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Poject on retail banking (garima) latest(1) amit


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Poject on retail banking (garima) latest(1) amit

  1. 1. A PROJECT REPORT ON ―RETAIL BANKING‖Submitted In Partial Fulfillment of The Requirement For The Award Of The Degree of Master of Management Studies (MMS) of The Mumbai University SUBMITTED BY- MISS. GARIMA K. MISHRA 107 (B) SUBMITTED TO- Dr. G. D. POL FOUNDATION YMT COLLEGE OF MANAGEMENT, KHARGHAR MUMBAI UNIVERSITY 2011-13 1
  2. 2. DECLARATIONI, MISS GARIMA K. MISHRA the undersigned, hereby declare that the project report entitled―RETAIL BANKING‖ written and submitted by me to the University of Mumbai, in partialfulfillment for the award of degree of Master in Management Studies (MMS) under the guidanceof Prof. Mrunal is my Original work and the conclusion drawn therein are based materialscollected by myself.Place: Kharghar, Navi Mumbai [GARIMA MISHRADate: 2
  3. 3. CERTIFICATECertified that the project entitled ―RETAIL BANKING‖ was carried out by MISS GARIMAMISHRA (MMS),Bonafide student of YMT COLLEGE OF MANAGEMENT – KHARGHAR duringthe year 2011-13.It is Certified that all correction/suggestions indicated for Internal Assessment have beenincorporated in the Report.The project report has been approved as it satisfies the academic requirements in respect ofproject work prescribed for the said SUMMER INTRNSHIP PROJECT.Signature of Coordinator Signature of Director 3
  4. 4. ACKNOWLEDGEMENTThe satisfaction and completion of this project would be incomplete without mentioning thepeople who guided me on this explore.I express my thanks to YMT COLLEGE OF MANAGEMENT, KHARGHAR which provided mean opportunity to do this project.I take this opportunity of expressing my sincere thanks to our Director Mr. C. Babu forproviding me a congenial environment, which has nurtured me to complete this project, andproviding all the necessary facilities during the course of my project.I would like to thank Prof. Mrunal, YMT COLLEGE OF MANAGEMENT, KAHRGHAR and Ms.Rohini Scale -1 officer BANK OF INDIA, Ghansoli Branch who has been the guiding light,advising with the topic‘s relevance and scheduling the respective project.Last but not least; I would like to thank my family who has helped me directly or indirectly in allpossible ways for success of the project.Through this study I have learnt a lot about the Retail Banking as a whole and hope that thisstudy will help all those people who are already or planning to apply for loan to meet their needand demand. 4
  5. 5. TABLE OF CONTENTSSr no. Contents Page no. Chapter- 1 Introduction 1.1 General Introduction 5 1.2 History 6 1.3 Profile Of The Organization 7 Chapter- 2 Objectives 2.1 Objectives Of The Study 8 2.2 Data Collection 9 Chapter- 3 Contents 3.1 Analysis And Interpretation 10-37 Chapter- 4 Findings And Conclusion 4.1 Findings 38 4.2 Suggestion 39 4.3 Conclusion 40 Chapter- 5 Annexure 5.1 Bibliography 41 5
  6. 6. INTRODUCTION OF BANKING SECTOR:Banking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;both are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated in the Bank of Calcutta in June 1806, which almost immediately became the Bank ofBengal. This was one of the three presidency banks, the other two being the Bank of Bombayand the Bank of Madras, all three of which were established under charters from the British EastIndia Company. For many years the Presidency banks acted as quasi-central banks, as did theirsuccessors. The three banks merged in 1921 to form the Imperial Bank of India, which, uponIndias independence, became the State Bank of India in 1955.The Indian economy is emerging as one of the strongest economy of the world with the GDPgrowth of more than 8% every year. This has given a great support for the development ofbanking industry in the country. Due to globalization, competition among the banks hasdrastically been increased. As India has a substantial upper and middle class income hence thebanks have immense opportunities to increase their market shares. The consumer being on thereceiving end is in the comfortable position but the banks trying to increase their market sharehave to continuously add value for consumers in order to increase market share and sustaintheir growth.The banking sector is the most dominant sector of the financial system in India. Significantprogress has been made with respect to the banking sector in the post liberalization period. Thefinancial health of the commercial banks has improved manifolds with respect to capitaladequacy, profitability, and asset quality and risk management. Further, deregulation hasopened new opportunities for banks to increase revenue by diversifying into investmentbanking, insurance, credit cards, depository services, mortgage, securitization, etc.Liberalization has created a more competitive environment in the banking sector 6
  7. 7. AN OVERVIEW OF BANKING:A bank is a government –licensed financial institution whose primary activity is to act as apayment agent for customer and to borrow and lend money at differing maturities. It is aninstitution for receiving, keeping, and lending money at interest. In order to make profits, modernbanks generally ―borrow short and lend long‖ (i.e. take money from depositors and lend thatmoney for longer term projects).Many other financial activities were added over time. For example banks are important playersin financial markets and offer financial services such as investment funds. In some countriessuch as Germany, banks are the primary owners of industrial corporations. In Japan, banks areusually the nexus of a cross- share holding entity known as the Zaibatsu. In France,bancassurance is prevalent, as most banks offer insurance services (and now real estateservices) to their clients.TRADITIONAL ACTIVITIES OF A BANKBanks act as payment agents by conducting checking or current accounts for customers, payingcheque drawn by customers on the bank, and collecting cheques deposited to customers‘current accounts. Banks also enable customer payments via other payment methods such astelegraphic transfer, and ATM. Banks borrow money by accepting funds deposited on currentaccounts, by accepting term deposits, and by issuing debt securities such as banknotes andbonds. Banks lend money by making advances to customers on current accounts, by makinginstallment loans, and by investing in marketable debt securities and other forms of moneylending. Bank provides almost all payment services, and a bank account is consideredindispensable by most businesses, individuals and governments.BANKING STRUCTURE OF INDIABanking in India originated in the last decades of the 18th century. The oldest bank in existencein India is the State Bank of India, a government-owned bank that traces its origins back to June1806 and that is the largest commercial bank in the country. Central banking is the responsibilityof Reserve Bank of India, which in 1935 formally took over these responsibilities from the thenImperial Bank of India, relegating it to commercial banking functions. After India‘s independencein 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the governmentnationalized the 14 largest commercial banks; the government nationalized the six next largestin 1980. Currently, India has 88 scheduled commercial banks (SCBs)- 27 public sector banks(that is with the government of India holding a stake), 31 private banks (these do not havegovernment stake; they may be publicly listed and traded on stock exchanges) and 38 foreignbanks. They have a combined network of over 53,000 branches and 17,000 ATMs. According toa report by ICRA limited =, a rating agency, the public sector banks hold over 75 percent of totalassets of the banking industry, with the private and foreign banks holding 18.2% and 6.5%respectively. 7
  8. 8. OBJECTIVE OF THE STUDYMy study project is based on following objectives.1. To study the Loan Assessment System in Bank.2. To study the Loan Assessment System between PSU and Private Sector Bank.3. To study Retail Banking.Data Collection: My project is a study project, it is totally based on proposal which bankprovides. Data collection is mainly based on secondary sources. The secondary sources of datacollection are given below:Secondary Sources: It includes bank records, past data records, internet sources and books. Bank Records Internet Proposals 8
  9. 9. Data AnalysisThe data will be analyzed by reading the various proposal of accepting the proposal or providingloan facilities to the customer. I shall use different analytical tool to accomplish the job. Eachbank use different policy for sanction of loan proposal. By reading proposal which bank providefor study I came to know the criteria which Bank of India used for accepting loan proposal ofindividual or small and medium size enterprises.Reserve Bank of IndiaThe Reserve Bank of India (RBI) is Indias central banking institution, which controls themonetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj inaccordance with the provisions of the Reserve Bank of India Act, 1934. The share capital wasdivided into shares of ₹100 each fully paid which was entirely owned by private shareholders inthe beginning.[2] Following Indias independence in 1947, the RBI was nationalized in the year1949.The RBI plays an important part in the development strategy of the Government of India. It is amember bank of the Asian Clearing Union. The general superintendence and direction of theRBI is entrusted with the 20-member-strong Central Board of Directors—the Governor (currentlyDuvvuri Subbarao), four Deputy Governors, one Finance Ministry representative, tenGovernment-nominated Directors to represent important elements from Indias economy, andfour Directors to represent Local Boards headquartered at Mumbai, Kolkata, Chennai and NewDelhi. Each of these Local Boards consist of five members who represent regional interests, aswell as the interests of co-operative and indigenous banks.Central Board of DirectorsThe Central Board of Directors is the main committee of the central bank. The Government ofIndia appoints the directors for a four-year term. The Board consists of a governor, four deputygovernors, fifteen directors to represent the regional boards, one from the Ministry of Financeand ten other directors from various fields.GovernorsThe current Governor of RBI is Duvvuri Subbarao. The RBI extended the period of the presentgovernor up to 2013. There are four deputy governors, currently K. C. Chakrabarty, SubirGokarn, Anand Sinha and Harun Rashid Khan.Deputy Governor K C Chakrabartys term hasbeen exteded further by 2 years. 9
  10. 10. Functions of Reserve Bank of IndiaBankers’ Bank and Lender of the Last ResortThe scheduled banks can borrow from the Reserve Bank of India on the basis of eligiblesecurities or get financial accommodation in times of need or stringency by rediscounting bills of 10
  11. 11. exchange. Commercial banks can always expect the Reserve Bank of India to come to theirhelp in times of banking crisis. Hence they have been termed as the ―lender of last resort‖. TheReserve Bank stipulates that the commercial banks maintain the reserves in the form of SLRand CRR for the same purpose.Controller of CreditThe Reserve Bank of India is the controller of credit i.e. it has the power to influence the volumeof credit created by banks in India. It can do so through changing the Bank Rate or throughopen market operations. According to the Banking Regulation Act of 1949, the Reserve Bank ofIndia can ask any particular bank or the whole banking system not to lend to particular groups orpersons on the basis of certain types of securities. Since 1956, selective controls of credit areincreasingly being used by the Reserve Bank.Every bank has to get a license from the Reserve Bank of India to do banking business withinIndia. The Reserve Bank has also the power to inspect the accounts of any commercial bank.As supreme banking authority in the country, the Reserve Bank of India, has the followingpowers: (a) It holds the cash reserves of all the scheduled banks. (b) It controls the credit operations of banks through quantitative and qualitative controls. (c) It controls the banking system through the system of licensing, inspection and calling for information. (d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.Custodian of Foreign ReservesAs the Central Bank is the custodian of the country‘s foreign exchange reserves it is vested withthe responsibility of managing the investments and utilization of the reserves in foreignexchange. It acts as the custodian of India‘s reserve of international currencies. The ReserveBank of India has the responsibility to maintain the official rate of exchange. It manages theinvestment of reserves in gold accounts abroad and the shares securities issued by foreigngovernments and international banks or financial institutions.Supervisory FunctionsIn addition to its traditional central banking functions, the Reserve Bank has certain non-monetary functions of the nature of supervision of banks and promotion of sound banking inIndia. The Reserve Bank Act, 1934 and the Banking Regulation Act, 1949 have given the RBIwide powers of supervision and control over commercial and co-operative banks, relating tolicensing and establishments, branch expansion, liquidity of their assets, management and 11
  12. 12. methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorized tocarry out periodical inspections of the banks and to call for returns and necessary informationfrom them. The nationalization of 14 major Indian scheduled banks in July 1969 has imposednew responsibilities on the RBI for directing the growth of banking and credit policies towardsmore rapid development of the economy and realization of certain desired social objectives. RETAIL BANKINGINTRODUCTION―Retail Banking is a banking service that is geared primarily toward individual consumers. Retailbanking is usually made available by commercial banks, as well as smaller community banks.Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail bankingentities provide a wide range of personal banking services, including offering savings andchecking accounts, bill paying services, as well as debit and credit cards. Through retailbanking, consumers may also obtain mortgages and personal loans. Although retail banking is,for the most part , mass-market driven, many retail banking is streamlined electronically viaAutomated Teller Machines (ATM‘s), or through virtual retail banking known as online banking.‖―Retail Banking deals with lending money to consumers. This includes a wide variety of loans,including credit cards, mortgage loans and auto loans, and can also be used to refer to loanstaken out at either the prime rate or subprime rate.‖―Retail Banking refers to banking in which banking institution execute transactions directly withconsumers, rather than corporations or other entities.‖Banking services offered to individual customers such as savings accounts, personal loans,remittance services .Pure retail banking is generally conceived to be the provision of massmarket banking services to private individuals. It has been expanded over the years to include inmany cases services provided to small-and medium sized business. Some banks may alsoinclude their ―private banking‖ business (i.e. services to high net worth individuals) in theirdefinition of retail banking.CHRACTERISTICS OF RETAIL BANKING 1. Banking facilities targeted at individual customers. 2. Focused towards mass market segment covering a large population of individuals. 12
  13. 13. 3. Offer different liability, asset and service products to the individual customers. 4. The delivery model of retail banking is both physical and virtual i.e. services are extended through branches and also through technology driven electronic off site delivery channels like ATM‘s, internet banking and mobile banking. 5. Extended to small and medium size business.ADVANTAGES OF RETAIL BANKING 1. Client base will be large and therefore risk is spread across the customer base. 2. Customer Loyalty will be strong and customers tend not to change from one bank to another very often. 3. Attractive interest spreads since spreads are wide, since customers are too fragmented to bargain effective; credit risk tends to be well diversified, as loan amounts are relatively small. 4. There is less volatility in demand and credit cycle than from large corporate. 5. Large numbers of clients can facilitate marketing, mass selling and the ability to categories / select clients using scoring system/ data mining.CONSTRAINTS OF RETAIL BANKINGThough retail banking as a segment has a number of embedded advantages, the segmentsuffers from constraints also. A few of the constraints are listed below: 1. Problems in managing large numbers of clients, especially if IT systems are not sufficiently robust. 2. Rapid evolution of products can lead to IT complications. 3. The cost of maintaining branch networks and handling large numbers of low-value transactions tend to be relatively high. (For this reason banks are encouraging clients to use cheaper distribution channels, such as ATMs, the telephone or internet for these transactions and reserve the branches for higher added value transactions). 4. Higher delinquencies especially in unsecured retail loans and credit card receivables. 13
  14. 14. PRODUCTS IN RETAIL BANKING* Indian retail credit* Housing finance* Auto finance* Consumer durable loan* Educational loan* Other personal loans* Credit cards* InsuranceDEFINING RETAIL BANKING ACTIVITYRetail banking activity is commonly understood to comprise:• banking services for consumers (individuals/private households) and• banking services for small- and medium-sized enterprises (SMEs).The delineation of each of these two segments, however, is not standardized by, for instance anomenclature for central banks‘ statistics or other official databases. The inclusion or exclusionof customer categories from these segments depends, to a large extent, on cultural habits,market developments or the individual business strategies of banks. In some countries orspecialized banks,For example, services for wealthy individuals and households fall under the so-called segmentof private banking. Moreover, whether a certain size category of SMEs belongs to the segmentof retail banking or the segment of corporate banking varies from bank to bank. In order toreduce this complexity, the Authority has used the following definitions for the purposes of thesector inquiry:• Personal banking, i.e. banking products and services for consumers including currentaccounts (and related services such as ATM, direct debit and credit transfers), sight depositsand other savings accounts, credit lines/overdrafts (no limits on individual asset size) andconsumer loans;• Business banking, i.e. banking services for enterprises up to a maximum turnover of EUR 10million annually and including services such as current accounts, term loans and credit lines.This report, following industry and literary usage, will also use the term ‗SME banking‘ or ‗SMEcustomers‘ for this sub-segment. In carrying out the inquiry and, for instance, addressingcomprehensive questionnaires to banks in the EFTA States, the Authority has not applied a rigiddefinition within these general parameters. This approach has allowed for individually flexibledefinitions, for example by accepting the banks‘ own definition of SME business even wherethey may be narrower in scope. 14
  15. 15. RETAIL BANKING PRODUCT AND SERVICES:Within the two segments mentioned above, the Authority has focused on the following mainproducts:• Within the segment of banking services for consumers, three sets of retail banking productsform the core of the sector inquiry: i) Current accounts – the bank account which individuals use for most of their household transactions such as receiving wages or paying bills. ii) Deposit accounts – an account which individuals use for saving. The accounts provide instant (‗sight deposits‘) or time-limited (‗time deposits‘) access to funds. iii) Consumer term loans – a loan account operating for a specified time period, which is used to fund personal or household consumption.In addition to these three sets of products, the sector inquiry has also taken some account ofother retail banking products for individuals such as payment cards, mortgages and investmentfunds.• The analysis of banking services for small enterprises (SMEs) focuses on: i) Current accounts – the bank account which SMEs use for the bulk of the payments they make and receive. ii) Term loans - a loan account operating for a specified time period, which an SME uses to finance its business expenditure. iii) Credit lines – an open-ended facility which incorporates the credit element of a loan – enabling SMEs to draw down finance – and the flexibility of a current account for making and receiving payments.In addition to these three sets of products, the sector inquiry has also taken some account ofother products for SMEs such as leasing (which involves a bank‘s paying for part or all of thecost of a capital asset for an SME and the bank then leases this asset to the SME). Togetherwith the retail banking products specified above, the sector inquiry also analyses paymentssystems, since they form the core of money transmission services in personal and SMEbanking, and are significant structures within the retail banking sector as a whole. 15
  16. 16. DRIVERS OF RETAIL GROWTH:CHANGING CONSUMER DEMOGRAPHICS Growing disposable incomes Youngest population in the world Increasing literacy levels Higher adaptability to technology Growing consumerism Fiscal incentives for home loans Changing mindsets-willingness to borrow/lend Desire to improve lifestyles Banks vying for higher market shareFUTURE OF RETAIL BANKING: The accelerated retail growth has been on a historically low base Penetration continues to be significantly low compared to global bench marks. Share of retail credit expected to grow from 22% to 36%. Retail credit expected to grow to Rs.575000 cr. by 2010 at an annual growth rate of 25%. Dramatic changes expected in the credit portfolio of Banks in the next 5 years. Housing will continue to be the biggest growth segment, followed by Auto loans. Banks need to expand and diversify by focusing on non urban segment as well as varied income and demographic groups. Rural areas offer tremendous potential too which needs to be exploited.CHALLENGES: Sustaining Customer loyalty NPA reduction & Fraud prevention Avoiding Debt Trap for customers Bringing Rural masses into mainstream banking 16
  17. 17. INTRODUCTION OF BANK OF INDIA:Bank of India was founded on September 7, 1906 by a group of eminent businessmen fromMumbai. In July 1969 Bank of India was nationalized along with 13 other banks.Beginning with a paid-up capital of Rs.50 lakhs and 50 employees, the Bank has made a rapidgrowth over the years. It has evolved into a mighty institution with a strong national presenceand sizable international operations. In business volume, Bank of India occupies a premierposition among the nationalized banks.Presently, Bank of India has 2609 branches in India spread over all states/ union territoriesincluding 93 specialized branches. These branches are controlled through 48 Zonal Offices.Bank of India has several firsts to its credit. The Bank has been the first among the nationalizedbanks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch atMumbai way back in 1989. It pioneered the introduction of the Health Code System in 1982, forevaluating/ rating its credit portfolio. Bank of India was the first Indian Bank to open a branchoutside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in1974. The Bank has sizable presence abroad, with a network of 23 branches (including threerepresentative offices) at key banking and financial centers viz. London, New York, Paris,Tokyo, Hong-Kong, and Singapore. 17
  18. 18. DIFFERENT TYPES OF LOAN FACILITIES PROVIDED BY BANK OF INDIA: Star Mitra Personal Loan: It is special loan scheme for physically challenged people to purchase durable and sophisticated appliances that promote their social and physical rehabilitation. Star Pensioner Loan Scheme: 1. It is a loan scheme to meet marriage expenses/ medical expenses/ education of self/ spouse/ children/ near relatives. 2. Repairs/ renovation/ extension of existing house/ flat. 3. Any other personal expenses of bonafidenture. 4. Repayment of existing housing loan from other banks. 5. Purchase of consumer durables/ computers/ professional equipments. Star Home Loan: It provide loans to purchase a plot for construction of a house, to purchase/ construct house/ flat, as well as for renovation/ repair/ alteration/ addition to house/ flat, furnishing of house. Star Personal Loan: Star personal loan scheme provides loan to meet various personal requirements of customers and their family. Star Educational Loan: Star Education Loan Scheme provides financial support from the bank to deserving students for pursuing higher education in India and Abroad. Star Mahila Gold Loan Scheme: Star Mahila Gold Loan Scheme for purchase of gold ornaments, preferably hallmarked, from reputed jwellers and/ or Gold coins of Bank of India. Star Auto fin: Star Auto fin Loan facilitates purchase of two/ four wheeler vehicles, also for purchase of used/ second hand two and four wheeler. (Age of vehicle should not exceed 3 years.)DIFFERENT TYPES OF LOANS & RATE OF INTEREST LOANS RATE OF INTERESTSTAR HOME LOAN 10.50%PERSONAL LOAN 15.50%STAR EDUCATION LOAN 13.50%STAR VEHICLE LOAN 12.25%STAR MAHILA GOLD LOAN 13.50% 18
  19. 19. CRITERIA FOR ACCEPTING LOAN PROPOSAL IN BANK OF INDIA: 1. EDUCATION LOAN: OBJECTIVE & PURPOSE: The Star Educational Loan Scheme aims at providing financial support from the bank to deserving/ meritorious students for pursuing higher education in India and abroad. The main emphasis is that every meritorious student is provided with an opportunity to pursue education with the financial support on affordable terms and conditions. ELIGIBILITY CRITERIA: a) STUDENTS ELIGIBILITY: Should be an Indian National; Secured admission to professional/technical courses in India or Abroad through Entrance Test/Merit based selection process. Good academic career. The student should not have outstanding education loan from any other Institution. Father/Mother should be co-borrower. Branch nearest to the permanent residence of student will consider the loan. b) ELIGIBLE COURSE: (i) Studies in India : Graduation/ Post Graduation courses Professional courses: Engineering, Medical, Agriculture, Law, Dental, Management, Computer, etc. Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other Institutes set up by Central/State Govt. Other courses leading to diploma/degree, etc. conducted by colleges/universities approved by UGC/Govt./AICTE/AIBMS/ ICMR, etc. 19
  20. 20. (ii) Studies abroad: Graduation: For job oriented professional/technical courses offered by reputed universities. Post Graduation: MCA, MBA, MS, etc. Courses conducted by CIMA - London, CPA in USA, etc. EXPENSES CONSIDERED FOR LOAN : Fee payable to college/school/hostel Examination/Library/Laboratory fee. Purchase of books/equipments/instruments/uniforms. Caution deposit/building fund/refundable deposit supported by Institution bills/receipts. Travel expenses/passage money for studies abroad. Purchase of computers - essential for completion of the course. Insurance cover for the student.Any other expense required to complete the course - like study tours, project work, thesis, etc. QUANTUM OF FINANCE :Need based finance subject to repaying capacity of the parents/students with margin and thefollowing ceilings : Studies in India - Maximum Rs.10.00 lakh Studies Abroad - Maximum Rs.20.00 lakh. MARGIN :Up to Rs.4 lakh : NILAbove Rs.4 lakh ( Studies in India) : 5%Studies Abroad : 15% Scholarship could be included in margin.Margin to be brought in on year to year basis as and when disbursements are made. 20
  21. 21. SECURITY:Up to Rs. 4 lakh : No securityAbove Rs.4 lakh &up to Rs.7.5 lakh : Collateral security in the form of a suitable third Party guarantee.Above Rs.7.5 lakh : Co-obligation of Parents together with tangible Collateral security of suitable value along with the Assignment of future income of student for Payment of installments.The security can be in the form of land / building / Govt. Securities / Public Sector Bonds / NSC/KVP / LIP / Banks Term Deposit etc. in the name of Student / Parent / Guardian / Guarantorwith suitable margin. RATE OF INTEREST: Up to Rs.7.50 lacs – 13.5% Above Rs.7.50 lacs – 13% a. Int. Concession of 0.50%p.a. for woman beneficiaries for limits up to Rs.50,000/- and 1% for limits over Rs.50,000/- b. For Professional courses (like Engg./Medical/ Management, etc.) int. concession : 0.50% p.a. INSURANCE:All the student borrowers are offered a specially designed OPTIONAL Term Insurance coverand the premium can be included as an item of finance. REPAYMENT:Repayment holiday/Moratorium Course period + 1 year or 6 months after getting job,whichever is earlier. 21
  22. 22. After commencement of repayment Loan amount up to Rs.7.50 lacs : 7 years. Loan amount over Rs.7.50 lacs : 10 years. BANK CHARGES: For Studies in India- NIL.Processing/upfront charges For Studies Abroad – Rs.1000 for issuance of sanction letter for obtention of VISA. Amount refundable on availing loan.Document /Stamp Charges At ActualChange of Institution Studies in India – Rs.250/- Studies Abroad- Rs.500/-One time charges for any deviations from the scheme norms including approval of coursesoutside the scheme applicable @ Rs.500 for loan upto Rs. 4 lacs, Rs.1000 for loan up toRs.7.50 Lacs and Rs.2000 for Loan over Rs.7.50 Lacs. In respect of loans availed by borrowersfrom rural areas from the Rural Branches – Charges NIL. OTHER CONDITION:i) Loan to be disbursed in stages as per requirement / demand, directly to the Institution/Vendors of books/equipments/instruments to the extent possible;ii) Student to produce mark list of previous term/semester before availing next installment ;iii) Student / Parent to provide latest mailing address, in case of any change;iv) Student /Parent to inform Branch immediately on change of course /completion ofstudies/termination of studies/ any refund of fees by college /institution /successful placement/obtention of job/change of job etc., 22
  23. 23. So after reading so many proposal for education loans I came to know Bank of India accept theproposal only if it fulfills the above conditions. 2. STAR HOME LOAN: 1. Provides loans to purchase a Plot for construction of a House, to purchase/construct house/flat, as well as for renovation/ repair/alteration/addition to house/flat, furnishing of house. 2. Maximum loan amount is Rs.500 lacs and repayment ranges up to 20 years, with reasonable margin and nominal processing charges. No commitment /administrative charges. 3. The loan is available at very competitive rates of interest, currently available in the industry. 4. Option for different EMI amounts for different periods during tenure of loan to suit customers repayment capacity. 5. Prepayment of Loan permitted. 6. Interest is calculated on daily balance basis which is of great advantage to customer as it results in lower interest amount. 7. Loan to NRIs as well as Persons of Indian Origin. 8. Simplified application form/procedures for convenience of customers, and speedy approvals. 9. Free Personal Accident Insurance cover. 10. Life Insurance Cover to borrowers for Loan Protection (optional). 23
  24. 24. OBJECTIVE & PURPOSE To purchase / construct house / flat To renovate / extend / repair existing house / flat. To purchase a plot of land for construction of house. To acquire household articles along with the house / flat-for furnishing the house / flat.ELIGIBILITYSalaried employees, Professionals, Self-employed persons. Requests are also considered fromNRIs, HUF, Prop. Firm, Partnership firms and corporate are eligible for STAR HOME LOANplan of BANK OF INDIA.QUANTUM OF LOANFor construction/purchase of a house/flat-Rs.300 lacs (Rs.500 lacs in major metros viz.Mumbai, Kolkata, New Delhi and Chennai) Repairs/renovation/extension to house/flat –Rs.50 lacs Purchase of a plot - Rs.100 lacs Purchase/acquire household articles for furnishing the house/flat - Rs.5.00 lacs. (15% of Home Loan amount)Minimum Home Loan: - For Metro/Urban Centers:-Rs. 1 LacPROCESSING CHARGES & OTHER EXPENSESFor IndividualsLoan Limit Charges- One Time (inclusive of ST)Up to Rs.25 Lacs @0.50% of loan amount ( Min.Rs.4,000 and Max. Rs.10,000)>Rs.25 to Rs.75 Lacs Flat Rs.20,000>Rs.75 to 300 Lacs Flat Rs.25,000>Rs.300 Lacs Flat Rs.50,000 24
  25. 25. For Partnership firms & Corporate Borrowers – Processing charges will be double that ofindividuals.For Rural areas – Processing charges will be 75% that of applicable to individuals in respect ofloans availed by borrowers from rural areas from the Rural Branches.Legal Expenses/Valuation Charges/Stamp Paper Charges etc., At actualsMARGIN (for 1st house):For Loan up to Rs.20 Lacs 20%Over Rs.20 to Rs.50 Lacs 25%Over Rs.50 Lacs 30%It is summarized from the above table for loan up to Rs. 20 lacs borrower has to pay 20% of 20lacs i.e. 20% of the loan amount. In case of loan of Rs.20 lacs to 50 lacs borrower has to pay25% of 50 lacs and remaining 75% given by the bank as a loan. In case of loan over Rs. 50 lacsborrower has to pay 30% of the loan amount and remaining 70% given by the bank as a loan.Margin is subject to RBI stipulated Loan to Value of Max. 90% for loans up to Rs.20.00 lacs andLoan To Value of Max.80% for loans above Rs.20.00 lacs on pure cost of the house / flat, i.e.excluding stamp duty ,registration, stamp duty, etc.REPAYMENT:Maximum 20 yrs. including moratorium period of 18 months (max.) in monthly installments.Extended repayment up to 25 years permitted in Bank‘s approved projects. Loan to be normallyrepaid before date of retirement in case of salaried persons and before attaining 65 years of agein case of others.ELIGIBLE QUANTUM OF LOAN / EMI:Calculation of quantum of loan is related to Income/repayment capacity ofproponent/borrower. 25
  26. 26. Salaried Employees : 72 times of gross monthly salary or 6 times of gross annual income based on I-T Returns.Self-employed/ 6 times of Gross annual income based on I-TProfessionals etc. ReturnsHUF/Proprietorship /Partnership Firm/ 6 times of cash accruals (PAT+Depreciation)Company as per Balance Sheet/P&L AccountFirm/ CompanyIn case of Individuals:Net take home pay/income (net of all deductions including EMI of Proposed loan) shouldnot be less than 40% of the gross monthly salary/income of applicant(s)In case of HUF/Proprietorship/ Partnership firm/Company :DSCR (Debt Service Coverage Ratio) should be minimum 1.5.RATE OF INTEREST: Up to 5 >5-10 Limits yrs. yrs. >10-15 yrs. >15-20 yrs.Up to Rs. 30 lacs 10.5 10.5 10.5 10.5Over 30 lacs & below 75 lacs 10.75 10.75 10.75 10.75Rs. 75 lacs & above 11.25 11.25 11.25 11.25So from above table we can say that:Loan upto Rs. 30 lacs the interest rate is 10.5% for 5- 20 yrs.Loan above Rs. 30 lacs & below Rs.75 lacs the interest rate is 10.75% for 5-20 yrs.Loan of Rs. 75 lacs & above the rate of interest is 11.25% for 5-20 yrs.SECURITY:Mortgage / Equitable Mortgage (1st charge) on land/flat/house.Third Party guarantee (if mortgage could not be created at the time of disbursement).So we can say that for applying home loan proposal individual need to fulfill the aboveprocedure. After verifying all the documents which are require for accepting loan proposal Bankof India provide Home Loan facility to the customer as per their needs and wants. 26
  27. 27. SPECIAL FEATURES:1. Free Personal Accident Insurance cover for the borrower (covering accidental death as wellas permanent total disablement) as per terms of insurance policy covering loan outstanding ason the date of accident(Renewal at the discretion of the Bank).2. Life Insurance cover to housing loan borrowers , at affordable premium against risk of deathduring tenure of loan under Group Insurance Scheme in tie up with Star Union Dai-IchiInsurance Co. Ltd. at borrower‘s own expenses & option.3. Loan furnishing the house/flat at a rate of interest as applicable to housing loan under thescheme.OTHER ATTRACTIVE FEATURES: Interest on daily Reducing Balance Basis. No pre-payment charges on Floating Rate Loans. Repayment allowed up to 70 years in select cases. Facility for set-up/ set-down EMIs. Inclusion of national rental income in case of 2nd house and also Employees staying in staff Quarters. Inclusion of Income of close relatives for enhanced loan. Tax Benefit on interest and installments rapid in Home Loan. Facility for 100% loan irrespective of stage of construction OR Bridge Loan subject to conditions. Interest subvention from Government of India in the 1st year subject to condition.EMI CALCULATOR FOR HOME LOAN:Equated Monthly Installment, i.e., EMI in short is the amount payable every month to the bankor any other financial institution until the loan amount is fully paid off. It consists of the intereston loan as well as part of the principal amount to be repaid. The sum of principal amount andinterest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. Thisamount has to be repaid monthly. The interest component of the EMI would be larger in theinitial months and gradually reduce when compared to the principal amount. The exactpercentage allocated towards payment of the principal depends on the interest rate. Thoughtotal monthly principal and interest payment won‘t change, the proportion will change withtime. With each successive payment, an applicant will pay more toward the principal and less ininterest. 27
  28. 28. Eg. Principal Loan Amount = 10,00,000 Interest Rate = 10.5% p.a. Loan Term = 20 years. Monthly Payment EMI = 9,984 Total Interest Payable = 13,96,112 Total Payment = 23,96,112 (principal+ interest)So from the above table we can say that out of Total Payment an applicant has to pay majorportion in terms of interest i.e. 58% of total. It is a part of bank income.Formula For Calculation of EMI E = P × r × (1 + r)n/ (1 + r)n - 1)Where,E is EMIP is Principal Loan Amountr is rate of interest calculated on monthly basis.n is loan term / tenure / duration in number of months 28
  29. 29. Break-up of Total Payment principal Loan Amount Interest 29
  30. 30. EMI PAYMENT SCHEDULE Principal+ Year Principal Interest Interest Balance 1 15,540 1,04,266 1,19,806 9,84,461 2 17,252 1,02,554 1,19,806 9,67,209 3 19,153 1,00,653 1,19,806 9,48,056 4 21,264 98,542 1,19,806 9,26,792 5 23,607 96,166 1,19,806 9,03,185 6 26,209 93,597 1,19,806 8,76,977 7 29,097 90,709 1,19,806 8,47,880 8 32,304 87,502 1,19,806 8,15,576 9 35,864 83,942 1,19,806 7,79,713 10 39,816 79,990 1,19,806 7,39,897 11 44,204 75,602 1,19,806 6,95,693 12 49,075 70,731 1,19,806 6,46,618 13 54,484 65,322 1,19,806 5,92,135 14 60,488 59,318 1,19,806 5,31,648 15 67,154 52,652 1,19,806 4,64,495 16 74,554 45,252 1,19,806 3,89,941 17 82,770 37,036 1,19,806 3,07,171 18 91,892 27,914 1,19,806 2,15,279 19 1,02,019 17,787 1,19,806 1,13,261 20 1,13,261 6,545 1,19,806 0From the above chart we can say that in 1 year out of Rs. 1,19,806 only Rs. 15540 deductedfrom the total amount as a principal and remaining Rs. 1,04,266 an applicant has to pay as aInterest. From the above table we can observe that start 13 years installment major partdeducted as a Interest which is loss for the customer but at the same time it is income for thebank. But from 14th year the amount which is deducted as an Interest is less than the principaland it is continue till last installment.So from the above table we can summarize that an applicant always try to repay the loan before13 years which is beneficial for him because till 13th year interest is more than the principal, butin case if he is not in a position to repay the loan then an applicant should continue till lastinstallment because there is no benefit for him to repay the loan after 13th year as the principalis more than the interest. So it is always advisable for an applicant to repay the loan as early aspossible otherwise, continue till last installment. 30
  31. 31. INTRODUCTION OF ICICI BANKICICI Bank Limited is an Indian diversified financial services company headquartered inMumbai, Maharashtra. It is the second largest bank in India by assets and third largest bymarket capitalization. It offers a wide range of banking products and financial services tocorporate and retail customers through a variety of delivery channels and through its specializedsubsidiaries in the areas of investment banking, life and non-life insurance, venture capital andasset management. The Bank has a network of 2,630 branches and 8,003 ATMs in India, andhas a presence in 19 countries, including India.The bank has subsidiaries in the United Kingdom, Russia, and Canada; branches in UnitedStates, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International FinanceCentre; and representative offices in United Arab Emirates, China, South Africa, Bangladesh,Thailand, Malaysia and Indonesia. The companys UK subsidiary has established branches inBelgium and Germany.ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab NationalBank and Bank of Baroda.DIFFERENT TYPES OF LOAN FACILITIES PROVIDED BY ICICI BANK Home Loans Personal Loans Loans against Securities Car Loans Two Wheeler Loans Commercial Vehicle Loans Loan against Gold Ornaments Loan For Construction Equipment 31
  32. 32. CRITERIA FOR ACCEPTING LOAN PROPOSAL IN ICICI BANK 1. EDUCATION LOAN:ELIGIBLE STUDENT: The Student Should be an Indian National. Student should secured admission to professional/ technical courses in India or Abroad through Entrance Test / Merit Based Selection process after completion of HSC(10 plus 2 or equivalent).COURSES ELIGIBLE:Studies in IndiaApproved courses leading to graduate / post graduate degree and P G diplomas conducted byrecognized colleges / universities recognized by UGC / Govt. / AICTE/ AIBMS/ ICMR etc.Courses like ICWA, CA, CFA etc. Courses conducted by IIMs, IITs, IISc, XLRI, NIFT, NID etc.Regular degree/diploma courses like aeronautical, pilot training, shipping etc., approved byDirector General of Civil Aviation /Shipping, if the course is pursued in India. Approved coursesoffered in India by reputed foreign universities. Teacher Training /Nursing /B.Ed. courses will beeligible for education loan provided the training institutions are approved either by the CentralGovernment or by State Government and such courses should lead to degree or diplomacourse and not to certification course.Studies AbroadGraduation: For job oriented professional/ technical courses offered by reputed universities. Post graduation: MCA, MBA, MS, etc Courses conducted by CIMA- London, CPA in USA etc.Degree/diploma courses like aeronautical, pilot training, shipping etc. provided these arerecognized by competent regulatory bodies in India/abroad for the purpose of employment inIndia/abroad.Expenses Consider For Loan Fee payable to college/ school/ hostel. Examination/ Library/ Laboratory fee. Travel expenses/ passage money for studies abroad. 32
  33. 33. Insurance premium for student borrower, if applicable. Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts. Purchase of books/ equipments/ instruments/ uniforms. Purchase of computers - essential for completion of the course. Any other expense required to complete the course - like study tours, project work, thesis, etc.Quantum of Finance Need based finance subject to repaying capacity of the parents/ students with margin and the following ceilings. Studies in India - Maximum Rs.10.00 lacs. Studies abroad - Maximum Rs.20.00 lacs.Margin Up to Rs 4 lacs : Nil Above Rs 4 lacs Studies in India: 5% Studies Abroad: 15%Security Loans Upto Rs 4 lacs - Co obligation of parents. If parents are not there banks could consider grandparent as co obligator to the loans taking into account their net worth. Above Rs 4 lacs and upto Rs. 7.5 lacs. Co obligation of parents along with Collateral in the form of a suitable third party guarantee for 100% of the loan amount to be taken. For cases above Rs 7.5 lacs. Co obligation of parents along with Collateral security of 100% value of loan. Assignment of future income of the student for payment of the loan installments for all loans.Rate of Interest 33
  34. 34. 4 Lakhs - 14% p.a4 lakhs to 7.5 lakhs - 18% p.aAbove 7.5 lakh up to 20 lakhs - 18% p.a So we can say that for loan amounted to Rs.4 lakhs the rate of int. which bank charges to thecustomer is 14%. Loan of Rs. 4 lakhs to 7.5 lakhs the rate of interest is 18% and from 7.5 lakhsto 20 lakhs the rate of interest is same i.e. 18%.Terms and Conditions for LoanFor more than 4 lakhs and up to 7.5 lakhs of Education loan, student have to give third partyguarantee to re payment of Education loan along with parent‘s(Third party) Salary documents,Bank balance sheet and other Property proofs.For more than 7.5 lakhs and up to 10 lakhs, ICICI Bank executives will check all necessarydocuments, according to ICICI Bank Education loan terms and conditions to provide loan as perparent‘s future Income and type of course selected by student.Up to 20 lakhs education loan (only for foreign studies), students have to submit all documentswith proof of admission in college, according to ICICI Bank terms and conditionsDocuments required while applying for ICICI Bank Education loan to study in India andabroad:Students have to submit the following documents to get ICICI Bank Education loan. Candidateshave to fill the ICICI Bank Education loan application form and must include relevant necessarydocuments of latest last 2 months salary slip of parent and income tax assessment sheet.Student has to attach one set of Education qualification certificates of his/her last studies like10th class and Intermediate etc. Student can have the complete details on ICICI BankEducation loan documents need to submit to approve/get loan.Income Proof-Any either salary slip/otherResidency proofEducation Certificates of SSC, Intermediate and other necessary, if required.Income tax assessment of last 2 yearsLast 6 months of Bank account balance sheet 34
  35. 35. Latest 2 passport Photo graphsAdmissions proof in collegePassport/VisaRepayment The repayment holiday shall be a year more than the period of the course or 6 months after the borrower gets a job, whichever is earlier. The loan shall be repaid in 5 - 7 years after commencement of repayment Prepayment permitted without any charges.Processing Charges: Nil2. HOME LOAN Objective & purpose To purchase or construct house/ flat. To renovate or repair of existing flat/ house. To purchase a plot of land for construction of house. HOME Loan Amount The home loan amount depends on repayment capability and is restricted to a maximum of 80% of the cost of the property or the cost of construction as applicable. Tenor Maximum tenure of home loan can be 20 years. However, in case of salaried customers it is capped at retirement age. 35
  36. 36. Eligibility Criteria ICICI Bank offers Home Loans to Resident as well as Non Resident Indians.Criteria based on which Bank sanction the loan to the applicant: An Applicant must be at least 21 years of age on sanction of loan. An Applicant must be salaried or self employed with a regular source of income. The loan must terminate before or 65 years of age of retirement, whichever is earlier. Minimum age of Co- Applicant should be 18 years. If the spouse of an Applicant is an earning member, then an Applicant can make him/her the Co-Applicant. Their income will be considered to enhance the eligibility. In case of Co- Owner they must be necessarily be Co- Applicant. Documents Required For the Sanctioning Home Loan In case of Salaried Customer: Application form with photograph duly signed by all applicants. Identity, residence and age proof. Last 3 months salary-slips. Form 16/ Income Tax Returns. Last 6 months bank statements. Processing fee cheque. In case of Self Employed Professional: Application form with photograph duly signed by all applicants. Identity, residence and age proof. Education qualification certificate and proof of business existence. Last 3 years Income Tax Return with Computation of Income. Last 3 years CA Certified / Audited Balance Sheet & Profit and Loss Account. Last 6 months bank statements. Processing fee cheque. 36
  37. 37. In case of Self Employed Non-Professional: Application form with photograph duly signed by all applicants. Identity, residence and age proof. Proof of business existence. Business profile. Last 3 years Income Tax Return with Computation of Income. Last 3 years CA Certified / Audited Balance Sheet & Profit and Loss Account. Last 6 months bank statements (self and business). Processing fee cheque.Rate of Interest:Loan Amount Rate of InterestLoan up to Rs. 30 lakhs 10.50%Rs.30 lakhs to 75 lakhs 11.00%Rs. 75 lakhs & more 11.50%All ICICI Bank floating rate home loan is benchmarked to I-Base. Effective April 23, 2012 I-Basewill be 9.75% Administrative fee is 0.5% of the loan amount and applicable service tax will belevied.Repayment: Repayment Tenure is the tenure for the number of year for which the loan gets sanctioned. ICICI Bank offers a wide range of option for the tenure of the loan. An Applicant can take a Home Loan for up to 20 years provided an Applicant do not reach the age of 65 years or retire within that period. All loan repayments are done via Equated Monthly Installments. 37
  38. 38. An EMI refers to an Equated Monthly Installments. It is a fixed amount which an Applicant pays every month towards his/her loan. It comprises of both, principal repayment & interest payment. EMI payments start from the month following the month in which the full disbursement has been made. The EMI is to be paid every month through (PDCs) or Electronic Clearing System. In case of part disbursement of the loan, monthly interest is payable only on the disbursed amount. This interest is called pre-EMI interest (PEMI) and is payable monthly till the final disbursement is made, after which the EMIs would commence.FINDINGS : Based on information which I have collected for study some findings for my project are- Bank of India provides the cheapest rate of interest for housing loan i.e. 10.5% for 20 years, whereas the rate of interest for home loan in ICICI Bank is 10.5% for 1st year and then it increases to 11% and so on. Procedures for sanction of loan for other banks are quite lengthy and people avoid lengthy procedure and documentation, therefore people try to get loan from public banks rather than private banks. Bank of India provides free insurance to an applicant who applies for home loan as well as education loan. Bank of India provides some Interest Concession for Women Beneficiaries. 38
  39. 39. SUGGESTIONS: Following are some suggestion which I want to give Bank of India: Bank has to create awareness among people about the loan facility which bank provides its customer in Ghansoli Branch through posters, because in Ghansoli Branch there was no poster regarding loan facility like other bank. Staff members should provide proper guidance regarding loan queries and they should provide information accordingly. 39
  40. 40. CONCLUSION: Based on above findings conclusion for my projects are- It is beneficial for people to apply for loan in Bank of India to enjoy following facilities: Low Interest Rate Free Insurance Coverage Interest Concession for Women Low Risk Easy processing and Documentation 40
  41. 41. REFERENCE:Newspapers- The Economic TimesProposals provided by BankINTERNET 41