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CONTENTS




Chapter No.                               Title   Page No.

   01         INTRODUCTION

              1.1 Int...
03   PROFILE OF INDUSTRY/ COMPANY

          3.1 Introduction: Banking sector

          3.2 Growth Of Bank

          3.3...
05       FINDINGS, SUGGESTIONS AND CONCLUSION

     Findings

     Suggestions

     Conclusion

                    BIBLI...
LIST OF TABLE & CHARTS

LIST OF TABLES

TABLE NO.        TITLE OF TABLES                                PAGE NO.

      T1...
List of Charts




  CHART NO.            TITLE OF CHARTS                   PAGE NO.

     C1          The chart showing s...
Few decades back, buying a home was not a very easy task as there were hardly any lenders
available to loan the ever incre...
charges, and demand only the basic essential proof. Most banks are reluctant to advance loan
to the service class e.g. law...
CHAPTER-01
INTRODUCTION




               8
INTRODUCTION

Housing loan means any loan or advance granted to an individual or any other entity which
may be specified b...
Add to this the stable property prices over the last year and plunging interest
rates, planning for dream home could not h...
RESEARCH DESIGN

         Statement of the problem:

           A strong banking sector is important for flourishing econ...
RESEARCH METHODOLOGY:

Research Methodology is an important part of every project. Because it help in knowing
how to selec...
•       Sampling Procedure :- What process should be used to collect the sample. So,
        representation samples, conve...
4. Data analysis and interpretation

5. Findings ,suggestions and Conclusion




                   CHAPTER-02
           ...
Review of Literature

PNB FOR HOUSING NEEDS

HOUSING FINANCE SCHEME

In terms of RBI guidelines, banks can deploy their fu...
b) For purchase of house/ flat from the original allottee, i.e. on first power of
        attorney basis, where the Housin...
d) For repairs/ renovation/ additions/ alterations, the maximum amount of loan
               shall not exceed Rs. 20 lacs...
entering into tripartite agreement among authority/ seller, allottee/ purchaser and bank, bank
gets direct privity with th...
Loan on pari passu or second charge basis

f)Circle Heads and above are empowered to consider requests only from confirmed...
e. a) A clause be put in the Sanction letter that any third party liability coming on the
       bank due to wrong informa...
Grah raksha kavach- life insurance cover (both due to natural and accidental death) to bank’s
existing as well as new hous...
period. The EMI in such cases be appropriately worked out and advised
            presuming that the entire loan is disbur...
Likely rental income, if the property is to be let out be also considered for determining
   the repaying capacity. The sa...
Illustrative charts indicating EMI to cover repayment of principal and interest on
       ‘upfront / advance basis’ and on...
i.   where the loans are prepaid by the borrowers from their own sources.

 ii.   Where the borrower shifts to other bank ...
14) Issuance of interest certificates:- an interest certificate may be issued to the borrower(s)
who have availed housing ...
h) The following types of bank finance may be included under Direct Housing Finance:-

      I.   Bank finance extended to...
j) Statement of account of prospective borrower(s) minimum for last six months be
   obtained. In case of salaried employe...
p) Spot verification of plot/ house to be purchased/ constructed is must and the
   incumbent should give his comments on ...
Reiterate ion of the following important guidelines (RBDA/28 dt 29.05.09) keeping in view
the increasing incidence of frau...
b) The rate of interest would be charged as applicable for total tenor of the loan (i.e.
       from the date of original ...
ii.   An architect appointed by the bank must also certify before disbursement of
           the loan that the built up pr...
and value of the account on case to case basis. However, in case of deviation
                which is not compoundable, t...
c) Fee structure for valuation of property, as prescribed vide L&A Circular No.
                 12/2007 dated 5.2.2007 fo...
Appointment of advocates-

Eligibility (for Housing Loan processing related work):- advocate must be in the approved
list ...
20) Checklist/ Documentation.

21) Classification of Housing finance under priority sector direct finance:-

  i.    Housi...
B. Lending to Housing intermediary agencies

a) Lending to housing finance institutions:-

  I.      Banks may grant term ...
d) Terms and conditions for lending to Housing intermediary agencies:-

       I.   In order to enhance the flow of resour...
by the Bureau of Indian Standards (BIS) in view of the important of safety of buildings
especially against natural disaste...
c. Housing finance provided by banks for which refinance is availed of from
           National Housing Bank.

       d. I...
26) General:- While financing housing projects, if any need arises for obtaining a particular
type of agreement, the same ...
Scheme for public can also be considered by our branches through ‘Hub & Spoke Model’ at
all centres (including centres whe...
T1 PNB special Housing Loan Scheme for new accounts under fixed option with re-set
clause of five years (valid from 01.01....
Max. repayment age              60 years (no power at any level to fix the repayment
                                perio...
Age proof                          Municipal Birth Certificate, School Leaving Certificate,
                              ...
circulars on the subject, shall remain unchanged and are applicable to the captioned
scheme as well.

The captioned scheme...
obtained.                     Medical Questionnaire (SMQ)
                                                                ...
1) SHR05- loan with sanctioned limit upto Rs.5.00 lacs (8.50%);

           2) SHR20- loan with sanctioned limit above Rs....
AMOUNT: 90% of EMD in case of House/ flat/ plot/ land, subject to maximum of Rs.2.00
lacs (25/04)

ROI: BPLR minus 1.75%. ...
vi.      MULTIPLE FINANCING: (RBDA/42 dt 7/12/06):- Recently, cases of multiple
          financing under the scheme have ...
NATURE: For personal needs in the shape of OD limit.

AMOUNT: Minimum Rs 50000/- & maximum Rs 5.00 lacs. Subject to additi...
Other guidelines: In case interest is not serviced within 7 days of the close of the close of the
month, the borrower shal...
charges. Earlier loan be adjusted through the proceeds of this loan & present outstanding be
taken into consideration for ...
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
Comparative study of interest rates on housing loan
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Transcript of "Comparative study of interest rates on housing loan"

  1. 1. CONTENTS Chapter No. Title Page No. 01 INTRODUCTION 1.1 Introduction 1.2 Research Design  Statement of the Problem  Objective of Study  Research methodology  Limitations of Study  Layout of Chapters 02 REVIEW OF LITERATURE 1
  2. 2. 03 PROFILE OF INDUSTRY/ COMPANY 3.1 Introduction: Banking sector 3.2 Growth Of Bank 3.3 Functions of Banking 3.4 Nationalization of Financial Institutions 3.5 Nationalization of 14 major commercial banks in 1969 3.6 Commercial bank 3.7 Scheduled banks 3.8 Non Scheduled Banks 3.9 History of PNB 3.10 Profile of PNB 3.10 Outlook 3.12 Vision, Mission ,Values and Ethics 3.13 Products and Services 3.14 Awards 04 Analysis of Data Trends In Housing Loan Interest Rates Comparison Of Banking Facilities Comparison Of Interest Rates Of Different Banks Housing Loan Best Interest Rates Market Share Of Major Players Comparison Of Major Players 2
  3. 3. 05 FINDINGS, SUGGESTIONS AND CONCLUSION Findings Suggestions Conclusion BIBLIOGRAPHY 3
  4. 4. LIST OF TABLE & CHARTS LIST OF TABLES TABLE NO. TITLE OF TABLES PAGE NO. T1 The table Showing PNB special Housing Loan Scheme for new accounts under fixed option with re-set clause of five years T2 Table showing guidelines of medical examination based on clarifications received from Life Insurance Corporation of India (LIC) T3 Table showing comparison of banking facilities T4 The table showing comparison of interest rates of different banks T5 The table showing housing loan best interest rates 4
  5. 5. List of Charts CHART NO. TITLE OF CHARTS PAGE NO. C1 The chart showing structure of Indian banking system C2 The chart showing trends in housing loan interest rates C3 The chart showing market share of major players Executive summary 5
  6. 6. Few decades back, buying a home was not a very easy task as there were hardly any lenders available to loan the ever increasing astronomical lump sum of money. However, with time, the rising property prices and the burgeoning housing finance market in the country, made the phenomenon of the home loans easy and the dream of buying a home possible. Also, the HFC’s (Housing Finance Companies) and banks have come up with so many home loan plans that they have become an answer to every customer’s necessity. Apart from this, the changing equation of market has also provided customers with several reasons to opt for a home loan. Here are few reasons to why home loans have gradually became a necessity in the society. The need for home loans arises not because property prices are heading upwards all the time but because home loans make great sense from a long-term savings perspective. Not only are home loans a handy tool for the common man to own a roof over his head but they also help save money in the long run. With skyrocketing real estate prices, people are increasingly opting for housing loans to acquire their dream home. Interest rates are coming down all the time and the housing finance companies are literally falling over each other to lure the prospective home-seekers. Like all other commercial banks PNB is also having home loans in their portfolio. Frequent changes in regulation made by central bank affect the banks to a larger extent because banks have to follow according to the directions given by the central bank which reduces the profit of the bank. Now a days banks cannot charge their own management interest rates they are force to look the market and follow according to the RBI rules and regulations, this has unable them to balance both the income and expenses, for eg., now the fixed deposit interest rate is 10.5% and is housing loan interest rate is 8.5%, they have the bear the loss of -2% which the banks have to pay themselves. Middle class people cannot afford to the current interest rate, it is too expensive for them. To broaden the customer base the vast middle income strata should be fully exploited who are very sentimental about house property in India Simplify the procedure, reduce service 6
  7. 7. charges, and demand only the basic essential proof. Most banks are reluctant to advance loan to the service class e.g. lawyers, police officers etc.. This aspect must be exploited. 7
  8. 8. CHAPTER-01 INTRODUCTION 8
  9. 9. INTRODUCTION Housing loan means any loan or advance granted to an individual or any other entity which may be specified by RBI from time to time for the purpose of construction/ repairs/ upgradation of a house or residential property or acquisition of a house or residential property or both i.e.house and residential property. A roof over one's head and ground beneath one's feet count as the bare necessities of life. There’s nothing quite like owning a home, however humble, to give one that warm and glowing feeling. But when one buys a home, one has much more than a feel-good purchase in mind: it’s also a crucial investment decision, perhaps the biggest spending decision of one's life. There are ample opportunities today for young salaried investors to plan their moves early and buy a house at the right time — and at the right price. In the process, not only do they fulfill that cherished dream of owning a house, but also put themselves on the path to acquiring property that would meet the needs and aspirations of their growing family, even as it leads to wealth creation. Every individual aspires to own a home. But many either spend a lifetime saving to purchase a house or exhaust money on monthly house rents. Take a house loan and let the monthly rent (easily converted into affordable EMIs) build dream home. 1.1Profitable Proposition “The overall demand in the residential sector has grown by about 7-8 per cent in the past few months as compared to the same period last year. The growth is on account of two main factors:  One, income-tax exemption;  Two, with no similar rebates available for individuals in the high-income group, they are creating a second asset. 9
  10. 10. Add to this the stable property prices over the last year and plunging interest rates, planning for dream home could not have been better timed. Rock-bottom interest rates, standardization of the periodicity of interest calculation across lenders (which makes it easier to compare loans), lower interest charges, waiver of loan application processing fees and, a customer-friendly attitude is reason enough to celebrate the ascension of the home loan consumer as the king. 10
  11. 11. RESEARCH DESIGN  Statement of the problem: A strong banking sector is important for flourishing economy. The failures of the banking sector may have an adverse impact on other sectors. This Study will help us to understand the housing loan about banking services and products. In this background this study tries to analyze the housing loan interest rate towards banking services.  OBJECTIVE OF THE STUDY: The objective of this study is • To analyze the history of Punjab national bank. • To analyse the home loans with a view to arrive at the most popular loan schemes offered by the banks under study • Conclude from the analysis the best possible housing loan schemes which would keep the bank ahead of competition. • The reasons being the features that the scheme provides are not being provided by many of the housing finance companies. 11
  12. 12. RESEARCH METHODOLOGY: Research Methodology is an important part of every project. Because it help in knowing how to select representative sample from the world or the general population, the right research tools and techniques to complete the research. To satisfy the customer the study of consumer behavior is important because he is the king. The Research Process is based on survey method, so in order to implement the survey we go to Service Provider and the Services user which is the customers. The research involves the following steps :- ♦ Define the problem & research objective - The problem and objective is to assess the services offered by various service provider and what the consumer wants. ♦ Developing the research Plan - The second stage of research methodology is to develop a research plan.The research plan desigined to take decesion on the data soruces, research approaches, research, instruments, sampling plan and contact methods. ♥ Survey Research – It was a descriptive research. ♦ Research Instrument – The use of an effective research instrument is very important. Because through this instrument we collect data. In this project through observations & personal interviews were conducted. ♦ Personal Interview – As we were doing direct selling. we interacted with my customers are asked about there views in selecting a service and what are there wants and expectations from a service provider ♥ Sampling Plan - After finalizing the research approch and instruments a sampling must be designed. ♦ Sampling Unit –data have been collected from banks ♦ Sample size – It has been collected from four banks. 12
  13. 13. • Sampling Procedure :- What process should be used to collect the sample. So, representation samples, convenience sampling is used. ♦ Collect the Information :-After completing all the steps, the data are collected from different sources. Primary data: Information is collected through direct interview with employees and other banks. Secondary data: • Website. • Bank old record books. • PNBO’s compliments ♦Analyze the Information:-After the data is collected they are analyzed to Know the findings. The data is then tabulated to develop frequency distribution. ♦Present the findings:-As the last step, the findings are presented that are relevant to the major marketing decisions.  Limitation of the study: • Because of heavy work, the external guide cannot spend more time for interaction. • This study is limited to Hassan branch of PNB. • Since the bank is so wide so it was not possible for me to cover all the branches of PNB.  Layout of Chapters 1. Introduction 2. Profile of Industry 3. Research methodology 13
  14. 14. 4. Data analysis and interpretation 5. Findings ,suggestions and Conclusion CHAPTER-02 REVIEW OF LITERATURE 14
  15. 15. Review of Literature PNB FOR HOUSING NEEDS HOUSING FINANCE SCHEME In terms of RBI guidelines, banks can deploy their funds under the Housing Finance allocation in any of the three categories i.e:- i. Direct finance; ii. Indirect finance or; iii. Investment in bonds of NHB/HUDCO or combination thereof. Direct Housing Finance:- Direct Housing Finance refers to the finance provided to individuals or groups of individuals including cooperative societies. In view of freedom granted by RBI to banks to evolve their own guidelines on the terms and conditions as regards security, margin, age of the dwelling units and repayment period for direct housing loans, bank has in place Direct Housing Finance Scheme for individuals which is given as under: 1) ELIGIBILITY:- Individuals. Joint owners are also eligible. 2) PURPOSE:- a) For construction of house or purchase of house/ flat. Loan can also be extended for purchase of land/ plot for house building. Under- construction houses/ flats of private builders- finance be permitted for purchase of under- construction houses/ flats of only those private builders’ projects/ private builders, which have been approved by Circle Heads, as per criteria given in this circular. 15
  16. 16. b) For purchase of house/ flat from the original allottee, i.e. on first power of attorney basis, where the Housing Board/ Development Agencies, such as DDA,GDA, etc., permit conversion of leasehold property into freehold to the allottee of property. However, advance is not permitted against plots purchased on power of attorney basis. c) For carrying out repairs/ renovation/ additions/ alterations/ cost of furnishing to the house/ flat. 3) EXTENT OF LOAN:- a) Need- based loan for construction of house/ flat or purchase of house/ flat depending upon the project cost and repaying capacity of the borrower. However, maximum amount of Rs. 20 lacs can be sanctioned for purchase of land/ plot for house building. Circle Heads & above may consider loan for purchase of plot/ land maximum upto Rs. 50 lacs depending on merits/ genuineness of each case/ repaying capacity and after fully satisfying about the realistic valuation of the land/ plot. b) In respect of purchase of built up/ complete houses/ flats from private builders, where valid mortgage is created, finance be permitted by the officers at various levels as per their normal powers for sanction of term loan, under the scheme, across all centres, after due diligence, proper valuation as per Bank’s guidelines, and subject to compliance of directives of Hon. High Court of Delhi (reiterated in subsequent paragraphs in this circular) and other guidelines, applicable under the scheme. Compliance of Apartment Ownership Act passed by the state, wherever applicable, be also ensured. c) Circle Heads & above may allow Housing Loan on pari passu or second charge basis only to confirmed employees of central/ state government/ Public Sector Undertakings (PSUs) maximum upto Rs. 20 lacs. The quantum of loan be decided taking into account the amount of earlier loan availed and repaying capacity of the borrower. 16
  17. 17. d) For repairs/ renovation/ additions/ alterations, the maximum amount of loan shall not exceed Rs. 20 lacs. e) Cost of furnishing may be included in the project cost maximum upto 10% of the amount of loan permissible for the purpose of repair/ renovations/ additions/ alterations which is maximum Rs. 20 lacs (i.e. maximum amount of loan for cost of furnishing shall be upto Rs.2 lacs). f) Cost of car parking:- if the car parking place is located in the same building/ society/ compound, the cost of car parking upto maximum extent of 5% of the cost of flat/ house) can be reckoned with/ included for granting housing loan. However, it is to be noted that car parking area should be identifiable, specific and be clearly mentioned in the sale agreement/ allotment letter. (RBDA- 40 dt 04.08.09). 4) MARGIN: a)For construction of house or purchase of house/ flat or for carrying out repairs/ renovation/ additions/ alterations to existing house/ flat as well as for furnishing ---- 25%*. (increased from 20% w.e.f.11.10.2007 –RBD Advances Circular 45/07) *(Acquisition cost of plot including stamp duty and registration charges, if any, paid by the borrower be also considered towards margin money). b) for purchase of land/ plot for house building: ---- 40%. 5) RATE OF INTEREST (effective from 01.08.2008):- 9.25% 6) SECURITY:- a) Equitable/ registered mortgage of the property. b) Where mortgage cannot be created immediately in situations like house/ flat is being purchased/ allotted by the Housing Board, Development Authorities or Co-operative Society, and title/ conveyance deed are executed in favour of purchaser only after completion of construction & possession/ making full payment of the cost of house/ flat, a stamped tripartite agreement be executed amongst Housing Board/ Development Authority/ Co-operative Society/ Builder, the intending borrower and the bank before release of the loan. ( By 17
  18. 18. entering into tripartite agreement among authority/ seller, allottee/ purchaser and bank, bank gets direct privity with the authority/ seller.) To secure such loan, guarantee of person(s) acceptable to the bank be obtained. Circle heads & above are, however, authorized to waive the guarantee on merits of each case for the projects of highly reputed approved private builders. c) In respect of purchase of house/ flat on first power of attorney basis, equitable/ registered mortgage of some other property/ pledge of govt. security, NSCs, KVPs, IVPs/PSU bonds (where interest is being serviced regularly)/ banks’ FDR/LIC policies (surrender value), etc., equal to 125%* of the loan amount be obtained. *In respect of loan for purchase of house/ flat on first power of attorney basis, Circle Heads (irrespective of any scale/ officers in Circle offices of the scale of V and above may permit obtention of above referred security equal to 50% of the loan amount. d) In situations where: i. The mortgage by deposit of Title Deeds is not possible, the property being an Ancestral Property (without Title Deeds) or Lal Dora Land, OR ii. There is delay in execution/ unwillingness to execute a stamped Tripartite Agreement by Housing Board/ Development Authority/ Cooperative Society, the sanctioning authority may accept, at its discretion, equitable/ registered mortgage of some other property/ pledge of government security, NSCs, KVPs, IVPs/ PSU bonds (where interest is being serviced regularly)/ banks’ FDR/ LIC policies (surrender value) etc. the value of such security so obtained should be equal to 125% of the loan amount. The details of such situations, along with reasons of obtaining alternative security as detailed above, must clearly be specified in the sanction note by sanctioning authority. e) Security verification to be carried out once in two years for regular accounts after initial end use verification and on half yearly basis in case of NPA accounts. In case of two continuous default in repayment, inspection should be carried out immediately. 18
  19. 19. Loan on pari passu or second charge basis f)Circle Heads and above are empowered to consider requests only from confirmed employees of central/ state govts. /public sector undertakings foe an amount of loan of maximum upto Rs. 20 lacs and extend credit to such employees, who might have raised funds for construction/ acquisition of accommodation from other sources and need supplementary finance after obtaining pari passu or second charge over the property mortgaged in favour of other lender. Disbursement:- a. For outright purchase of house/ flat & plot, the loan will be paid in lump sum to the vendor at the time of registration after satisfying that borrower has paid/ provided for the balance amount/ his contribution. b. For house/ flat under construction, the loan amount will be disbursed in stages depending on progress of construction i.e. at stage like completion of plinth, construction upto lintel level, completion of roof etc. and/or demand raised by selling agency after ensuring that the borrower has invested his pro-rata share towards required margin. Request for down payment can be permitted by sanctioning authority, in respect of under- construction houses/ flats of builder/ developers of national repute, subject to availability of tangible collateral security of the value of at least 50% of the down payment to be disbursed. (Names of builders/ developers of national repute will be finalized with the approval of Field General Managers/ General Manager RBD: HO). {RBDA/40 dt 04.08.09} c. In case of repairs/ renovation/ addition/ alteration, incumbents to ensure that after having disbursed 50% of the amount sanctioned, the subsequent disbursement (s) should be after proper verification that the amount earlier disbursed has been utilized as per estimates submitted by the borrower and that he has invested his pro-rata share towards required margin. d. On completion, a certificate be obtained from approved architect/ qualified engineer, certifying the end use of funds granted by the bank. 19
  20. 20. e. a) A clause be put in the Sanction letter that any third party liability coming on the bank due to wrong information/ detail given by the borrower, will be his/ her responsibility; b) Building plan duly approved by competent authority be made a pre- condition for considering housing loans (LA 65 DT 27.05.09). 8) Insurance:- The property will be kept insured for reconstruction cost ( and not the market value or the limit sanctioned for houses/ flats as the reconstruction cost will be higher as compared to limit sanctioned) in respect of fire, riots and wherever required, against other appropriate hazards, such as earthquake, flood etc by the borrower, with usual bank clause. However, the BMs should ascertain by reviewing on an ongoing basis that the adequate coverage of insurance is available for reconstruction cost at all times, as the cost may increase during the period of insurance policy, which generally is being taken for a period of 10 years. Subsidiaries of General Corporation are issuing insurance policy, specifically to cover risks relating to housing. These policies are called “Fire Police A”, which cover risks such as fire, lightening, riot, strike, terrorism, storm, cyclone, typhoon, hurricane, tornado, flood, inundation, earthquake, fire & shock. These policies can also be issued on one time basis for a period of 10 years at a reduced premium i.e. 50% of the normal premium. The value of the property is based on rate of construction of the building as per the PWD rates for that particular region and the same is suitably loaded for extra fittings and fixtures, superior constructions and other relevant details. In fire insurance, building above the plinth and foundation is covered. However, when the policy is extended to cover the risk of earthquake then the cost of plinth and foundation can be included in the sum insured. IFFCO TOKIO GENERAL INSURANCE CO. LTD.- the coverage for accidental death and permanent total disability ( due to an accident) bundled with the mandatory insurance ‘Fire Policy- including earthquake’ is also offered in tie up arrangement with Iffco Tokio General Insurance O. Ltd., to all existing as well as new Housing Loan borrowers who are individuals (single or joint). Reference may be made to the relevant circulars issued by Retail Banking Division on the subject. 20
  21. 21. Grah raksha kavach- life insurance cover (both due to natural and accidental death) to bank’s existing as well as new housing loan borrowers is also offered in tie up arrangement with TATA-AIG, in the shape of a single premium reducing term assurance policy. Reference may be made to the relevant circulars issued by Retail Banking Division on the subject. 9) Repayment:- a) Loan alongwith interest is to be re-paid in equated monthly installments within a period of 25 years (10 years in case of repair/ renovation/ addition/ alteration), inclusive of moratorium period, if any. Moratorium or repayment holiday may be permitted where the house is constructed till completion of construction or 18 months (6 months in case of repair/ renovation/ addition/ alteration) from the date of disbursement of first instalment of the loan, whichever is earlier. However, Circle Head and above may further relax the moratorium period by six months. (RBDA/40 dt 04.08.09) Further, in those cases where a moratorium period is allowed by the sanctioning authority, where loan is allowed for construction purposes, It may be ensured that the amount of expected accrued interest, on monthly compounded basis, for the period of moratorium is added to the loan (principal) amount presuming that the entire loan is disbursed on the date of first disbursal itself and EMI calculated accordingly. However, there may be situations where Sanctioning Authority is required to quote EMI matching to the EMI quoted by our competitors, this is on account of recovery of interest component chargeable in the account, during the period of moratorium, by some of the Housing Financial Institutions/ Banks. Therefore, it is desirable that the prospective borrower is suitably advised and given the option, at his/ her specific request, of either: I. Repaying the interest component chargeable in the account during the period of moratorium and EMI thereafter OR II. In case borrower exercises the option of not paying interest during the moratorium period, interest component chargeable in the account for the moratorium period would be spread over the EMIs for the entire repayment 21
  22. 22. period. The EMI in such cases be appropriately worked out and advised presuming that the entire loan is disbursed on the date of first disbursal itself. In case of loans to individual members of Group Housing Societies, the repayment shall start form immediate subsequent month after the final disbursement of the loan. b) In case of purchase of ready built house/ flat or land/ plot, the repayment to start after the date of possession or 3 months from the date of advance whichever is earlier. c) i) Repayment should be fixed on a realistic basis, which should not normally exceed 50% of gross income. For this purpose, all deductions including the proposed Housing Loan instalment should not exceed 50% of gross income. ii) However, in cases where gross monthly salary is above Rs.50,000, deductions can be permitted upto 60%. Circle Head & above may, however, permit salary deductions upto 70% in case of person whose gross monthly salary is minimum Rs.1.00 lac. (This provision is, however, not applicable in respect of Housing Loans to NRIs/ PIOs). iii) The relaxation in salary criteria of the prospective Housing Loan borrower, as above, will be permitted only on a very selective basis after assessing in detail the domestic requirements of his/ her family/ dependent members, including future obligations and recording complete justifications. iv) The income of the spouse and earning children (whether married or unmarried) should be taken into account for determining the income for the purpose of borrowers’ repaying capacity. The income of the joint owners of the property may also be added for determining the repaying capacity. In such cases, they should be made co-borrower. v) Father/ mother can also be made as co-borrower in cases where property is in the single name of his/her son and also clubbing of their income be permitted for the purpose of eligibility/ repayment of loan. In case of self employed individuals the gross income may be arrived at by adding amount of depreciation to the net profit amount and repaying capacity be assessed accordingly. 22
  23. 23. Likely rental income, if the property is to be let out be also considered for determining the repaying capacity. The same be assessed on the basis of the rental value in the locality in which the house/ flat is located. The market report may be gathered from the property dealers of the locality and a mention of the same way clearly be made in the sanction note. d) Sanctioning authority may consider fixing the monthly installments on graduated basis, if there is reasonable expectation of growth in the income in the coming years on specific request from the borrower. e) Repayment of the loan along with interest should not ordinarily extend beyond the age of 65 years of borrower. Hub Incharge in the rank of scale iv & above/ Circle Head may relax repayment period upto the age of 70 years. In case loan is allowed to joint owners, it should be ensured that at least one of the joint owners should be able to repay the loan along with interest maximum upto the age of 65 years. The Hub Incharge in the rank of iv & above/ Circle Head may consider repayment tenor according to the age of co-borrower (who is not co-owner), maximum upto his/ her age of 70 years, based on due diligence/ merits of each case. f) In order to ensure that regular installments are received and defaults are minimized it be ensured as under: minimum 24 advance cheques signed by borrower towards repayment of monthly instalments along with Letter of Deposit be obtained. However, when the number of cheques with the branch reaches six (6), the borrower to give additional 24 cheques duly signed. This system of giving additional cheques shall continue till the adjustment of the loan. The guidelines for safe custody of advance cheques circularized by Inspection & Control Division be followed. OR Irrevocable Letter of Authority from the borrower to the employer for either remitting the salary to the bank or for remitting the monthly instalment for repayment of loan to the bank. An acknowledgement of the said letter of authority from the employer be kept on record. Further, in cases where employer remits the salary to the bank, an irrevocable letter of authority from the borrower be obtained for debiting the amount of instalment to the SF account. 23
  24. 24. Illustrative charts indicating EMI to cover repayment of principal and interest on ‘upfront / advance basis’ and on ‘arrear basis’ are available as at proforma-I of the circular. Effect of upward revision in interest rates on repayment:- the borrower always has one of the following options to exercise for repayment of loan:- a) To pay increased amount of EMI; b) To continue to pay the existing amount of EMI with condition that the balance outstanding in the account would be paid in one go with last EMI of the originally applicable repayment tenor; c) To prolong the repayment period. In case no option is given by the borrower, the option (c) i.e. to prolong the repayment period appropriately be implemented, subject to the condition that in the event of revision in interest rate to be charged in the account, if a borrower shifts to the next higher bracket of repayment tenor, the applicable rate of interest will be charged for the original repayment bracket/ tenor. The borrower should, however, invariably be intimated about the change in the interest rates, as and when it takes place. Necessary changes in repayment period of loan also be made in the system every time any change In interest rate is effected, so that account does not show any irregularity in regular repayment of the loan, due to above adjustment/ reschedulement. 10) Upfront fee & documentation charges:- in the data analysis chapter, its specified below. 11) Loaning powers:. 12) Pre payment charge: to avoid take over/ shifting of housing loan accounts by other banks/ financial institutions a flat per-payment charge of 2% be recovered from all those borrowers who intend to shift their Housing Loan Accounts to some other banks/ financial institutions by way of availment of loan from such banks/financial institutions. This pre-payment charge is recoverable on all fresh loans sanctioned under the scheme on or after 5.12.2001 or in those existing accounts where facility of lower rate of interest is allowed. However, no prepayment charges are to be levied in the following cases:- 24
  25. 25. i. where the loans are prepaid by the borrowers from their own sources. ii. Where the borrower shifts to other bank within 30 days from the date of issuance of circular for upward revision in the rate of interest to be charged in his account or change in other terms of sanction. Penal interest for non- construction of house (RBDA/ 40 dt 04.08.09):- Existing guidelines:- Further, to avoid speculative activity, a flat pre-payment charge of 2% be recovered from all those Housing Loan borrowers, who avail Housing Loans for purchase of plot/ land and pre-pay the loan before 5 years without undertaking construction. This pre- payment charge is recoverable on al fresh loans sanctioned under the scheme on or after 1.9.2004. Revised guidelines:-In case construction of the house is not completed within 3 years from date of disbursement of the loan or in case the plot/ land is sold, penal interest at 2% over & above the prescribed rate of interest will be charged. Circle Heads & above may, however, reduce penal rate of interest, maximum by 1% p.a. on merits of each case like general/ real constraints faced by the borrower in construction of house on account of lack of infrastructure development, no development in locality/ colony/ area etc where plot/ land is located (RBDA/40 dt 04.08.09). 13) Expression of interest (in principle sanction):- to facilitate the prospective Housing Loan borrowers who are interested in knowing what amount of loan he/ she is entitled and to help them to take a decision on purchase of the property, branches may issue a letter to the prospective borrower conveying “expression of interest” (in- principle sanction) on the prescribed proforma (Annexure-18). The introduction of such a facility is with an objective to provide greater flexibility in negotiations/selection of property to the prospective borrowers. To safeguard the bank’s interests, it be clearly specified while conveying the ‘expression of interest’ that though bank conveys’ its ‘expression of interest’, the bank is under no commitment or obligation to sanction/ disburse loan. The actual sanction or disbursal will depend upon receipt of application complete with all particulars, the value and acceptability of the security offered (i.e. the house/ flat to be financed), legal and technical clearances and the creation of the valid equitable mortgage etc. further, ‘expression of interest’ shall be valid for a period of three months from the date of its issue. 25
  26. 26. 14) Issuance of interest certificates:- an interest certificate may be issued to the borrower(s) who have availed housing loan from the bank for availing benefits under the provisions of income tax act on the prescribed proforma (Annexure-19). 15) Other guidelines:- a) Circle Heads & above will have full discretion with regard to moratorium period, insurance. b) Need- based bank credit (within the overall limit of Rs.20 lacs) as housing finance can be extended for repairs, additions, etc. to a building/ house/ flat irrespective of whether it is occupied or tenant occupied. For this purpose, estimate of cost of repair, addition, etc., and the certificate of completion of work done be obtained from qualified engineer/ architect. c) Requests for additional finance may also be considered for carrying out alterations/ additions/ repairs to the house/ flat already financed by the bank. d) There is no bar in providing finance to a person who or whose spouse already having house or flat in his/ her name. e) In case of default in repayment of loan, the borrower shall be liable to pay penal interest as per the guidelines circulated through L&A Circulars from time to time. (As per present provision, it is to be charged @ 2% on the entire outstanding amount as per L & A Circular No. 191 dated 26.12.2007.) f) In case of finance for purchase of plot/ land/ flat/ house, sanctioning authority to ensure that the title of the same is marketable and free from encumbrances. g) Sanctioning Authority may permit takeover of Housing Loan accounts from other financial institutions/ banks. Further, Circle Heads and above may allow takeover of Housing Loan accounts from other FIs/ banks, on individual merits of the case(s), subject to the condition that the loan allowed by employer has been for the ‘purpose’ of housing activity only. However, Sanctioning Authority, while taking over the loans shall ensure that housing loan accounts with other financial institutions/ banks are running regular with no defaults in payment of interest/ installments. 26
  27. 27. h) The following types of bank finance may be included under Direct Housing Finance:- I. Bank finance extended to a person who is already owning a house in the town/ village where he resides for buying/ constructing a second house in the same town/ village or in other town/ village for the purpose of self occupation. II. Bank finance extended for purchase of house/ borrower who proposes to let it out on rental basis on account of his posting outside the Head Quarter or because he has been provided accommodation by his employer. III. Bank finance extended to a person who proposes to buy an old house wherein he is presently residing as a tenant. IV. Bank finance granted only for purchase of a plot, provided a declaration is obtained from the borrower that he intends to construct a house on the said plot, with the help of bank finance or otherwise, within such a period as laid down by the bank. V. Supplementary finance:- a) Bank finance for carrying out alterations/ additions/ repairs to the house/ flat already financed by the bank. b) Bank finance to individuals for construction/ acquisition of accommodation, against pari passu or second charge basis or against such securities as specified under item 6. i) Reschedulement in Housing loans may be allowed by an authority one step higher, maximum upto a total period of 7 years over and above the repayment period as prescribed in the original sanction by the sanctioning authority. This shall also be applicable in case of takeover of housing loan accounts provided the accounts are running regular. However, incase of NPA accounts guidelines as issued by the bank from time to time shall be applicable. It has now been decided that for a limited period upto 31.3.2009, the sanctioning authority, can restructure housing loans at their level, as per guidelines contained in RBD Advances Circular No. 58/08 sated 10.12.2008.(RBD 63 dt 27.12.08) 27
  28. 28. j) Statement of account of prospective borrower(s) minimum for last six months be obtained. In case of salaried employees, statement of account should be of that account in which their salary is being credited. In other cases it should be of an count whose declaration has been made in the income tax returns. This is to facilitate ascertaining general conduct of the account including other borrowings. k) Housing loans with multi-location scenario of customer (RBDA/26 dt 26.05.09):- Frequent complaints are being received from various quarters regarding non- compliance of guidelines regarding the process of dealing/ sanctioning housing loans with multi- location scenario of customer e.g. customer working in Delhi wants to buy housing property at Agra, as contained in RBD Advances Circular No.40 dated 12.09.2008. It is reiterated that the housing loan should be sanctioned at the Hub/ CCPC; which is near the present place of work/ posting/ residence of prospective borrower. For security verification/ NEC, the sanctioning Hub/ CCPC should, however, take the help of Hub/ CCPC, which is located near the housing property. Further, it is advised that the Hub/ CCPC at the place of the housing property must get the job of security verification/ NEC done promptly, so that there should be no complaint on this count. Circle Head of the area where housing property is located is, however, empowered to give administrative clearance for considering sanction of Housing Loan at Hub/ CCPC falling in his/ her area, on merits. l) The regularity of income of the borrower over the entire span of loan should be clearly established before sanction of loan. Latest salary slip, ITR (for the last three years) etc. be taken. For business class of borrower, repaying capacity be arrived at on the basis of net income of last three years, as given in ITRs. m) Bank’s existing customers, preferably with a minimum dealing of six months, be considered for sanction of Housing Loans. In respect of customers of other banks, their track records and past dealings, for the last one year, with the existing bank, be thoroughly verified before making the advance. n) Post dated cheques of the bank whose statement of account is furnished be obtained and not of our bank where a shadow account is opened just for getting cheque book. o) Where the PDCs are nearing exhaustion, the branch should insist for fresh PDCs and non- submission of the same be treated as violation of terms and conditions. 28
  29. 29. p) Spot verification of plot/ house to be purchased/ constructed is must and the incumbent should give his comments on the location/ valuation of the house/ plot while according sanction. q) Other sources of income of the applicant should be verified carefully. r) Take over cases from other banks be entertained only after ensuring that the account in other bank is running regular and strictly in terms of banks’ extant guidelines for take-over of a/cs. s) Identify proof of the applicant, his credentials, stability of employment and residence of customer, be checked properly. t) Assessment of other liabilities of the customer be done carefully. u) Proper selection of borrowers and improvement of diligence level; v) Immediate contact be made with the borrower on delay/ default of any installment. w) Contact/ liaison with the employer to put pressure on the borrower. x) Other KYC norms be meticulously followed. y) Chain of title deeds should be complete and all the previous original title deeds should be kept on record. z) Wherever possible action under Securitization Act and/or u/s 138 of the Negotiable Instrument Act be taken after complying with the requirement of law. aa) All guidelines circulated by the bank from time to time in respect of i. Fair practice code. ii. Loan documents and iii. Drawing of credit information reports (CIRs) from ‘Credit Information Bureau (India) Ltd. (CIBIL) be also followed. 29
  30. 30. Reiterate ion of the following important guidelines (RBDA/28 dt 29.05.09) keeping in view the increasing incidence of frauds, we reiterate the following important guidelines for compliance by the field functionaries:- i. That the officials of the branch/Hub/CCPC should exercise extra caution to ensure that they have in their possession detailed plans of the building (duly approved by the competent authority) to be taken as security, duly confirming that it is constructed as per admissible laws and rules and that there is no likelihood of its being demolished at a later date on the demolished at a later date on the grounds that the construction was unauthorized/illegal; ii. That the services of only those advocates/ lawyers be taken for verification purposes, who are of good standing and are experienced persons; iii. That a clause be put in sanction letters that any third party liability coming on the bank due to wrong information/declaration given by borrower, will be his/ her responsibility; iv. That the directives of High Court of Delhi, as circulated vide RBD Advances Circular No.40 dated 12.9.2008, inter alia, requiring the bank to obtain the sanctioned Building Plan, be strictly adhered to. Prudential guidelines on restructuring of advances by banks- restructuring of Housing Loans:- (RBDA/58 dt 10/12/08):- it has been observed by RBI that the aforesaid ceiling of 10 years would make many of the housing loans ineligible for special regulatory treatment, since housing loans are normally granted with much longer repayment period. The matter has been reviewed by RBI and it has been decided that the aforesaid ceiling of 10 years over the repayment period of the restricted advances, would not be applicable for restricted housing loans, subject to compliance with all other laid down guidelines on the subject. Bank’s decision:-Further, the bank’s board has approved following parameters for restructuring of housing loan advances a) The repayment period of restructures housing loan will be fixed depending upon the repaying capacity of the borrower but should not exceed 30 years or till the borrower attains the age of 65 years, whichever is earlier. Circle Head may relax the period till the borrower attains the age of 70 years. 30
  31. 31. b) The rate of interest would be charged as applicable for total tenor of the loan (i.e. from the date of original sanction to the terminal date in terms of restructuring package) prevailing on the date of sanction of the package. 16) Directives of High Court of Delhi- the following directives be compiled with meticulously (RBD Advances Circular Nos.39 dated 22.11.2006 & 49 dated 24.10.2007, 13 dt 13.02.09) A. Housing Loan for building construction I. In cases where the applicant owns a plot/ land and approaches the banks/ FIs for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the banks/FIs before sanctioning the home loan. II. An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executants to obtain completion certificate within three months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges. III. An architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained. B. Housing Loan for purchase of constructed property/ built up property. i. In cases where the applicant approaches the bank/FIs for a credit facility to purchase the built up house/ flat, it should be mandatory for him to declare by way of an affidavit- cum undertaking that the built up property has been constructed as per the sanctioned plan and/ or building bye-laws and as far as possible has a completion certificate also. 31
  32. 32. ii. An architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/or building bye-laws. C. Unauthorized colonies- no loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid. D. Commercial property- no loan should be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan. E. Building plan (LA 65 dt 27.05.09):- i. A clause be put in the sanction letter that any third party liability coming on the bank due to wrong information/ detail given by the borrower, will be his/ her responsibility; ii. Building plan duly approved by competent authority be made a pre- condition for considering housing loans. It has been decided that in cases where built up IPs are proposed to be accepted as primary/ collateral security including mortgage loan/ loan against tangible security/ lease rentals, etc. besides adhering to the laid down guidelines, the following guidelines be meticulously followed with immediate effect: a) An affidavit-cum-undertaking be obtained from the proposed borrower applying for such credit facility that the built up property has been constructed as per sanctioned plan, and/ or building bye-laws; b) An architect/ valuer appointed by the bank shall also certify while giving valuation of proposed IP that the built up property is strictly as per sanctioned plan and/or building bye-laws; c) In case deviations are reported in the construction, by an architect/ valuer appointed by the bank and/ or noticed by incumbent incharge/ dealing official, in light of provisions of the building laws of a particular area/state and if the violation is compoundable, then payment of compounding, merits in the case 32
  33. 33. and value of the account on case to case basis. However, in case of deviation which is not compoundable, then the concerned architect and the sanctioning authority has to examine each case as there may be demolition to the extent of extra construction, thus such cases should be avoided for bank finance unless there are compelling merits in the account. Value of IP financed in such cases should at least be 250% of the loan amount (LA 126 dt 03.10.09). 7) Guidelines for entrusting work to architects/ advocates for prevention of frauds in the housing loan sector- approving of advocates/ architects (RBD Advances Circular No.22 dated 27.4.2007) I. Guidelines for valuation of property under Housing Finance Sector:- a) Guidelines for valuation of properties and empanelment of valuers, as contained in L&A Circular No. 12/2007 dated 5.2.2007 followed by other relevant circulars on the subject, be made applicable mutatis mutandis to all housing loan borrowal accounts, irrespective of any loan limit/ valuation of house/ flat/ plot mortgaged to the bank. b) In addition to above, the valuer shall also be required to perform the following work in cases of construction of houses/ flats:- i. Check the estimate submitted by the applicant keeping in view location of the project and rates prevailing in the market for construction material and confirm genuineness; ii. Verify the compliance of various requirements for implementation of the project such as approval of map, permission of an authority required to implement the project and give necessary report/ confirmation pertaining thereto; iii. Give a certificate at various stages of construction (but necessarily at initial stage. Plinth level and on completion) that the construction is strictly as per the sanctioned plan. 33
  34. 34. c) Fee structure for valuation of property, as prescribed vide L&A Circular No. 12/2007 dated 5.2.2007 followed by other relevant circulars, if any, shall remain unchanged. However, for valuation of property less than Rs.20 lacs, the fee payable shall be maximum Rs.1500/- II. Guidelines for Housing Loans processing related work to be performed by advocates/ appointment of advocates:- Circle offices will approve the advocates and shortlist the panel of 4-5 advocates exclusively for the Housing Loans processing related work. The advocates shall be required to do the following job: i. Verification of the Income Tax return from the Income Tax Department. Verification of salary certificate from the employer’s office; ii. Compliance of guidelines with regard to verification of genuineness of the title deeds and obtention of search report in respect of non- encumbrance of the property as circulated vide Law Division Circular No.5/2003 and 3/2004; iii. Verification having field the deed of apartment in case the property is sold by way of apartments by the promoter and its contents. Verification of the certified copy of the deed of apartment with the original, kept with the promoter. Verification of the endorsement on the certified copy of deed of apartment and the bye laws of the association of apartment owners. Verification of completion of the apartment, name of the occupant of the flat and capacity under which he/she is residing in the flat; iv. If the sale deed is being executed by power of attorney holder, verification form the principal having executed the PA and principal is alive. Verification of identity of power of attorney holder; original power of attorney must be a part of the chain of title deeds; v. Verification of execution of tripartite agreement by private builder/ authority/ society. 34
  35. 35. Appointment of advocates- Eligibility (for Housing Loan processing related work):- advocate must be in the approved list of the Circle Office, having practice of not less than five years. Fee structure- the fee to be charged from the borrower and paid to the advocate for the aforesaid assigned work is 0.125% of the loan amount with minimum of Rs. 1000/- and maximum of Rs. 3000/-. III. An agreement on the prescribed format, as prescribed vide L& A Circular No.12/2007 dated 5.2.2007, be got executed by the valuer. The advocate also to give consent/ undertaking to the effect that the bank will be free to take appropriate legal action including filing/ lodging complaint to the professional body, if there is any misconduct on the part of the advocate or information submitted by advocate to the bank is found incorrect/ false, without prejudice to bank’s right to delist/ depanel the advocate from its panel. IV. All Circle Offices are advised to prepare the list of professionals and circulate the same to the branches/ hubs working under the respective jurisdiction for utilization of their services for performance of housing loan processing related work, as specified above. The professionals be given a time period of 3 working days to complete the assigned job and submit the report in each case. The applicant borrower found otherwise eligible for sanction of loan be given in principal sanction only after he/ she deposits the charges/ fee payable to professionals, along with the undertaking that these charges/fee will not be refunded in case any document submitted by his/ her is found deficient in any manner. Upfront fee/ documentation charges will be levied as per extant guidelines. V. In all cases, branches to adhere to KYC norms, other extant guidelines and properly verify the identity and credentials of each of the borrower, guarantor, builder, seller, officials of Group Housing Society etc. and verify the documents to their satisfaction, before disbursement of loan. 18) Criteria for approval of private builders and their projects (RBD Advances Circular No.33 dated 28.5.2007). 19) Risk weight on Housing finance. 35
  36. 36. 20) Checklist/ Documentation. 21) Classification of Housing finance under priority sector direct finance:- i. Housing loans:- Loans up to Rs. 20 lakhs to individuals for purchase/ construction of dwelling unit per family, (excluding loans granted by banks to their own employees) and loans given for repairs to the damaged dwelling units of families up to Rs. 1 lakh in rural and semi-urban areas and up to Rs. 2 lakhs in urban and metropolitan areas. ii. Indirect finance:- a) Assistance given to any governmental agency for construction of houses, exclusively for the benefit of SC/STs, where the loan component does not exceed Rs.5 lacs per unit and all advances for slum clearance and rehabilitation of slum dwellers. b) Assistance given to a non-governmental agency approved by the National Housing Bank (NHB) for the purpose of refinance will also be eligible for all the categories of borrowers as applicable to governmental agencies as priority sector advances. c) Investment in bonds issued by NHB/ HUDCO on or after April 1,2007, shall not be eligible for classification under priority sector lending. 23) Indirect Housing finance: general:- in terms of RBI guidelines, bank should ensure that their indirect housing finance is channeled by way of term loans to housing finance institutions, housing boards, other public housing agencies, etc., primarily for augmenting the supply of services land and constructed units, it should also be ensured that the supply of plots/ houses is time bound and public agencies do not utilize the bank loans merely for acquisition of land. Similarly served plots should be sold by these agencies to co-operative societies, professional developers and individuals with a stipulation that the houses should be constructed thereon within a reasonable time, not exceeding three years. For this purpose, the banks may take advantage of various guidelines issued by NHB for augmenting the supply of serviced land and constructed units. 36
  37. 37. B. Lending to Housing intermediary agencies a) Lending to housing finance institutions:- I. Banks may grant term loans to housing finance institutions taking in to account (long term) debt equity ratio, track record, recovery performance and other relevant factors. II. In terms of NHB guidelines, housing finance companies’ total borrowings, whether by way of deposits, issue of debentures/ bonds, loans and advances from banks or from financial institutions but including any loans obtained from NHB, should not exceed 16 times of their net owned funds (i.e. paid-up capital and free reserves less accumulated balance of loss, deferred revenue expenditure and intangible assets). III. In respect of housing finance companies, which are eligible to draw refinance from NHB, the quantum of term loan to be sanctioned to them will not be linked to net owned funds as NHB has already prescribed the above referred ceiling on total borrowings of housing finance companies. A list of housing finance companies approved by NHB for the purpose of refinance may be obtained directly from NHB or downloaded from www.nhb.org.in b) Lending to housing boards and other agencies:- the bank may extend term loans to state level Housing Boards and other public agencies. While extending the loans, bank must not only keep in view the past performance of these agencies in the matter of recovery from the beneficiaries but they should also stipulate that the Board will ensure prompt and regular recovery of loan installments from the beneficiaries. c) Financing of land acquisition:- the bank may extend finance to public agencies and not private builders for acquisition and development of land, provided it is a part of the complete project including development of infrastructure such as water systems, drainage, roads, provision of electricity, etc. such credit may be extended by way of term loans. The project should be completed as early as possible and, in any case, within three years, so as to ensure quick re-cycling of bank funds for optimum results. If the project covers construction of houses, credit extended thereof in respect of individual beneficiaries should be on the same terms and conditions as stipulated for direct finance. 37
  38. 38. d) Terms and conditions for lending to Housing intermediary agencies:- I. In order to enhance the flow of resources to housing sector, term loans may be granted by banks to housing intermediary agencies against the direct loan sanctioned/ proposed to be sanctioned by the latter, irrespective of the per borrower size of the loan extended by these agencies and such term loans would be reckoned for the purpose of achievement of their housing finance allocation. II. Banks can grant term loans to housing intermediary agencies against the direct loans sanctioned/ proposed to be sanctioned by them to Non-Resident Indians also. However, banks should ensure that housing finance intermediary agencies being financed by them are authorized by RBI to grant housing loans to NRI as all housing finance intermediaries are not authorized by RBI to provide housing finance to NRIs. Further, such finance granted by banks to housing finance intermediary agencies against the latters’ on –lending to NRIs will not be treated as housing finance for the purpose of scheme of yearly allocation of housing finance applicable to banks. III. The rate of interest on term loans extended by bank to housing finance intermediary agencies for on lending to Indian residents through L & A Circular from time to time. C. Term loans to private builders:- In view of the important role played by professional builders as providers of construction services in the housing field, especially where land is acquired and developed by State Housing Boards and other public agencies, bank may extend credit to private builders on commercial terms by way of loans linked to each specific project. However, the banks are not permitted to extend fund based or non-fund based facilities to private builders for acquisition of land even as a part of housing project. The period of credit for loans extended by bank to private builders may be decided by banks themselves based on their commercial judgement subject to usual safeguards and after obtaining such security as banks may deem appropriate. Such credit may be extended to builders of repute, employing professionally qualified personnel. It should be ensured, through close monitoring, that no part of such funds is used for any speculation in land. Care should be taken to see that prices charged from the ultimate beneficiaries do not include any speculative element, that is, prices should be based only on the documented price of land, the actual cost of construction and a reasonable profit margin. Bank may adhere to the National Building Code (NBC) formulated 38
  39. 39. by the Bureau of Indian Standards (BIS) in view of the important of safety of buildings especially against natural disasters. 24) Construction activities eligible for bank credit as finance:- The following types of bank credit will be eligible for being treated as housing finance:- i. Loans to individuals for purchase/ construction of dwelling unit per family and loans given for repairs to the damaged dwelling units of families. ii. Finance provided for construction of residential houses to be constructed by public housing agencies like HUDCO, Housing Boards, local bodies, individuals, cooperative societies, employers, priority being accorded for financing construction of houses meant for economically weaker sections, low income group and middle income group. iii. Finance for construction of educational, health, social, cultural or other institutions/ centres, which are part of a housing project and which are necessary for the development of settlements or townships. iv. Finance for shopping complexes, markets and such other centres catering to the day to day needs of the residents of the housing colonies and forming part of a housing project and; v. Finance for construction meant for improving the conditions in slum areas for which credit may be extended directly to the slum-dwellers on the guarantee of the government or indirectly to them through the state governments. vi. Bank credit given for slum improvement schemes to be implemented by Slum Clearance Boards and other public agencies. vii. Finance provided to- a. The bodies constituted for undertaking repairs to houses, and b. Owners of building/ house/ flat, whether occupied by themselves or by tenants, to meet the need based requirements for their repairs/ additions, after satisfying themselves regarding the estimated cost (for which requisite certificate should be obtained from an engineer/ architect, wherever necessary) and obtaining such security as deemed appropriate; 39
  40. 40. c. Housing finance provided by banks for which refinance is availed of from National Housing Bank. d. Investment in the guarantee/ non-guaranteed bonds and debentures of NHB/HUDCO in the primary market, provided investment in non- guaranteed bonds is made only if guaranteed bonds are not available. 25. Construction activities not eligible for bank credit:- I. Banks should not grant finance for construction of buildings meant purely for government/ semi-government offices, including Municipal and Panchayat Offices. However, banks may grant loans for activities, which will be refinanced by institutions like NABARD. II. Projects undertaken by public sector entities which are not corporate bodies (i.e. public sector undertakings which are not registered under Companies Act or which are not corporations established under the relevant statute) may not be financed by banks. Even in respect of projects undertaken by corporate bodies, as defined above, banks should satisfy themselves that the project is run on commercial lines and that bank finance is not in lieu of or to substitute budgetary resources envisaged for the project. The loan could, however, supplement budgetary resources if such supplementing was contemplate in the project design. Thus in the case of a housing project, where the project is run on commercial lines, and the government is interested in promoting the project either for the benefit of the weaker sections of the society or otherwise, and a part of the project cost is met by the government through subsidies made available and/or contributions to the capital of the institutions taking up the project, the bank finance should be restricted to an amount arrived at after reducing from the total project cost the amount of subsidy/ capital contribution receivable from the government and any other resources proposed to be made available by the government. III. Banks had, in the past, sanctioned term loans to corporations set up by government like State Police Housing Corporation, for construction of residential quarters for allotment to employees where the loans were envisaged to be repaid out of budgetary allocations. As these projects cannot be considered to be run on commercial lines, it would be in order for banks to grant loans to such projects. 40
  41. 41. 26) General:- While financing housing projects, if any need arises for obtaining a particular type of agreement, the same may be got approved by legal retainer locally available in consultation with respective Circle Head, and if necessary, by Law Department, HO New Delhi. 27) Tie up with PNB Housing Finance Ltd:- (RBDA/ 61 dt 26/12/08, 7 dt 19.01.09):- To avoid competition between PNB and PNB Housing Finance Ltd. (PNBHFL), the bank’s Board of Directors, in its meeting held on 16.12.2008, passed the following resolution: “resolved that PNB to enter into a tie up arrangement with PNB Housing Finance Ltd. Whereby Housing Loans upto Rs.30 lacs sourced by the branches of the bank will be passed to PNB Housing Finance for sanction and disbursement. This tie up between PNB and PNB Housing Finance Ltd. Shall be applicable only on the centres where the PNB Housing Finance Ltd. is present. On the remaining centres and for housing loans above Rs.30 lacs, the existing arrangement shall continue.” As per understanding reached between the two institutions, the branches at the centres where PNBHFL is present, will be passing on the housing loans upto Rs. 30 lacs, sourced by them, to the respective designate local branches of PNBHFL only. List containing addresses of PNBHFL is available at Annexure I of the Circular. Role of PNB branches as well as our Circle Offices for making this tie up success is also contained in Annexure ii of the circular. Clarification (RBDA 7 dt 19.01.09):- In this context, it is clarified that additional housing loans for additions/ repairs/ renovations etc. will, however, continue to be considered by our bank under ‘Hub & Spoke Model’ in cases where plot/ property is already mortgaged with the bank. Consideration of Housing Loan proposals by our branches through Hub & Spoke Model:- (RBDA/15 dt 19.02.09). In terms of RBD Advances Circular No.61 dated 26.12.2008, it is, inter alia, stipulated that the branches at centres where PNB Housing Finance Ltd. (PNBHFL) is present, would pass on the housing loans upto Rs.30 lacs, sourced by them, to the respective designate local branches of PNBHFL only, for sanction and disbursement. Further, in terms of RBD Advances Circular No.10 dated 28.01.2009, it was advised that advances under Special Housing Loan Scheme can be considered by all our branches (including branches at centres where PNB Housing Finance Ltd. Is present) under bank’s ‘Hub & Spoke Model’. Based on the references received from the field, it has now been decided that advances (including advances upto Rs.30 lacs) under bank’s regular Housing Finance 41
  42. 42. Scheme for public can also be considered by our branches through ‘Hub & Spoke Model’ at all centres (including centres where PNBHFL is present) for the period upto 30.6.2009. Accordingly, the leads generated at the branches for advances under the bank’s regular Housing Finance Scheme can now be forwarded to respective Hub/CCPC for consideration. Consideration of Housing Loan proposals by our branches through Hub & Spoke Model:- (RBD/35 dt 09.07.09):- Attention of all the concerned is invited towards RBD Adv.Cir.No.15 dated 19.2.2009 advising that advances (including advances up to Rs.30 lac) under bank’s regular Housing Finance Scheme for public can also be considered by our branches through Hub & Spoke Model at all centres (including centres where PNB HFL is present) for the period up to 30.6.2009. it has now been decided that housing finance (irrespective of any amount) may continue to be extended by our branches at all centres (including centres where PNB HFL is present) under bank’s ‘Hub & Spoke Model/CCPC’ Takeover of Housing Loans from PNBHL not to be done (RBDA/66 dt 31.12.08):- It has been decided that henceforth housing loan of PNB Housing Finance Ltd. will not be taken over by our branches. All concerned are advised to note the above guidelines for meticulous compliance. Takeover of housing loans from PNB Housing Finance Ltd to be done: (RBDA/25 dt 06.05.09):- Based on the feedback received from the field, the matter has been reviewed and it has been decided to permit take over of quality housing loans of PNB Housing Finance Ltd. as per extant guidelines. 42
  43. 43. T1 PNB special Housing Loan Scheme for new accounts under fixed option with re-set clause of five years (valid from 01.01.2009 to 30.06.2009):- (RBDA/64 dt 31.12.08, 8 dt 22.01.09, 14 dt 18.02.09):- A special housing loan scheme covering the following parameters has been approved by the bank:- Parameter Details Purpose The loan under the captioned scheme will be made available for all housing needs of borrowers e.g. construction of house or purchase of house/ flat and for carrying out repairs/ renovation/ additions/ alterations/ furnishing to the house/ flat. Cost of furnishing may, however, be included in the project cost maximum upto 10% of the amount of loan permissible for the purpose of repairs/ renovations/ additions/ alterations. Branches (RBDA 10 dt 28.01.09) Can be considered by all the branches (incl. branches at centres where PNB Housing Finance Ltd. Is present) under bank’s ‘Hub & Spoke Model’. Accordingly, the leads generated at the branches for advances under the above scheme can be forwarded to respective Hub/CCPC for consideration Min. amount of loan Rs.1.00 lac Max. amount of loan Rs.20 lacs Margin For loans with limit upto Rs.5 lacs -10% For loans with limit above Rs.5 lacs & upto Rs.20 lacs -15% Min. entry age 18 years Max. entry age 57 years Min. repayment tenor/ term 03 years Max. repayment tenor/ term 20 years 43
  44. 44. Max. repayment age 60 years (no power at any level to fix the repayment period beyond the borrower’s age of 60 years) Rate of interest (under fixed For loans with limit upto Rs. 5 lacs -8.50% p.a. option) For loans with limit above Rs. 5 lacs & upto Rs. 20 lacs -9.25% p.a. These rates are fixed for first five years. Re-set of interest rates will uniformly be on 01.07.2014 and thereafter every five years. The applicable interest rate will be 150 bps higher than the applicable interest rate for five years’ deposit or peak interest rate of deposit, whichever is higher prevailing at that time. Upfront/ Processing fee As applicable to bank’s regular Housing Finance Scheme (can be waived fully by sanctioning authority) Documentation charges As applicable to bank’s regular Housing Finance i.e. Rs.1350/- (excl. service tax)(can be waived fully by sanctioning authority) Life insurance Life insurance cover to be provided to borrower at bank’s cost, as per tie up arrangement entered into between the bank and LIC of India under Group Mortgage Redemption Insurance Scheme (GMRIS), as per details set out in Annexure i. the insurance cost is on one time single premium basis. The premium to be credited to a/c no.0153002100568733 “LIC Insurance Premium- PNB Special Housing Scheme” maintained in CBS system at BO Sansad Marg, New Delhi. Co-borrower To be permitted, only in case co-borrower agrees to go in for life insurance cover from LIC of India at his/her own cost under the aforesaid GMRIS. Bank will bear the cost of life insurance cover of only youngest person in joint accounts. Enhancement/ additional limit Not permitted. 44
  45. 45. Age proof Municipal Birth Certificate, School Leaving Certificate, Baptism Certificate, LIC Policy where age is admitted. Declaration of good health (DGH) Required in all cases (to be obtained in duplicate on format as per Annexure ii). One copy to be sent on the same day to controlling LIC branch (i.e. LIC of India, Divisional Office1, Pension & Group Schemes Unit, Jeevan Prakash, 6th Floor, 25- Kasthurba Gandhi Marg, New Delhi-110001 Tel No. 011-23354037, Fax 23350832 Contact Person: Shri Sunil Kumar: Mobile No. 9718282823) e-mail Id bo_g103@licindia.com and another copy be kept with Loan documents at the disbursing branch. Pre-payment charges NIL Take over/ swapping of loan Not allowed. documentation As per extant guidelines. However, Housing Loan Agreement under the captioned Scheme will be obtained/ got executed, as per the revised format available as per Annexure iii. Validity of the scheme 01.01.2009 to 30.06.2009.it should be ensured that all the cases including those requiring medical examination are sanctioned and disbursed before 30.06.2009. MIS Information as per Annexure iv to be sent to the aforesaid controlling office of LIC on weekly basis on every Friday. In case of NIL information, MIS need not be sent. (failure to observe this time schedule will invite penal action). Other terms & conditions/ guidelines of the scheme for providing housing loans to public, as contained in RBD Advances Circular No.40 dated 12.09.2008 followed by various 45
  46. 46. circulars on the subject, shall remain unchanged and are applicable to the captioned scheme as well. The captioned scheme is for new accounts sanctioned and availed from 01.01.2009 to 30.06.2009 and will run concurrently with the existing regular Housing Loan Schemes. Hence, any account not fulfilling to the norms of the captioned scheme can be covered in bank’s existing Housing Loan Schemes, on the terms and conditions set out therein. The sanctioning authority will ensure due diligence for sanction of loan. The detailed terms of the aforesaid Insurance Plan of LIC along with premium rates per Rs.10000/- of loan amount (separate for rate of interest 8.50% & 9.25%) are available as per Annexure V & VI of the circular. T2 Guidelines of medical examination:- (RBDA/8 dt 22.01.09):- based on clarifications received from Life Insurance Corporation of India (LIC), guidelines under the head ‘medical examination’ have been revised as under:- Loan amount/ sum assured Upto age 55 years Above age 55 years to 57 years Upto Rs.5 lacs Medical examination not Medical examination not required. Only required. Only DGH be Declaration of Good obtained along with Health (DGH) be information as per Short 46
  47. 47. obtained. Medical Questionnaire (SMQ) proforma attached. Above Rs.5 lacs & upto -do- Medical examination will be Rs.10 lacs mandatory, before sanction & disbursement of loan as per LIC rules. This medical examination includes full medical report from LIC examiner and FBS & ECG from any qualified doctor. Above Rs. 10 lacs & upto -do- Medical examination will be Rs. 20 lacs mandatory, before sanction & disbursement of loan as per LIC rules. This medical examination includes full medical report from LIC examiner and FBS, TMT & Lipid Profile from any qualified doctor. In case applicant is not found medically fit, as per the rules of LIC, he/ she will not be eligible for housing loan under the scheme. Functional guidelines regarding opening of account with new interest rate code:- (RBDA/14 dt 18.02.09):- Functional guidelines regarding opening of account with new “interest rate code”. Under the above scheme in the system and debit of Insurance premium were also advised in terms of IT Division Circular No. ITD/CBS/03/2009 dated 09.01.2009. In terms of the said circular of IT Division, it is, inter alia, advised as under:- That while opening the account under scheme code ‘TLPHL’ one of the following two interest codes (according to sanctioned limit of housing loan) will be assigned in “int. rate code’ field in general details: 47
  48. 48. 1) SHR05- loan with sanctioned limit upto Rs.5.00 lacs (8.50%); 2) SHR20- loan with sanctioned limit above Rs.5 lac & upto Rs.20 lacs (9.25%) That the new mode of Advance “DIHRS’ (DIRECT ADV. UNDER PNB SPL. HOUSING RATE SCHEME)” will be assigned in the ‘v’ details of the a/c, besides other mandatory codes. It has been noticed that the above guidelines regarding assignment of new interest rate codes and the new mode of advance code, as above, are not being followed meticulously, leading to generation of wrong MIS reports/ opening of accounts with wrong interest codes. Since interest rates under the above scheme are subject to reset on 01.07.2014 and thereafter every five years, opening of accounts under the captioned scheme with wrong interest codes will create avoidable problems at later stage. EARNEST MONEY DEPOSIT SCHEME (RBD 8/02, 17/04, 25/04, 42 DT 7/12/06) PURPOSE: For meeting earnest money deposit (EMD) requirements to apply for allotment of plot/ flat/ house under the schemes floated by State Housing Boards (SHB)/ Urban Development Authorities (UDA) ELIGIBILITY: Individuals/ joint owners, where SHB/ UDA undertakes to give Refund order/ allotment letter/ Forfeited amount in full to our bank subject to eligibility of the applicant for the proposed loan and future requirement for housing loan under our existing Housing Loan Scheme. 48
  49. 49. AMOUNT: 90% of EMD in case of House/ flat/ plot/ land, subject to maximum of Rs.2.00 lacs (25/04) ROI: BPLR minus 1.75%. Further, ZM & above may reduce it further maximum by 1% on merits of specific proposals of State Housing Boards/ urban development authorities etc. (Power for reduction not specified vide RBD 32/08). REPAYMENT: I. Unsuccessful applicants- by refund order. II. Successful applicants, a. Eligible and interested for housing loan- by housing loan, b. For others- through bullet payment. GUARANTEE: Clause deleted vide RBD 5/05 dt 12/1/05 DISBURSEMENT: Direct to SHB/ UDA along with application on behalf of borrowers. LOANING POWERS: Incumbents of authorized branches (station wise) as per orders of Circle Head after entering into MOU with SHB/ UDA. DOCUMENTS: i. Application- 1054, with suitable amendments, ii. Agreement – Annexure-24, iii. Guarantee deed- 58, iv. Consent letter for refund- annexure-25 v. UPFRONT FEE/ REMITTING CHARGES. 49
  50. 50. vi. MULTIPLE FINANCING: (RBDA/42 dt 7/12/06):- Recently, cases of multiple financing under the scheme have come to notice, thereby permitting finance by the branches for more than one application to individual applicant under the same Housing scheme of State Housing Board/ Development Authority. The issue has been examined at RBI’s level and it is felt that it is not prudent on the part of any bank to sanction multiple loans to an individual for applying for the same plot/ flat. RBI has, therefore, advised that necessary care be exercised in respect of such matters in future. OD FACILITY TO EXISTING HOUSING LOAN BORROWERS FOR PERSONAL NEEDS (RBD 19 dt 8/8/05, 10/07, 45/07, 9/08, 47/08, 43/09) Offer of the scheme: existing borrowers fulfilling the criteria be offered to avail the facility as per their eligibility on execution of documents. ELIGIBILITY: All existing housing loan borrowers having satisfactory repayment track record of minimum of past 24 months. All terms & conditions of sanction should have been fulfilled and no IR irregularity should be outstanding which has been identified as serious in nature. 50
  51. 51. NATURE: For personal needs in the shape of OD limit. AMOUNT: Minimum Rs 50000/- & maximum Rs 5.00 lacs. Subject to additional OD limit proposed and current outstanding in existing housing loan account should be maximum 75% is the current realizable value of the house so as to maintain a minimum margin of 25%. (RBD 45/07). It is clarified that the current realizable value of the housing property is to be taken into account, for the above purpose--- RBD 9 dt 03.03.08. Continuation of OD limit after adjustment of housing loan:- (RBD/ 47 dt 23.09.08):- References have been received from the field enquiring as to whether the said overdraft facility can be continued/ renewed even after adjustment of Housing loan a/c in full. In this context, it is clarified that after the Housing loan is paid fully, the overdraft facility can be continued/ renewed, provided the sanctioning authority us satisfied about the repaying capacity of the borrower and the value of security. RATE OF INTEREST: BPLR minus 1%. SECURITY: Extension of charge on existing IP mortgaged. REVIEW: The facility be reviewed annually. OD be set up in such a manner that take home salary should not be less than 40%of net salary after servicing of interest in case of salaried borrowers. In others cases, income should be sufficient to service the interest. Income of co- borrowers/ joint borrower etc taken for the purpose of eligibility at the time of sanction of housing loan should also be considered for this purpose. Upfront fee/ Documentation charges. LOANING POWERS: Small- NIL; MB- 4 lacs; LB- 5 lacs; CM & above- 5 lacs. The powers can be exercised even if existing facilities have been sanctioned by a higher authority. Documentation: i. Offer letter- Annexure- I duly acknowledged and accepted on the “terms and conditions of the sanction; ii. OD agreement- Annexure- ii; iii. Mortgage deed- Annexure iii; iv. EM for enhanced amount of OD. 51
  52. 52. Other guidelines: In case interest is not serviced within 7 days of the close of the close of the month, the borrower shall be liable to pay penal interest @ of 2% over and above the applicable rate on the amount of default and for the period of default. An undertaking to this effect be obtained from the borrower. Borrower shall be allowed to route his surplus funds from the OD account upto the extent of the limit. OD to borrowers where construction has not yet completed” (RBDA/43 dt 21.08.09):- Reference has been received seeking clarification whether the above- said facility can be extended to the existing housing loan borrower who has availed the housing loan for purchase of plot but construction thereon has not yet been commenced/ completed. It is clarified that overdraft facility for personal use should not be sanctioned to the borrowers, who have availed loan for purchase of plot, construction on which is yet to be completed. Marketing efforts: (RBDA/ 10 dt 13/2/07) Under “overdraft facility to existing housing loan borrowers”, branches will, however, make the offer in writing to all the existing housing loan borrowers, who fulfill the relevant criteria of the said offer, that an overdraft limit has been set up in his/ her/ their favour as per eligibility, which can be availed after execution of documents. PNB FLEXIBLE HOUSING LOAN (RBD 33/04 DT 18/10/04, 45/07) OBJECTIVE: The objective of the scheme is to offer attractive variant to the customer in which he will deposit his savings and withdraw it at his choice upto the extent of OD limit. All terms and conditions of housing loan scheme for public, except as detailed hereunder shall be complied with. ELIGIBILITY: Customers under 50 year of age are eligible. The existing customers are also permitted for changeover if eligible for the variant and pay the upfront fee and documentation 52
  53. 53. charges. Earlier loan be adjusted through the proceeds of this loan & present outstanding be taken into consideration for conversion of loan under this variant. PURPOSE: Purposes specified under Housing Loan scheme for public except for purchase of land/ plot. However, when the borrower is having undertaken construction, loan be allowed on his request. MARGIN: 25% (RBD 45 dt 11.10.07). EXTENT OF LOAN: 20% increase in original total limit be allowed for personal needs after 5 years on written request of the borrower subject to his repaying capacity and good repayment track record. The increase will be subject to market value of the property and margin of 25% shall be maintained at all levels. The increase can be allowed in the form of TL or OD facility as per the choice of the borrower in writing but the OD component in totality should not exceed 50% of the total limit. NATURE OF FACILITY: TL- 80%; OD- 20%. Two separate accounts be opened for both the facilities, suitable EMI be prescribed and EMI cheques be obtained. If 20% increase after 5 years is allowed in the shape of Term Loan, 2nd TL account be opened and separate EMI cheques be obtained. Similarly EMI cheques covering interest component of this limit be obtained. Separate documents be obtained for enhanced portion. Maintenance of separate account for personal needs is also necessary to ensure that interest component on Housing Loans is calculated easily for the purpose of issuance of Interest Certificate required by the borrower for claiming the benefit available under Income Tax Provisions. Further on attaining the age of 55 years the OD facility shall be allowed on monthly reducing DP basis with reduction commences from the month following the month when the customer attains the age of 55 years so as to ensure that whole of the OD limit including TL is adjusted by the age of 65 years. Other conditions: I. Over the period of the loan, the OD limit will be enhanced on regular basis at yearly intervals. II. The enhancement in OD be allowed upto the reduction of term loan. 53

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