1. A
PRESENTATION ON
ASSET-BASED RETAIL
FINANCIAL
SERVICES

2. Personal Finance
 Personal Finance represents the credit facilities provided by banks
and financial institutions to the individual customers.
 The coverage under personal finance differs from bank to bank.
 Examples:
 Employees Stock Option Scheme
 Housing Loan
 Holiday Travel Loan
 Car Loan
 Education Loan
 Personal Loan
 Property Loan etc..

3. Contd…
 The amount of loan falls within the range of Rs.20000 to Rs.
1500000 depending on the salary or income of the borrower.
 The personal loans are granted to any customer or non-customer if
the bank is satisfied with the repayment capacity of the borrower.
 Installments can be paid by depositing post dated cheques,
Authorisation to debit the amount to the borrower’s savings/current
account, Authorisation to transfer interest on term deposits to the
loan account, Authorisation to deduct the installment from the salary
by the employer and remit to the bank etc.
 The interest varies from bank to bank, Normally, banks allow 12
months to 60 months for repayment.
 Apart from interest, banks also charge one time processing fee
ranging from 1% to 3% of the amount of loan.

4. Contd…
 If the post dated cheques bounce, banks charge 2% to 3% interest
per month as penalty.
 Generally, Personal loans are unsecured as in most cases there is
no primary security.
 Therefore, many banks demand some security in the form of
property, gold ornaments, third party guarantee etc.
 Some banks instead of third party guarantee, insist that another
person should join as co-obligant.
 The documentation is simple as it contains only a promissory note,
a loan agreement and a guarantee deed signed by the guarantors,
if any.

5. Consumer Finance
 Consumer Finance is provided by banks to acquire consumer
durables such as refrigerator, Television, furniture etc.
 The primary security is the item purchased out of the loan.
 Banks do not lend the full value of the assets, but they deduct a
margin varying from 10% to 25% which the borrower has to remit in
advance.
 Generally, the payment is made directly to the supplier.
 The supplier will send the receipt with a copy of the invoice to the
bank.
 The borrower has to execute an agreement on stamp paper of
required value and a demand promissory note.
 The bank may demand for some security also, other than primary
security.
 If there are guarantors to the loan a letter of guarantee is also
obtained from the guarantors.

6. Contd…
 Instead of guarantors, if the bank is taking co-obligants, they will
sign the documents with the borrower.
 The payment may take place by post dated cheques, deducting the
installment amount from salary of the customers by entering into
contracts with their employers.
 Different banks offer different rates of interest depending on their
cost of funds and operating expenses.

7. Housing Finance
 In India, Housing finance received major focus among the banking
activities with the establishment of the National Housing Bank
(NHB) in 1988 under the National Housing Bank Act 1987.
 RBI transfers the right of financing housing loans to NHB which was
previously done by Rural Planning and Credit Department (RPCD).
 Housing Finance received national attention in 1979 with RBI’s
Housing Finance Scheme.
 Thereafter, RBI revised the guidelines and it gives instructions to
Commercial Banks for providing Housing Finance.
 Housing Loans can be provided as
1. Direct Loans
2. Indirect Loans

8. Contd…
 The housing loan of different financing agencies differs with regard
to the quantum, interest rate, margin requirements etc.
 Some of the common features are:
1. Eligibility
2. Amount of Loan
3. Period of Loan
4. Repayment
5. Purposes of providing Housing Finance:
 For buying or constructing second house for self occupation
 For buying or constructing the house to give it on rent.
 To buy the house in which he/she is residing as tenant.
 For the purpose of repair and renovation.
 To purchase the house which is taken under hire purchase
scheme, etc.

9. Contd…
6. Security
7. Cost of Borrowing
8. Documentation
9. Financial Institutions providing Housing Finance:
 Canfina of Canara Bank
 SBI Housing of SBI
 PNB Housing of PNB
 HUDCO(Housing & Urban Development Corporation)
 HDFC (Housing Development and Finance Corporation)
 Insurance Companies like LIC, GIC etc.

10. Residential Mortgage Backed Securities
(RMBS)
 Mortgage backed securities market is getting more response due to
its ability to provide immediate cash flow and thereby increase the
return.
 In India, the mortgage backed securities got entry into the Housing
Finance sector thanks to the initiative of National Housing Bank.
 The transactions in the Housing Finance sector can be classified
into ‘Primary residential mortgage market’ and ‘Secondary
residential mortgage market’.
 The primary residential mortgage market comprises of the primary
lenders who provide housing loans to borrowers. They are in direct
contact with the borrower and hold the security by way of mortgage
of the house property.
 The secondary residential mortgage market is securitisation of
housing loan installments.