment Land RecordsExtracts from Registrars office Mutation EntriesPlans & PermissionAs per the applicable transactionIndividual Title DocumentsSale Deed , RR, Letter to the Sub registrar, Prior Deeds, NOC to Mortgage, OCR, Share Certificate.

87

Know Your Customer (KYC) compliance

(A) The matrix of the documents that are required to be collected for residentindividual borrowers is as below, any one document from each of the documentcategory would be required :

Document CategoryResidence AddressProof

SalariedSEP & SENP Passport Passport Driving license Driving license Election Id card Election Id card Utility bill (not more than 3 Utility bill (not more than months old)3 months old) Latest (not more than 3 Latest (not more than 3 months old)statement ofmonths old)statement of account / passbookaccount / passbook maintained with anymaintained with any scheduled bank, dulyscheduled bank, duly certified by the bankcertified by the bank confirming the addressconfirming the address Letter from the existing Letter from the existing Banker (scheduledBanker (scheduled commercial bank) incommercial bank) in original verifying the nameoriginal verifying the and address on the bank’sname and address on the letterhead.bank’s letterhead. Copy of registered lease / Copy of registered lease / leave and licenseleave and license agreement which are notagreement which are not expired along with theexpired along with the utility bill in the name ofutility bill in the name of the landlord / ownerthe landlord / owner confirming address.confirming address. Residential Certificate Residential Certificate issued by Municipalissued by Municipal corporation / local selfcorporation / local self government bodiesgovernment bodies confirming address.confirming address. Latest premium receipt of Latest premium receipt of general/ life insurancegeneral/ life insurance company (not more than 12company (not more than months old in case of12 months old in case of annual premium receipt)annual premium receipt) True Copy of Gas True Copy of Gas

88

connection book.

Certificate issued by WardOfficer maintainingelection roll certifyingaddress of the applicant.Letter from employercertifying residentialaddress. Name andDesignation of the issuingauthority must be clearlymentioned.

connection book.

Certificate issued byWard Officer maintainingelection roll certifyingaddress of the applicant.

@ The passport $ driving license as above should be current i.e., the same should not beexpired.

Clarification :A single document can be accepted provided it serves the requirement for multiple proofsand the current residential address is same as on the proof submitted for individuals.Thus, the preferred document for the Photo Id, Residence Address & Age Proofs isPassport / Election Id / Driving License.For reference the list of documents accepted as Age Proof is given below

Age ProofSalariedSEPSENP Passport Passport Passport Driving license Driving license Driving license Election ID Election ID Election ID PAN Card PAN Card PAN Card Life Insurance Life Insurance Life Insurance PolicyPolicyPolicy Birth Certificate Birth Certificate Birth Certificate School leaving School leaving School leaving certificatecertificatecertificate Employee Id Employee Id Employee Id (only for PSU /(only for PSU /(only for PSU / Govt. employeesGovt. employeesGovt. employees SSC / HSC Admit SSC / HSC Admit SSC / HSC Admit CardCardCard SSC / HSC Mark SSC / HSC Mark SSC / HSC Mark SheetSheetSheet School / college School / college School / college passing certificatepassing certificatepassing certificate(Printed format with(Printed format with(Printed format with

89

personal details of theapplicant handwritten areacceptable) Salary Slip (if date of birth is mentioned) Domicile certificate Ration Card



(B) Documents required for individual NRI / PIO borrowers

Document categoryIdentity Proof In case the customer is a NRI –

a. Photocopy of the relevant pages of the passport where the customer’s name, address, date of birth, date & place of issue, expiry date, photograph, signature & stamp regarding stay outside India appear.b. Photocopy of valid work permit / employment visa. In case of expired visas, duly acknowledged petitions made to the Visa Authorities for renewal of Visas will be accepted as a valid document.

In case the customer is a PIO –

a. Copy of the relevant pages of his current passport.b. Copy of his PIO card OrCopy of past Indian passport of self / parent / grand-parentalong with a self declaration as ICICI format duly notarizedand stamped for requisite value.

Adress Proof A copy of at least one of the following Address proog outsideor within India :a. Utility Billb. Driving licensec. Residential Permit (Government Issued Identity Card)d. Credit Card Billse. Rent Receiptf. Overseas / Indian bank Statement

90

The address proof must match with the communication addressmentioned on the application form.

(C) Documents required for non – individual borrowers :Document categoryID proof Partnership Firm – Partnership Deed Company – Articles of Association, Memorandum of Association, Certificate of Incorporation.Office Address Proof Any one of the following documents: Latest (not more than 3 months old) Utility Bill like Telephone Bill, Electricity Bill confirming address. Letter from the existing Banker (scheduled commercial bank) in original. Existing banker must verify the name and address of the entity on the bank’s letterhead Latest (not more than 3 months old) statement of account / passbook maintained with any scheduled commercial bank, duly certified by the bank confirming the address. Copy of registered lease / leave and license agreement which are not expired along with the utility bill in the name of the landlord / owner confirming address. Certificate issued by Municipal Corporation / local self government bodies confirming address. Latest available Income Tax Assessment order confirming address. Latest available Wealth tax Assessment order confirming address. Sales Tax registration certificate confirming address. Valid Shops and Establishment Certificate confirming address. Factory registration certificate confirming address. Latest Premium receipt of general / life insurance company (not more than 12 months old in case of annual premium receipt)

In case of non – individual applicants, KYC will also be required for the partners /directors / promoters who would be required as the co – applicants and also all authorizedsignatories.

91

Repayment Track Record Based lendingAuto loans

Introduction of RTR based product Capitalize on Repayment History of applicant Focused on Auto Loan Customers Auto Loan Customers of a) ICICI Bank b) Other lenders

Product Highlights Opportunities to give home loans to approved list of auto loan customers Should have serviced for a minimum period of 12 months Or RTR should not have been closed before 12 months back Product can be offered for a) Home loans b) Home premises only for doctors c) HL for SEP & SENP Minimum – Maximum Loan : Rs.5 – Rs.25 lacs

Product Features RTR of commercial vehicles not acceptable a) Scorpio / Qualis b) Sumo / Tata Indicab Multiple lending on same RTR not acceptable Lending to Directors / Partners a) Based on RTR of the firm / Pvt Ltd. company b) Director / Partner > 76% should come as Co-applicant / Guarantor c) Stake to be verified by CA / CS or Returns of ROC Loan To Value as per product norms All other norms as per the product category

Customer SegmentResident Indian 1. Salaried 2. Self Employed Professionals 3. Self Employed Non Professional

Transporters / Taxi fleet Operators Not acceptable

93

Target Segment

Salaried

Self EmployedProfessional /NonProfesional

Already having Auto Loans with ICICI Bank and other Institutions

Product Working

Eligibility 1.Minimum Seasoning 2.Seasoning >12 months

>18 months

Parameters 1.EMI in arrears (current) 2.DefaultsRTR Health For 12 months RTR For 24 months RTR For 36 months RTR

Loan Amount based on RTR working

Loan Amount in lacs

Example 1Mr. Rakesh has Accent loan paying EMILoan Amount in lacs

Auto loan EMI *1.25/ EMI factor per lacfor the loan tenure

Rs.15000/-15000*1.25 / 927 = Rs.20.22 lacs

12 monthsEMI Multiplier1 times of the current EMI for Autoloan1.25 times of the current EMI for Autoloan

NilPeak not more than 30 days

0 Cheque bounces in 12 monthsMaximum 02 cheque bouncesMaximum 03 cheque bounces

94

PROCESS OF RTR

IMP

Completely filled in Home Loan form.Bank statement considered for RTR.Repayment Track for the applicable repaymentperiod.Age Proof / Signature ProofProcessing Fee ChequeProof of existence in case of SEP / SENPField InvestigationOffice address proof.

LAP: 03 years continuity of business Proof of ExistenceClient Reference – 02 large suppliers / customers.

PROCESS

Waiver

Income Documents – Salary Slip,cash salary, second income proof /annual benefits.Form No. 16Job confirmation proof.Income Proof for SEP / SENP.

Research Methodology

95

RESEARCH METHODOLOGY

Research Design: The Research Design can be grouped under 2 sectors i.e., Primarysource and secondary sources.

Research Design

Primary Source

Secondary Source

Interviews withcustomers / DMAs

Questionnaire

Websites and Intranet ofICICI Bank Ltd.

Other than these primary and secondary sources the study of various cases of theapplicants by going through the files guided to make an analysis and findings regardingthe status of Home Loans in the current scenario. Even by assisting the Credit ProcessingAnalyst, the analysis and findings were approved by them.

Sample Design:

The data collected from the questionnaire is of sample size 40.The questionnaires have been filled by the customers through Direct Marketing Agenciesof ICICI Bank Ltd. and their Direct Sales Agent.The questionnaires were distributed equally among 4 DMAs equally and the responsecollected through them was of great use.

96

Research Tools and Questionnaire:

QUESTIONAIRE:

1. NAME OF THE APPLICANT:

2. PROFESSION:

3. LOAN AMOUNT:

4. TENURE:

5. PRODUCT APPLIED FOR:

6. MODES OF PAYMENT:(a) ECS (b) PDCs (c) DAS

7. PROPERTY MORTGAGED:

8. ANY OTHER LOAN TAKEN ON SAME PROPERTY:

9. PREFFERED BANK FOR HOME LOANS:(a) ICICI (b) HDFC (c) SBI (d) PNB (e) Allahabad Bank

10. LOAN TAKEN FROM ANY OTHER BANK, IF YES WHICH BANK AND FOR WHAT PURPOSE:

11. SOURCES OF INFORMATION FOR THE VARIOUS HOME LOANS PLANS:(a) NEWSPAPER (b) BANK (c) DIRECT MARKETING AGENCY / DSA

12. ARE U SATISFIED WITH THE SERVICES PROVIDED BY ICICI?(a) YES(b) NO

AGE:

(d) SI (e) Any other

97

Analysis:

In last 10 years the rate of growth in the number of applicants have been at a faster pacebecause the individuals have vast knowledge about the benefits of Home Loans.YearNo. of Applicants2002-037,73,5622003-049,65,2912004-0513,42,0972005-0615,27,9452006-0717,95,0482007-0819,84,164

(These figures are of a particular state)

Secondly, the applicants applying for Home Loans were of young age as compared topast 10 years. Then the applicants ranging above 45 years were more in number applyingbut now there are applicants of even 25-30 years. The tenure to repay the loan has alsodecreased because of the increase in Income Obligation ratio.

But since last 1-2 years there is a stable percentage of individuals applying for it becauseof the increase in the rate of interest and strict norms of RBI. They are as follows:a) Rate of Interest will be less for people in minority.b) Applicants applying for more than 50 lacs who are High Net Individuals (HNI) areprovided with some percentage of rebate.c) Applicants taking loan for the second time for Home loans are under strict supervisionand verification.

This is done because the customers take loans for investing money by taking HL andenjoying the redemption and deductions.Bank has even introduced Know Your Customer (KYC) documents which constitutes ofall the personal and professional details of the applicants and the co-applicants applyingfor home loans which helps the bank to get the information about the customers andjudge the purpose of applying for HL.

98

FIVE FORCES OF PORTER’S MODEL OF ICICI

SUPPLIER’S POWER

BARRIERSTO ENTRY RIVALRY

THREAT OFSUBSTITUES

BUYER’S POWER DEGREE OF RIVALRY

Supplier Power

Increased Dependence on IPOsThere is a growing dependence of corporates on broking houses with the rising numberof IPO’s coming to the market.

Buyer Power

Lack of Expertise Curtails Bargaining PowerRetail investors often lack the knowledge and expertise in the financial sector that callsthem to approach the broking houses.Low Product Differentiation Proves BeneficialThe retail broking services provided by the various companies is homogeneous with verylow product differentiation. This allows customers to enjoy a greater bargaining power.

Degree of Rivalry

Move towards consolidationLot of brokerage companies are moving towards consolidation with the smaller onesbecoming either franchisees for the larger brokers or closing operations.Increased Focus of Banks in Retail BrokingVarious foreign banks like ABN Amro and others are planning to enter the Indian retailbrokerage industry.Online Trading Competes with Traditional BrokerageThere is an increasing demand for online trading due to consumer’s growing preferencefor internet as compared to approaching the brokers.

99

Barriers to Entry

Entry of Foreign PlayersNew forms of trading including T+2 settlement system, dematerialization etc arestrengthening the retail brokerage market and attracting foreign companies to enter theIndian industry.

Threat of Substitutes

Alternative Investment OptionsVarious alternative forms of investment including fixed deposits with banks and postoffices etc act as substitutes to retail broking products and services.

100

SWOT ANALYSIS

Strength Advanced Technology Providing innovative products and technology Leverage technology to satisfy customer demands. Add value to share holders.

Weakness: Too many subsidiaries High cost of funds

Opportunities: Higher capital base First mover advantages

Threats: Competition from other industry rivals like HDFC. Concern over NPA despite provisioning

Thus, ICICI has been able to use technology to provide value – added service to itscustomers during the last few years. For ICICI, technology is an integral part of theirbusiness. However, their overall progress could have been smoother but for certaininternal and extraneous factors and also a pressure on spreads due to a competitivemarket.

101

Comparative study of ICICI Bank Ltd. and HDFC Bank

Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban Mumbai is a huge,imposing edifice in glass and granite. HDFC Bank's office in central Mumbai is comparativelysmaller and more sedately furnished. The two banks have carried forward their style statement intheir approach to business. ICICI Bank thinks big, is all for growth and hungry for market share.HDFC Bank is more conservative and cautious, grows at a measured pace, without taking anyundue risks.

ICICI Bank's assets in the retail space stand at Rs 56,000 crore (Rs 560 billion). In comparison,the tally for HDFC Bank is Rs 18,000 crore (Rs 180 billion). ICICI Bank also leads HDFC Bank inalmost every segment they are present in. But that's just the current update.

The DNA of the strategy

ICICI Bank began its retail banking venture in mid-1999. By January 2000, it had moved on tointroducing home loans, car loans, personal loans and credit cards. Realising the need for abigger retail deposit base, the bank started building a branch and an ATM network. Theacquisition of Bank of Madura in March 2001 added 263 branches, many of them in cities whereICICI Bank did not have a presence.

The merger of the erstwhile financial institution ICICI Limited with the bank in April 2002, gave it aready-made corporate clientele. The flip side was that ICICI Bank had Rs 10,000 crore (Rs 100billion) of restructured assets for which it had to make provisions.

On the other hand, HDFC Bank kick started its operations in 1995 with a focus on corporatebanking, targeting the top-end of the market.HDFC Bank ventured into retail lending in 1998, ayear before ICICI Bank. But in products like credit cards, it was slow to get off the mark. Forinstance, its credit cards were launched only two years ago. By then ICICI Bank had beenpresent in the credit card business for nearly three years.

However, HDFC Bank was handicapped because it could not sell home loans (because itsparent HDFC was in the business), though it has been originating them in the past one-and-a-halfyears. For ICICI Bank, home loans are 46 per cent of its retail assets.

A banking consultant observes that ICICI Bank is far more aggressive. Though ICICI executivesdo not admit it, industry sources observe that ICICI's pricing has been far more competitive, whichprobably brought it more customers.

According to some industry experts, growth for ICICI Bank may have come at the cost of quality.ICICI Bank denies this.

Calling the customer

Both players targeted the same customer -- the upper-middle class. The marketing channelsused by both, including direct sales agents (DSAs), were the same. Yet, there was a difference.

In the past two years, the bank has spent less than Rs 100 crore (Rs 1 billion) on advertising andpublicity (In comparison, ICICI has spent Rs 185 crore). HDFC Bank says that its spends havealways focused on other channels such as direct sales and phone banking rather thanmainstream advertising.

102

Better pick-up

The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000 crore (Rs 600billion) and in FY06, it grew its deposits by 47 per cent compared with the industry deposit growthof 14 per cent. HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even inhome loans, ICICI Bank commands 30 per cent of the market, having eaten into housing financepioneer, HDFC's share.

Share of the wallet

Mar-05

BranchesATMsCitiesRetail assets (Rscrore)Deposits (Rs crore)Car loans (Rs crore)Credit cards (Mn)Retail customers(Mn)Cost of deposits (%)Net interest margin(%)Net NPLs (%)

HDFCBank 467 1,147 211

18,000

38,000 2,500 1.3

6.4

3.2

3.2

0.2

ICICIBank 565 2,000 371

56,000

99,80011,500 3

13.7

4.5

2.4

2

Even in the number of customers ICICI Bank leads by a distance (See table: Share of thewallet). Nearly 14 million customers bank with ICICI Bank, while the number for HDFC Bank isless than half (6.4 million). ICICI Bank has issued 3 million credit cards -- that is more than twicethe number of HDFC Bank's credit card users. However, industry observers point out that ICICIBank's effective users for credit cards may not be high.

Nonetheless, they concede that even with a discounted customer base, the numbers will still bestrong. Even in businesses like online trading where the risks are relatively low, ICICI Bankcommands a two-thirds marketshare.

'Tell all' street

The stock market has always valued HDFC Bank at a huge premium -- at the current price of Rs585, HDFC Bank is valued at 3.5 times price to forward book (valuation based on estimated bookvalue in FY 06 of Rs 165). The multiple for ICICI Bank that quotes at Rs 415, is just 2.1(estimated book value Rs 194). The reason: the impeccable quality of HDFC Bank's balancesheet. With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its booksare definitely in far better shape.

HDFC Bank's operations are also more profitable -- its net interest margin at 3.2 per cent is wayhigher than that of ICICI Bank's 2.4 per cent. Also, it is able to access deposits at a lower cost.On an average, it pays an interest of 3.2 per cent while ICICI Bank shells out 4.5 per cent.

But round one of the banking sweepstakes has clearly gone to ICICI Bank.

103

RESEARCH FINDINGS:

The data collected through questionnaires with the help of Direct Sales Agent and DirectMarketing Agencies has been of great importance to analyze many details regarding allthe captions that are there in the questionnaire of sample size 40. They are as follows:

• Age: The applicants ranging between the age of 30 - 45 years are the ones whohave applied for Home Loans large in number, it is because they are financiallystable and sound. But now a days customers ranging between 25 – 30 are evenapplying for Home Loans because they are aware of the benefits that can beavailed by applying for Home Loans.

Profession: Mostly, the Self Employed Non Professionals i.e., business personswho are involved in their family business apply for Home Loans. Salaried are lessin number.

Tenure & Loan Amount: The tenure which the bank and the customer finally arrives at is according to the eligibility of the applicant in consideration to hisa) Age – As the bank itself assumes that is the person capable enough physically and financially that he’ll be able to repay the loan in the fixed tenure.b) Profession – either the person is salaried which shows he has a fixed income per month and thus the installments will be on time, if the applicant is SEP or SENP then there can be any gain or loss and so the tenure and amount of loan is fixed accordingly.

Product applied for: The most preferred products in Home Loans are:

Home Loan – It is specially for the purpose of construction and purchase. Benefits of Home loans Cheaper Rates – RBI has given a margin of 0.75% which deducts from the current prevailing rates. Easily granted. Amount of loan granted – 50% of the salary in case of salaried class. Rebate / deduction in Income Tax.

Land Loan – It is normally given for the purpose of purchase of land for Investment for future. Benefits of Land Loans Normal rates – As it is granted for the purpose of investment so RBI has not given any deduction of margin because it is not beneficial for the government and is merely for the personal benefit of the customer.

•

•

•

104

There is no rebate in Income Tax.

LAP (Loan Against Property) – It is given for different purposes against anyproperty which is mortgaged with the bank and is released when the loan isover.Benefits of LAP Rates at which the loan is granted is above margin It is also known as Mortgage Loan.

Modes of Payment: After the whole analysis, the final conclusion is thatmore than 60% of the applicants repay the loan through PDCs.

Property Mortgaged: Applicants can mortgaged any free property whichthey own. Free property includes: Residential ( commercial and non-commercial) Commercial

Any other loan taken for the same property: Out of sample size 40, mostlyhave not applied for any other loan simultaneously but through CreditInformation Bureau of (India) limited (CIBIL) and DEDUP records show thatat time of applying for HL customers itself take a check that they havealready repaid their dues of other loans.

Preferred bank for Home Loans: According to the survey through questionnaire shows that ICICI Bank Ltd. is the most preferredbank but this is because questionnaires have been filled by the applicantsapplying in ICICI. Otherwise, HDFC is second market leader in Home Loans.

Loan from any other bank: Out of sample size of 40 customers mostly havenot applied in any other bank but some number of applicants are customers ofany other bank.

Sources of information for the various home loan plans: Features launchedby the bank in different plans of HL is outsourced through Direct Sales agentsand agencies. And even some customers or can say general public prefersbank as the most reluctant source of availing information.

99% of the applicants in sample size are satisfied by the services providedby ICICI Bank Ltd.

105

SUMMARY AND CONCLUSION:

The report made on ICICI Home Loans concludes by findings of various benefits to thecustomer, government, builders and HFCs / Banks.There is a growing tendency of investing at a younger age, increase in NRI demand inreal estate, increased urbanization, owning property now more economical than renting.Government committed to simplifying Mortgaged Backed Securitization andReconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI)Act 2002. There is tax benefit to the customers and rationalization of stamp duty.Builders are now a days focusing on end users rather than Investors and there isimprovement in quality of constructions.

The final outcome of the report gives the following data:

JUNE 2008FILES LOGIN 100( Ist Disbursement)

FILES CLEAR 46 ( Ist Disbursement)

49 ( Sub Disbursement) 52 ( Final Disbursement)

26 ( Sub Disbursement) 47 ( Final Disbursement)

The graphs below shows the market leadership of ICICI as compared to HDFC and SBI.

Market leadership

Sanctions (in Rs.Crore)

30000

25000

20000

15000

10000

5000

0

2004 2005 2006 2007

ICICI

HDFC

SBI

2005 2006 2007 2008

106

Market leadership

Disbursement (in Rs.Crore)

200001800016000140001200010000 8000 6000 4000 2000 0

2004 2005 2006 2007

ICICI

HDFC

SBI

2005 2006 2007 2008

Market share of ICICIYear 2003 – 04: 25000 croreYear 2004 – 05: 41000 croreYear 2005 – 06: 53000 croreYear 2006 – 07: 65000 croreYear 2007 – 08: 85000 crore ( projected)

Market Share

2007

2006

SBI

OTHER PSBs

LIC

OTHER HFCs

FBs

Pvt Bks

HDFC

ICICI

StanChart

50% 100% Citi

2008

2007

2005

20042006

20050%

107

Bibliography:

Pandey I.M., Financial Management

Chandra P., Financial Management

Khan & Jain, Financial Management

V.Sharan, Financial Institution & Services

Induction program book of ICICI Bank Ltd.

www.ICICIBank.com

www.homeloans.com

109