Central bank of india


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Central bank of india

  1. 1. CHAPTER-I 1
  2. 2. 1.1 INTRODUCTION TO THE COMPANYEstablished in 1911, Central Bank of India was the first Indian commercial bank which waswholly owned and managed by Indians. Central Bank of India a government-owned bank, isone of the oldest and largest commercial banks in India. It is based in Mumbai. The bank has3,563 branches and 270 extension counters across 27 Indian states and three UnionTerritories. Central bank of India is one of 18 Public Sector banks in India to getrecapitalisation finance from the government over the next 24 months. The establishment ofthe Bank was the ultimate realisation of the dream of Sir Sorabji Pochkhanawala, founder ofthe Bank. Sir Pherozesha Mehta was the first Chairman of a truly Swadeshi Bank. In fact,such was the extent of pride felt by Sir Sorabji Pochkhanawala that he proclaimed CentralBank of India as the property of the nation and the countrys asset. He also added thatCentral Bank of India lives on peoples faith and regards itself as the peoples own bank.During the past 99 years of history the Bank has weathered many storms and faced manychallenges. The Bank could successfully transform every threat into business opportunity andexcelled over its peers in the Banking industry. Central Bank of India has approached theReserve Bank of India (RBI) for permission to open representative offices in five locations -Singapore, Dubai, Doha, London and Hong Kong. This is the first time the bank is venturingan independent overseas foray after the Sethia scam in the 1970s forced the bank to closedown its London office. RBI had then asked the other two banks, who had operations inLondon, to close down.As on 31 March 2011, the banks reserves and surplus stood at 6,868.85 crore. Its totalbusiness at the end of the last fiscal amounted to 2,09,757.33 crore.The bank had a staffstrength of 37,241 as on Nov 2006.A number of innovative and unique banking activities have been launched by Central Bank ofIndia and a brief mention of some of its pioneering services are as under: Introduction to the Home Savings Safe Deposit Schemeto build saving/thrift habits in1921 all sections of the society.1924 An Exclusive Ladies Department to cater to the Banks women clientele. 2
  3. 3. 1926 Safe Deposit Locker facility and Rupee Travellers Cheques.1929 Setting up of the Executor and Trustee Department.1932 Deposit Insurance Benefit Scheme.1962 Recurring Deposit Scheme.Subsequently, even after the nationalisation of the Bank in the year 1969, Central Bankcontinued to introduce a number of innovative banking services as under:1976 The Merchant Banking Cell was established.1980 Centralcard, the credit card of the Bank was introduced.1986 Platinum Jubilee Money Back Deposit Scheme was launched. The housing subsidiary Cent Bank Home Finance Ltd. was started with its1989 headquarters at Bhopal in Madhya Pradesh. Quick Cheque Collection Service (QCC) & Express Service was set up to enable1994 speedy collection of outstation cheques.Further in line with the guidelines from Reserve Bank of India as also the Government ofIndia, Central Bank has been playing an increasingly active role in promoting the key thrustareas of agriculture, small scale industries as also medium and large industries. The Bank alsointroduced a number of Self Employment Schemes to promote employment among theeducated youth.Among the Public Sector Banks, Central Bank of India can be truly described as an All IndiaBank, due to distribution of its large network in 27 out of 29 States as also in 3 out of 7 UnionTerritories in India. Central Bank of India holds a very prominent place among the PublicSector Banks on account of its network of 3967 branches and 27 extension counters atvarious centres throughout the length and breadth of the country. 3
  4. 4. Customers confidence in Central Bank of Indias wide ranging services can very well bejudged from the list of major corporate clients such as ICICI, IDBI, UTI, LIC, HDFC as alsoalmost all major corporate houses in the country.1.1.1 DirectorsDirectors of Central Bank of India & their address:Shri. M.V.TanksaleChairman & Managing DirectorSmt Vijayalakshmi R. IyerExecutive DirectorShri Rajiv Kishore DubeyExecutive DirectorShri Alok TandonDirectorShri Salim GangadharanRegional DirectorShri Brijlal KshatriyaDirectorShri Romesh SabharwalDirectorMajor (Retd.) Ved PrakashDirectorShri B S RambabuDirector 4
  6. 6.  MIZORAM  MP  NAGALAND  NALANDA  ORISSA  PONDICHERRY  PUNJAB  RAJASTHAN  SIKKIM  TAMIL NADU  TRIPURA  UTTAR PRADESH  UTTARAKHAND  UTTARANCHAL  WEST BENGAL1.1.3 Present PlansRestoring the premium position of Central Bank of India amongst PSU banks is top on theagenda of its new Chairman and Managing Director, Mr M.V. Tanksale. Following are theplans of Central Bank of India: Branch expansion, extensive hiring to infuse young blood into its manpower, leveraging on technology and expanding its global footprint Above all, they will be focussing more on relationship banking than mere transaction banking. They will also be increasing their productivity levels in terms of business per branch by leveraging new technology. One of the ills affecting the bank has been its ageing manpower. To reverse this, it plans to go on extensive hiring. This fiscal, they will be taking on board 5,000 personnel, including 2,000 officers. And next fiscal, the hiring will be more. 6
  7. 7. Central Bank plans to introduce new products that will be tailor made for its retailcustomers. Only a few days ago they decided to launch a new product, Cent Double,which will ensure doubling of a certain amount of deposit within a stipulated time.They are yet to work out the rate (of interest) and the time frame. The bank will simultaneously expand its global footprint. Atpresent, it has presence in Zambia. This fiscal it plans to open a representative officein Nairobi and will subsequently enter Mozambique. Later, they will expand intoWest Asia through Dubai and Hong Kong. 7
  8. 8. 1.2 INTRODUCTION TO THE STUDYHousing being one of the three basic needs of life always remains in the top priorities of anyperson, society and economy. As a human being, an individual needs his own space andprivacy, which can be provided by the ownership of house. The home is the basic unit of thesociety. Home provides a platform to the family and the family is the most important socialinstitution, which leaves its imprint on an individual for whole life. Thus housing deservessignificant attention in the context of developing policies and strategies for humandevelopment. But still the majority of human populace lives in slums, shanties and temporaryshabby shelters in rural areas. This shortage of housing is a big impediment in the healthydevelopment of an individual and consequently the society, and the nation.The problem of space, privacy, security and sanitation leads to social, economic andenvironmental degeneration. The perpetual strife for space and house-ownership leads topersonal and social disorganization, which is detrimental for society and the economy.A developing nation like India has to focus more on housing sector to cater to the housingneeds of burgeoning population and to accelerate the economic growth. The housing sectorhas been globally used as an engine to propel the economic growth as it is generatesemployment and demand in the market. Last one decade has seen the authorities accordingsignificant focus on the housing sector in India. The government of India has been trying tonurture and strengthen the housing sector in recent times through various fiscal andlegislative measures.The total housing shortage in the country in 1997 was estimated to be 13.66 million units, ofwhich 7.57 million units were in urban areas. More than 90 per cent of this shortage was forthe poor and low income category. Against this background, the National Housing andHabitat Policy (NHHP) was formulated in 1998 and stressed on:  Removing legal, financial and administrative barriers for facilitating access to loans, finance and technology;  Ensuring that housing, along with supporting services, was treated as a priority and at par with the infrastructure sector;  The creation of surpluses in housing stock; and  providing quality and cost-effective shelters especially to the vulnerable groups and the poor. 8
  9. 9. The draft National Urban Housing and Habitat Policy 2007, while focussing on urbanshelters, emphasised on the promotion of larger flow of funds to meet the revenuerequirements of urban housing and infrastructure using innovative tools. It recognized thatbased on historical growth patterns, the urban population of India was likely to grow to 360million in the year 2010 and to 533 million by the year 2025. The document noted thePlanning Commission’s projection of total requirement of urban housing during the 10th Planperiod (2002-2007) of 22.44 million dwelling units including the backlog of 8.89 millionunits at the beginning of this Plan. With rising incomes, favorable demographic profiles,swelling middle class and rapid urbanisation, the demand is projected to rise to 73.96 millionunits for rural and urban areas during the 11th Plan period (2007-2012).1.2.1 Present Scenario of Housing LoansIn India, housing finance is the fastest growing sector in the current times. Banks are cashingon this phenomenon by offering easy home loans at attractive rates. Home loans products isoffered by almost all banks; right from loans for purchasing real estate to buying a flat, fromhome improvement to home extension loans. The EMI and rate of interest is arrived at,keeping a number of factors like, the loan amount, market value of the land or building,tenure of loans etc.Types of Home Loans Available: Home Purchase Loans Home Extension Loans Home Equity Loans Home Improvement Loans Land Purchase Loans for construction of flat/home1.2.2 HOME PURCHASE LOANSOwning a home is perhaps the biggest and most important dream of an average familytherefore ownership of a home goes beyond pure financial considerations. Home loanspurchase has witnessed an increase owing to competition between a number of public andprivate players. The cut in the loan interest rate has also fuelled the demand for this product. 9
  10. 10. 1.2.3 Kind of Home Purchase Loans Interest Rates: Fluctuating Home Purchase Loans Interest rates: Keep changing with change in the prevailing market rate or the prime lending rate. Fixed Loans Interest Rate: As the name suggests, do not change during the entire loan period, irrespective of the prevailing market rate. generally fixed loan interest rates are higher than the fluctuating loan rate.The current scenario in India is that of declining interest rate, so a fluctuating interest ratemakes more sense. The loan is repayable in the form of equated monthly installments (EMI).The EMI should not exceed 50 per cent of your monthly household income.1.2.4 Interest Rate on Home Purchase Loans:Home Purchase Loans interest rates depend on a number of factors : The tenure for which the loan is taken Loan amount Type of housing loans taken Type of customer and his repayment capacity Loan policy of different companies. Interest rates will be different for private sector and public sector players. Companies lower the interest rates during festive seasons.1.2.5 Maximum Home Purchase Loans Given Depends On: Individual loan policy of different companies. The maximum amount of loans given is however 85% of the value of the property (inclusive of cost of land) Repayment capacity of the customer Maximum term of home purchase loans The term of home purchase loans offered is maximum 25 years. This again depends on the repayment capacity of the individual1.2.6 Number of Loans Applicants:A loan can be taken either on an individual or joint basis. Some companies necessitate thatproposed owners be co-applicants, however, co-applicants need not be co-owners.1.2.7 Other Home Purchase Loans Costs: 10
  11. 11. Besides the interest rate, customers also have to bear the processing and administrativecharges which increase with the cost of the loan. If two housing finance corporations giveyou the same amount of loan but at different interest rates, calculate what works out better foryou.1.2.8 Home Purchase Loans Application Process:An individual/company/professional can apply for home purchase loans in different homeloans corporations by filling the application form. These days companies provide onlineforms for customer convenience. There is certain information that one must furnish in orderto qualify to approval of home loans.1.2.9 HOME EXTENSION LOANSBanks provide customers with home extension loans to extend their houses, add more roomsetc. Such loans fall under the category of home loans.1.2.10 Maximum Amount of Home Extension Loans:Banks normally offer 70-85% of the total amount of home extension as loan. The amount ofloan sanctioned also depends on a number of factors such as the age of the applicant at thetime of loan, tenure of the loan, repayment capacity of the borrower etc.1.2.11 Interest Charged by Bank for Home Extension Loans:Rates of interest charged will be as per Banks policy on the date of disbursement of loan.Interest rates can be either on fixed or floating basis.1.2.12Process of Home Extension Loans Application:Customers can fill online application forms or personally visit the bank for approval of loan.A nominal fee of 1-2% is charged as processing by the banks. 11
  12. 12. 1.2.13 HOME EQUITY LOANSHome equity loans helps the customer to mortgage his existing property to the bank fortaking loan for some other purpose. Banks assess the current market value of the property togive loans to customers. Customers can use the money so acquired for marriage, education,medical purpose. Residential/Non-residential properties are considered for approval of loan.They are only given to legal title holders, also the land should be free from any kind ofdispute.1.2.14 Maximum Amount of Home Equity Loans:Banks offer around 60-65% of the actual value of the property as loan. The Loan amount cango up to 10-15 lakhs for commercial and residential properties. Repayment is done throughEquated Monthly Installments or EMI. The repayment period can range from 10-15 yearsdepending on the banks policies.1.2.15 Interest Charged by Banks for Home Equity Loans:Rate of interest can both be fixed as well as fluctuating, according to the requirement of thecustomer. Rate of interest charged is also fixed according to the prevailing market conditions.1.2.16Home Equity Loans Application Process:An individual/company/professional can apply for home equity loan in different home loancorporations/ banks by filling the application form. These days companies provide onlineforms for customer convenience. There is certain information that one must furnish in orderto qualify to approval of home loan.1.2.17 HOME IMPROVEMENT LOANSMaintaining homes is a costly affair. Banks are coming out with new products to suit theneeds of the customers. Home improvement loans have been introduced by quite a few banks.1.2.18 Purpose of Home Improvement Loans Include: Internal and external repairing Waterproofing and roofing Complete interior renovation 12
  13. 13. 1.2.19 Interest on Home Improvement Loans: Home improvement loans interest rates depend on a number of factors : The tenure for which the loan is taken Loan amount Type of housing improvement loans taken Type of customer and his repayment capacity Loan policy of different companies. Interest rates will be different for private sector and public sector players. Companies lower the interest rates during festive seasons.Rates of interest charged will be as per Banks policy on the date of disbursement of loan.1.2.20 Maximum Amount of Home Improvement Loans:An old customer is sometimes given 100% cost of improvement. Generally all the newcustomers are sanctioned 85% of the cost of improvement. The maximum loan amount canvary from bank to bank, it also depends on the amount of loan taken and the repaymentcapacity of the customer.The amount of loan is however subject to the market value of property. The maximum termof home improvement loan varies from bank to bank, depending on the age of the applicant atthe time of loan application. The loan payment is made by equated monthly installments(EMI).1.2.21 Number Of Loans Applicants:A loan can be taken either on an individual or joint basis. Some companies necessitate thatproposed owners be co-applicants, however, co-applicants need not be co-owners. Minimumage of a person applying for loan should not be less than Home Improvement Loans Application Process:An individual/company/professional can apply for home improvement loans in differenthome loans corporations/ banks by filling the application form. These days companiesprovide online forms for customer convenience. There is certain information that one mustfurnish in order to qualify to approval of home loans. 13
  14. 14. 1.2.23LAND PURCHASE LOANSIn India, various private and public sector banks are coming out with attractive loan plans forits customers for purchase of land for construction of house/flat. The loan can be taken forboth land purchase as well as construction on the land.1.2.24 Eligibility for Land Purchase Loans:Any individual aged 21 years or above having regular income is generally eligible to applyfor land Purchase loan.1.2.25 Maximum Amount of Loans:The quantum of loan sanctioned, depends on a number of factors like the cost of house/flat,persons age while applying for loan, income, repayment capacity etc. Loans of higheramount may be considered on the basis of merit of the case. The loan can then be repaidthrough Equated Monthly Installments or EMI. The loan is payable maximum in years.1.2.26 Margin for purchase or construction of new house/flat:Minimum 15% of the project cost for individualMinimum 10% of the project cost in case wife joins as co-borrower1.2.27 Margin for purchase of old house/flat/land:Minimum 30% of Purchasing value. This value may vary from bank to bank.1.2.28 Interest on Land Purchase Loans:Interest on both fixed as well fluctuating rates are available. The actual interest rate isgoverned by prevailing market conditions at the time of taking loan. Special reductions ininterest rates may sometimes be allowed for women and in other special conditions. Anominal processing fee of 1% of amount of loan taken is generally charged by banks.1.2.29 Documentation : Businessman/ Self employed professional: Application form with photograph Educational qualification Identity and residence proof 14
  15. 15. Proof of business existence with business profile and last three years income tax return Last 3 years income statement and balance sheet. Last 3 months personal and business bank statements.1.2.30 Salaried customers: Application form with photograph Identity and Residence proof Latest salary slip Form16 Last 6 months banks statement1.2.31 Reasons For Which People Get Their House Financed1. The fear of Income Tax authorities :- In a country like India where there is a lot of flowof black money, spending lakhs of rupees together catches the attention of income taxauthorities. Also for this reason people get their house financed.2. Easy payment in Installments :- It is a human psychology that when one asked to pay Rs. 1000 altogether, it pinches more than paying Rs. 100 every month for ten months. So the lum sum payment looks too much and hard to pay.3. Necessity :-Housing loan becomes necessity for those people who have no funds for Renovation/ Construction/ Extension/ Purchase or Improvement for own and buy a new house.4. Dead investment :- Generally people consider investing on houses a dead investment , which locks to capital and gives no return, so they prefer paying slowly through installments.5.Maintain the Liquidity :- Investing lakhs of rupees altogether, disturbs the liquidity position of the firm. As its very important to maintain the liquidity of a concern, getting the houses financed is the only way out to possess a house without disturbing the liquidity position. 15
  16. 16. 6. Better Investment facilities :- Funds are always limited. Thus it is very important to invest them in the most beneficial way. As said earlier that investment in houses is considered as a dead investment, which doesnt give any return, thus by getting their houses financed an individual or a firm try to keep the money with them to invest in better alternatives.1.2.32 Computing Eligibility for The Home LoanA number of factors are taken into account when assessing customer repayment capacity.Customer income, age, number of dependants, qualifications, assets and liabilities, stability/continuity of your employment/ business are some of them. Besides the proposed owners inrespect of which he is seeking financial assistance will have to be co-applicants. However, allco-applicants need not be co-owners. Income of the spouse can also be clubbed if he/she hasbeen made the co-applicant.However, there are ways by which a customer can enhance their eligibility.For instance, if customer spouse is earning, put him/her as a co-applicant. The additionalincome shall be included to enhance his/her loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants.Customer fiancées income can also be considered for sanctioning the loan on his/hercombined income? The disbursement of the loan, however, will be done only after customersubmit proof of your marriage.The housing finance company can consider all the income accruing to the applicant on amonthly basis, i.e. all the recurrent credits (basic salary, HRA, other allowances but not theLTA and medical), any rental income that he is getting and the savings in rent paymentwhich might accrue to him an account of his moving from a rented dwelling to self-occupiedproperty. In short, the calculation will be as per the applicants net cash inflows, less expensesand commission for the salaried class, and as per his profit-and-loss account for the self-employed or a private company ( net profit + 2/3rd depreciation + directors remuneration).Providing additional security like bonds, fixed deposits and LIC policies may also help toenhance eligibility.1.2.33 When to applyThe movement customer decides to buy a home, borrower can put in their application,borrower can apply for a loan even before they have selected the property. Yes, customer canapply for a loan even before he/she have selected the property. The property need not even be 16
  17. 17. in the same city where customers are residing. Should there be a change in customer’sfinancial status or plans, he/she can withdraw their sanction within 6 months of approval.However, Housing Finance Companys are always ready to assist their customers in the eventof legitimate problems. And, Housing Finance Companys might reconsider this if they findthat there are satisfactory reasons for the delay.If it is refinancing customer are interested in, it is possible within 6 months from the date ofpurchase of property.1.2.34SanctioningOn the basis of certain documents submitted by borrower , Housing Finance companys willdetermine borrower eligibility. How ever, there are ways by which borrower can enhancetheir eligibility.For instance, if customer spouse is earning, put him/her as a co-applicant. The additionalincome shall be included to enhance his/her loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants.The disbursement of the loan, however, will be done only after customer submit proof oftheir marriage. Providing additional security like bonds, fixed deposits and LIC policies mayalso help to enhance eligibility.While there is no need for a guarantor, it could be that having one might enhance customercredibility with Housing Finance Companys. If so, their loan officer would provide you withthe necessary details.Below is a list of documents required from you for sanctioning. You may be asked to submitfurther legal documents if required by Housing Finance Companys or its approved lawyers.Do retain photocopies of all documents being submitted by customer .1.2.35List of documents for sanctioning 1. Passport size photograph 2. Age verification: PAN card, Voters ID, Passport, License 3. Bank statement for the last six months. 4. Income Documents e.g. Latest Form 16, Certified IT returns for latest 3 years 5. Processing Fee cheque & Loan Enclosure letter.In case of further queries , additional documents may be required. 17
  18. 18. 1.2.36 Loan DisbursementFor outright purchase of house/flat, the loan amount will be paid in lump sum to the vendor atthe time of registration after satisfying that the borrower has paid/provided for the balanceamount. For houses/flats under construction, the loan amount will be disbursed in stagesbased on the progress of construction. Disbursement will be made after the property has beentechnically appraised and all legal documentation has been completed. The borrower has toinvest his proportionate share of the cost, prior to disbursement of loan. Home loan will bedisbursed after customer identify and select the property or home that he/she are purchasingand on his/her submission of the requisite legal documents.While borrower may be under the impression that the list of documents asked for is ratherextensive, please note that it is for his/her own good. Each and every single document askedfor will be verified and checked to ensure his/her safety. This may take some time but HFC’swant to ensure a clear title and will complete all the legal and technical verifications to ensurethat customer have full rights to his/her home.1.2.37 List of documents for disbursementa) Standard documents required : Loan Agreements, Disbursement Requests, Post-dated cheques Personal guarantor’s documents, as the case may beb) Some documents, which are specific to each state are required during disbursements. Forfurther information, please contact the nearest office.1.2.38What is an EMIAn EMI refers to an equated monthly installment, it is a fixed amount which borrower payevery month to words their loan. It comprises of both, principal repayment and interestpayment.This is one acronym that is now synonymous with the loan business. "What is EMI?" and"How is it calculated?" are two of the most common questions put forth by loan applicants.The EMI is an abbreviated form of the equated monthly installment and is simply referred toas monthly installment in common parlance. And, being a self-explanatory term, that isexactly what it is. The amount borrower will have to pay his/her financier every month whenrepaying their loan. 18
  19. 19. Being a monthly payment, at the end of the year, borrower would have paid 12 EMIs. This issometimes referred to as the equated annual installment (EAI) - the amount borrower wouldpay every year.However, it is important to note that though the EMI is a constant amount throughout therepayment tenure, in actuality it is an unequal combination of principal repayment andinterest payment.This unequal distribution is due to the EMI tilting heavily towards interest payments in theinitial years of repayment. While principal repayments take predominance as the end of therepayment tenure nears.For instance, in the above example, the EMI will stay constant for all the 60 months at Rs2,226. However, in the first year of repayment, only Rs 16,218 of the principal is repaid andin the final (fifth) year, Rs 24,179 of the same.Finally, if borrower are dependent on income from this home (such as rental payments) tohelp service his/her loan, then borrower would be in a better position to pay the pre-EMI rateof interest and start paying his/her EMI only when their home is ready for occupation.1.2.39Getting the papers in orderBuying a home entails a tremendous amount of paperwork. And, hence, there is a lot toconsider where documentation is concerned.Is the Title clear? Are the non-encumbrances certificates in place? Are the permissions underUrban Land Ceiling and Regulation Act, 1976 for developing of land/plot verified? If beingpurchased in a resale, the Title and Letter attesting to the ownership of property is veryimportant.Generally, if the project under construction has been approved by a leading housing financecompany (HFC), it would have examined the legal and technical documents. So the next timeyou fret about how long your HFC is taking to disburse the loan, remember that all thisverification is for your ultimate benefit.While it is comforting to know that the verification is being done, it does not shift yourresponsibility and risk to the financial institution. You had better do your own verification.In practicality, you may not understand the legal jargon used in such documents. Hence, itwould be wise to get a lawyer to take a look at it. This may set you back by around Rs 1,500but it is money well spent. 19
  20. 20. Then comes the registration. Registration refers to the recording of the contents of adocument with a Registering Officer appointed by the state government. Do ensure that youare aware of what you have to pay and by when.Stamp duty is a tax levied by state governments on certain instruments. Being levied by thestate government, this one will obviously vary between states and will depend on thepurchase price shown in the Agreement of Sale. Stamp duty is paid at the time of registration.The payment of proper stamp duty on instruments bestows legality on them. That means, theycan be admitted as evidence in the court of law. An instrument not properly stamped doesnthave this privilege.1.2.40 Stamp Duty & RegistrationStamp duty is basically a tax levied by state governments on certain instruments (not ontransactions). And, the term "instrument" encompasses agreements, exchange deeds, giftdeeds, power of attorneys, indemnity bonds and conveyances.How does it differ from registration ?While stamp duty is payable at the time of registration, the two are quite different. Stampduty is revenue earned by the government on execution of instruments but registrationcharges are collected for keeping the records of the documents. All documents creating rightsin immovable property require compulsory registration. Registration refers to the recording ofthe contents of a document with a Registering Officer appointed by the state government. Hepreserves copies of the original document. The sole purpose being to conserve evidence andassurance of title and prevent fraud. Hence, it safeguards your interest as a buyer. Also, theStamp Act varies between states but the contents of the Indian Registration Act, 1908 arecommon across the country. Though, registration fees may differ across states.How much does it amount to ?Stamp duty is always a percentage of the market value of the property. Moreover, thispercentage varies between states. For instance, in Bangalore it varies as per the slab ofproperty value while it is 10% in Rajasthan and 5% in Calcutta. In Maharashtra, the ratesdepend on the slab of property value. Take the case of residential flats purchased in a co-operative housing society or an apartment owners association. 20
  21. 21. If the cost of the transaction is between Rs 1 - 2.5 lakh, the stamp duty is 0.5% of the sale value If the cost of the transaction is between Rs 2.51 - 5 lakh, the stamp duty is Rs 1,250 + 3% (above Rs 2.5 lakh) If the cost of the transaction is between Rs 5.01 - 10 lakh, the stamp duty is Rs 8,750 + 6% (above Rs 5 lakh) & If the cost of the transaction is above Rs 10 lakh, the stamp duty is Rs 38,750 + 8%(above Rs 10 lakh)1.2.41Supporting Documents to be attached:a) Common for all applicants:1. Allotment letter of the co-operative society / association of apartment owners.2. Copy of approved drawings of proposed construction / purchase.3. Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the property to be purchased / constructed.4. If you have been in your present employment / business or profession for less than a year, mention details of occupation for previous 5 years, giving position held, reasons for change and period of the same.5. Applicable Processing Fees.b) Additionally, If You Are Employed:1. Latest salary slip/salary certificate showing all deductions.2. If your job is transferable, permanent address where correspondence relating to the application can be mailed.3. A letter from your employer agreeing to deduct the monthly installments towards repayment of the loan from your salary. This will expedite the processing of your loan application.If You Are Self-Employed:1. Balance Sheets and Profit & Loss Accounts of the business/profession along with copies of Individual Income Tax Returns for the last three years certified by a Chartered Accountant. 21
  22. 22. 2. A note giving information on the nature of your business/profession, form of organization, clients, suppliers, etc.1.2.42 MAJOR PLAYERS IN HOUSING FINANCEIn Public Sector - HUDCO (Housing and Urban Development Corporation) - L.I.C Housing Finance Ltd. - G.I.C Housing Finance Ltd.Nationalized Banks There are 14 nationalized banks in India, but some major are: - State Bank of India - Central Bank of India - Vijaya Bank - P.N.B - Dena bank - Union Bank of India - Allahabad Bank - P & S Bank Co-operative Banks Private Ltd. Banks - HDFC Bank - ICICI Bank 22
  23. 23. CHAPTER-II 23
  24. 24. REVIEW OF LITERATUREThomas O. Stanley, John K. Ford (1986) reviewed with an objective method of pricing,where the cost of each component of a product is determined separately, is relevant to thepricing of loans in banking. Relevant factors in this case are a “real rate” of interest, aninflation premium, administrative expenses, a maturity factor and an allowance for creditrisk. All these can be accounted for in the pricing of retail loans. This systematic approachenhances the loan pricing procedure and offers an objective way for an institution to establishand monitor the risk level of its portfolio of earning assets. From data it is clear that bankinghas priced its retail loans well and this brings the evolution of new pricing techniques intoquestion.Rodney Shakespeare (2005) reviewed the present options for an economy all have seriousweaknesses and, in any case, the way forward for Islam must be completely distinctive.Fortunately, Islamic opposition to riba enables a distinctive new way which addresses the realeconomy, furthers justice and ends foreign financial colonialism. The new way uses Islamicendogenous loans. These are state-issued, repayable, interest-free loans which are generallyadministered by the banking system on market and private property principles. The loans arecounter-inflationary and are always directed at productive capacity.Taisier A. Zoubi, Osamah Al-Khazali (2007) examined the factors which affect lossprovision for loans and investment in Murabaha, Musharka, and Mudarabah for banks in theGulf Cooperation Council (GCC) region. The effect of prior period earnings, legal andstatutory reserves, size of the bank, level of debt, and loan and investment to deposit ratio onthe loss provisions of banks are examined for the period 2000-2003.Design/methodology/approach – To test the factors that explain the loan loss provision and totest the income smoothing hypothesis, debt to equity hypothesis, and reserve hypothesis, asingle stage regression model was developed and tested. Findings – The results indicate thatwhen return on assets (ROA) before tax and loss provisions for the current year is higher thanthe prior year ROA and the actual capital reserve is below the legal required reserve, thenmanagement is expected to increase loss provisions for the current year. This result is robustfor all the years of this study. Originality/value – While prior research has examined theissue of the loan loss provision in USA, Japan, and Europe, no research has examined theissue of the loss provisions in the GCC region. This study demonstrates that the incomesmoothing hypothesis is relevant across different regulatory requirements, economic 24
  25. 25. conditions, and different accounting standards. Managers of banks in the GCC region use theloss provision, among other things, to smooth earnings to achieve certain objectives.Sheena Thakur (2008) analyzed that Finance Minister has acted Santa Clause andannounced debt waiver and relief for small and marginal farmers. The move will cost thegovernment a total of Rs 60,000 crore – the waiver costing Rs 50,000 cr and a 25 per centdiscount on the one time waiver to cost Rs 10,000 crore. Agricultural loans given byscheduled commericial banks, regional rural banks and cooperative credit institutions up toMarch 31, 2007 and over-due as of December 31 that year will be covered under the waiverscheme to address the problem of indebtedness of farmers. Agriculture loans restructured andrescheduled by banks from 2004-06 and other loans normally rescheduled under RBIguidelines will also be eligible under the waiver scheme. The loan waiver scheme will benefitthree crore small and medium farmers and cover loans worth Rs 50,000 crore in total – that is4 per cent of the total loans of commercial banks. One crore other farmers will benefit to thetune of Rs 10,000 crore in the waiver. According to industry sources, the banks have reasonsto be happy as there was an implicit hint that they would get reimbursed accordingly. In thatscenario, the move will help the banks to get rid of bad debt. The farmers can also take freshloans post the settlement of the older ones which will give a fillip to agri credit space that hasalready touched Rs 2,40,000 cr in 07-08.Vaibhav Aggarwal (2008) reviewed that in a remarkable move benefiting the co-operativebanks, the RBI said that it will soon allow co-operative banks to raise capital throughinnovative instruments. This was suggested by the RBI deputy governor Usha Thorat, whosaid that the guidelines would issue soon. This new development came when she wasspeaking on the sidelines of a MoU-signing function between the Indian Institute of Banking& Finance (IIBF) and National Co-operative Union of India/National Council for Co-operative Training on 29th of May, 2008.Presently, only commercial banks can come up with a premium issue that helps boostcapital, however, co-operative banks cannot. Therefore, there is a need for innovativeinstruments. In the present scenario, the co-operatives improve their capital through the issueof shares to customers and by ploughing back their earnings. Clarifying on the farm debt-waiver scheme, stated that no benefit under the debt-waiver scheme will be allowed for farmloans that have fallen overdue after December 2007. “Loans overdue after December 2007will not be covered by the scheme and it is very clearly spelt out in the scheme. Those, who 25
  26. 26. have their payment overdues for up to February 29, 2008, will have to meet their paymentsobligation. Stated otherwise, those, who have already repaid their dues by the date, stand toloseZubair Hasan (2008) discussed the issue of credit creation and control in the area of Islamicbanking. Design/methodology/approach – In view of a rapid expansion of Islamic banking inrecent decades, the answer to questions whether Islamic banks can create credit likemainstream banks and, if yes, what methods central banks could use to control it in their caseis of paramount importance. An overview of the literature on the subject is provided andcredit creation process is explained as background material for the discussion. Findings – Theliterature on the subject is scanty, controversial and inconclusive. One reason seems to be themismatch between structural design of Islamic banks and the objectives they are supposed tomeet. It is concluded that Islamic banks can create credit in the usual manner but centralbanks will have to design new tools for credit control applicable to Islamic banks. Researchlimitations/implications – It is not a rigorous analytical exercise as the main purpose of thepaper is to reopen an important issue for discussion. It is an opinioned work and presentsrather tentative answers to the questions raised. Practical implications – The findings of thepaper may have serious implications for the current structure of Islamic banks and the legalframework for regulating their credit creation activities. Originality/value – The paper drawsattention to a rather neglected issue in Islamic banking and offers guidelines to resolve it. 26
  27. 27. CHAPTER-III 27
  28. 28. 3.1 NEED OF THE STUDYThe review of literature revealed the fact that majority of researchers have conducted a fullfledge study on the types of Home Loan in the organization. Few studies have beenconducted on the effect of Home Loan on the customers of the organization and satisfactionlevel. This study is being conducted in order to throw more light on the types of Home Loanproduct.3.2 SCOPE OF THE STUDYThis study has covered the 100 respondents of Amritsar City. 3.3 OBJECTIVES OF THE STUDY  To know the factors which influence a customer to select a particular institution for home loan.  To know the satisfaction level of customer regarding home loan policy of bank.  To know the problems faced by respondents while getting housing finance. 28
  29. 29. CHAPTER-IV 29
  30. 30. 4.1 Research MethodologyResearch Methodology is a way to systematically solve the research problem. The ResearchMethodology includes the various methods and techniques for conducting a Research.“Marketing Research is the systematic design, collection, analysis and reporting of data andfinding relevant solution to a specific marketing situation or problem.The purpose of Research is to discover answers to the Questions through the application ofscientific procedures. My project has a specified framework for collecting data in an effectivemanner. Such framework is called “Research Design”.4.2 Research Design4.2.1 Sampling Plan – Sampling can be defined as the section of some part of an aggregateor totality on the basis of which judgment or an inference about aggregate or totality is made.The sampling plan helps in decision making in the following areas: -4.2.2 Sample size – Sample size refers to the total numbers of items about which theinformation is desired. The sample size of the study is 100.4.3 Data Collection And Analysis4.3.1 Data Collection - Research work is exploratory in nature. Convenient sampling hasbeen used. Information has been collected from both Primary and Secondary Data. Primary sources – Primary data are those, which are collected are fresh and for the first time, and thus happen to be original in character. Primary Data has been collected by conducting surveys through Questionnaire, which include both open ended and close-ended Questions. Secondary sources – Secondary Data are those which have already been collected by someone else and which already had been passed through the statistical process. Secondary data has been collected through Magazines, Web sites, Newspaper and Journals.4.3.2 Tools Of Presentation And AnalysisAnalysis of Data: After collecting the data has been analyzed through various statisticaltools and techniques. The analysis of data requires a number of closely related operationssuch as establishment of categories, the application of these categories to raw data through 30
  31. 31. coding, tabulation and then drawing statistical inferences. The unwieldy data shouldnecessarily be condensed into few manageable groups and tables for further analysis. Thus ithelps to classify the raw data into some purposeful and usable categories.4.4 Limitations Of The StudyFollowing are the limitations of this study:1. This study has been restricted to Amritsar City only.2. The information provided by the respondents may be biased and incorrect.3. The sample may not represent the whole population.4. Paucity of time and resources could lead to the inability of conducting a large survey.5. Approaching customers who had taken loan from sample institutions may not easy. 31
  32. 32. CHAPTER-V 32
  33. 33. DATA ANAYSIS AND INTERPRETATION1.Do you have a home loan? Table No. 5.1 Response regarding home loan facility Response %Age Yes 100 No 0 Figure No. 5.1 Response regarding home loan facility 0% 100% Yes NoInterpretation: The study is limited to those 100 respondents who have availed home loanfacility from Central Bank of India. 33
  34. 34. 2. What is your purpose for the home loan? Table No.5.2 Purpose for the home loan Reason %Age Construction 38 Purchase 52 Extension 8 Renovation 2 Figure no.5.2 Purpose for the home loan 8% 2% 38% 52% Construction Purchase Extension RenovationInterpretation: The above figure depicts that out of the total sample of 100 respondents, it isfound that most of the applicants applied for the purpose of purchase that is 52% as againstthe other purposes of home loans i.e. construction, extension and renovation which amountedto 38%, 8%, and 2% respectively. 34
  35. 35. 3. Why did you select that particular institution? Table No. 5.3 Particular institution by the respondents Reason %Age Easy Accessibility 39 Prompt Services 14 Existing Customers 19 Others 28 Figure No5.3 Particular institution by the respondents 28% 39% 19% 14% Easy Accessibility Prompt Services Existing Customers OthersInterpretation: The above figure depicts that out of the total sample of 100 respondents, it isfound that 39% of the respondents come to a particular institution due to easy accessibilitywhile 28% of the respondents are recommended by some one to avail loan from a particularinstitution, and only 14% respondents opt because of prompt services while 19% are theexisting customers. 35
  36. 36. 4.What problems did you face while getting the home loans? Table No. 5.4 Problems Faced while getting the home loans Response %AgeLengthy Procedure 20Terms & Conditions 21Attitude of the staff 04Timely Credit 24Others 31 Figure No. 5.4 Face while getting the home loans 20% 31% 21% 24% 4% Lengthy Procedure Terms & Conditions Attitude of the staff Timely Credit Others Interpretation: The above figure depicts that out of the total sample of 100 respondents, it is found that 31% of the respondents faced the problem of more documentation formalities while availing the home loans. 24% of the respondents faced the problem of time involved in the disbursement process followed by other problems like terms & conditions, lengthy procedure and attitude of the staff. 36
  37. 37. 5.Are you satisfied with the services provided by Central Bank of India? Table No.5.5 Satisfaction With the services Response %age Yes 80 No 20 Figure No.5.5 Satisfaction With the services 20% 80% Yes NoInterpretation: The above figure depicts that majority of the customers are satisfied with theservices provided by central bank and only 20% of the customers that are not satisfied withthose services. 37
  38. 38. 6.If no what do you think could be the solution to improve the shortcomings? Table No. 5.6 Improvement for the shortcomings Response %age Better service quality 30% Cordial staff behaviour 30% Reduction in complexity in processes 40% Others 0% Figure NO. 5.6 Improvement For the Shortcomings 0% 30% 40% 30% Better service quality Cordial staff behaviour Reduction in complexity in processes Others Interpretation: The above figure depicts that 40% of the customers are saying that there should be reduction in complexity in processes while 30% of the customers saying that cordial staff behaviour should be there and there should be better service quality. 38
  39. 39. 7 How do you rate Central Bank of India regarding home loan a whole ? Table no. 5.7 Rating of central bank Response %AgeExcellent 16Very Good 47Average 32Poor 5 Figure no.5.7 Rating of central bank 5% 16% 32% 47% Excellent Very Good Average PoorInterpretation :From the above graph it is clear that out of 100 respondents, 16% respondents have rated thehome loan facility of Central Bank of India as Excellent followed by 47% rated it as VeryGood, 32% rated it as Average and rest of them rated it as “Poor”. 39
  40. 40. CHAPTER-VI 40
  41. 41. Findings of the Study1. The study is limited to those 100 respondents who have availed home loan facility fromCentral Bank of India.2. The applicants applied for the purpose of purchase that is 52% as against the otherpurposes of home loans i.e. construction, extension and renovation which amounted to 38%,8%, and 2% respectively.3. 39% of the respondents come to a particular institution due to easy accessibility while 28%of the respondents are recommended by some one to avail loan from a particular institution,and only 14% respondents opt because of prompt services while 19% are the existingcustomers.4. 31% of the respondents faced the problem of more documentation formalities whileavailing the home loans. 24% of the respondents faced the problem of time involved in thedisbursement process followed by other problems like terms & conditions, lengthy procedureand attitude of the staff.5. It is also found that majority of the customers are satisfied with the services provided bycentral bank and only 20% of the customers that are not satisfied with those services.6. 40% of the customers are saying that there should be reduction in complexity in processeswhile 30% of the customers saying that cordial staff behaviour should be there and thereshould be better service quality.7 16% respondents have rated the home loan facility of Central Bank of India as Excellentfollowed by 47% rated it as Very Good, 32% rated it as Average and rest of them rated it as“Poor”. 41
  42. 42. CHAPTER-VII 42
  43. 43. 7.1 CONCLUSIONAt last, after the five decades of independence, the vital housing finance industry is cominginto its own. On the one side, the govt. has recognized the role that housing can play in therevival of the national economy and has accordingly, started taking steps to give a boost tohousing finance sector, and, on the other, the industry, dominated-nay virtually monopolizedby one company all these years, is now attracting new players from private bank, insuranceand finance sector. More over the prolonged depression in the real estate market during thelast three years or so, has brought down property prices from unthinkable heights tosomewhat reasonable levels prompting millions of middle class people to go for their ownhouses, giving a boost to housing finance sector in the process.Future prospects of housing finance institutions are very much bright in the Indian market.The housing finance market – with a turnover of more than Rs. 50,000 crore a year isexpanding and has tremendous future prospects Because of the following reasons: -Growth in demand is driven by improved offer debility - Falling property prices - Lowest interest rates since inception - Rising income level increasing - Fiscal incentives on both interest & principal repayments - Increasing urbanizationIt is a very good opportunity for genuine house seekers to go for a housing loan and give asecure feeling to their families. Housing is one toll that can ease the unemployment problemin the country. It employs both skilled and unskilled labour and catalyses activity in at least200 related sectors. As a result it and is trying to make housing affordable to common man bygiving all kinds of incentives and sops. Tax relief is a part of this.Notwithstanding the various constraints the future outlook for the housing finance sector ishighly promising. 43
  44. 44. 7.2 RECOMMENDATIONS1. Most of the customers said that the formalities involved in getting the loan sanctionedmade the procedure lengthy and cumbersome and they face difficulty in getting timely credit.So there is a need to cut short the lengthy and cumbersome procedure into simplifiedprocedure with minimum formalities. They further suggest that the authority to sanction theloan must be given to the local branch mangers in order to minimize the levels through whichthe loan application is required to be passed.2. Another suggestion from the customers is that as the customer enters into the bank to takea housing loan he should be guided properly as to how to apply for the loan. What are termsand conditions required to be fulfilled so that his loan application and they can get credit ontime.3. Specialized staff should be recruited to guide the customer as the customers are not fullyaware of the housing loan schemes available with the banks. When he wishes to take ahousing loan, he should be properly guided as to what schemes are available, what are theterms and conditions of each schemes, which schemes would match the requirements of thecustomer.4. Some customers suggested that eligibility criteria should be widened so that more andmore customers can avail of the facility of housing finance and fulfill their dream of having ahouse of their own.5. More marketing efforts should be undertaken to make the housing schemes popular amongthe people. Stress on advertising should be made to reach the masses. Moreover institutionstaff should go to the different rural areas and provide information to rural people throughseminars on housing loan facility provided by them.6. Awareness level should be increased through Exhibitions, Newspaper, Hoarding’s.7. There should be some relaxation in the matter of guarantee.8. Customer waiting time can be minimized.9. Door step service can be provided to the customer.10. Disbursements and applications processing time should be minimized. 44
  45. 45. REFERENCES 45
  46. 46. REFERENCES Vaibhav Aggarwal (2008), “Co-operative Banks to benefit: RBI” published Rupee Times Online Edition. Sheena Thakur (2008), “Debt waiver, relief schemes for marginal farmers” published by The Economic Times. Taisier A. Zoubi, Osamah Al-Khazali (2007), “Empirical testing of the loss provisions of banks in the GCC region”, Journal: Managerial Finance, Volume: 33, Issue: 7, Pg: 500 – 511, published by Barmarick Publications Rodney Shakespeare (2005), “Islamic Endogenous Loans”, Journal: Humanomics, Volume: 21, Issue: 3, published by Emerald Group Publishing Limited Thomas O. Stanley, John K. Ford (1986), “The Role of Risk in Pricing Retail Loans”, International Journal of Bank Marketing, Volume: 4, Issue: 5, Page: 58 – 65 published by MCB UP Ltd Zubair Hasan (2008), “Credit creation and control: an unresolved issue in banking”, International Journal of Islamic and Middle Eastern Finance and Management, Volume: 1, Issue: 1, Page: 69 – 81, Emerald Group Publishing Limited 46
  47. 47. ANNEXURE 47
  48. 48. QUESTIONNAIRE SECTION A : PERSONAL PROFILE Name: ________________________________________________ Age: _____________ Occupation:(a) Govt. Employee  (b) Private Sector Employee (c) Self Employee/Professional  Monthly Income:(a) Below Rs.10000  (b) Rs.10001-Rs.15000 (c) Rs.15001-Rs.20000  (d) Rs.20001-Rs.25000 (e) Rs.25001-Rs.30000  (f) Above Rs.30000  Gender:(a) Male  (b) Female  SECTION B 1. Do you have a home loan ? (a) Yes  (b) No  2. What is your purpose for the home loan? (a) Construction  (b) Purchase  (c) Extension  (d) Renovation  48
  49. 49. 3. Why did you select that particular institution? (a) Easy Accessibility  (b) Prompt Services  (c) Existing Customer  (d) Others  4. What problems did you face while getting the housing finance? (a) Lengthy procedure  (b) Terms & Conditions  (c) Attitude of the staff  (d) Timely credit  (e) Others  5. Have you compared the rate of interest Central Bank of India with others ? (a) Yes  (b) No 6. Are you satisfied with the services provided by CBI? (a) Yes  (b) No 7.If no what do you think could be the solution to improve the shortcomings? (a) Better Service Quality  (b) Cordial Staff Behaviour  (c) Reduction in Complexity in processes  (d) Others  49
  50. 50. 8.How do you rate Central Bank of India regarding Home Loan as a whole? (a) Excellent  (b)Very Good  (c)Average  (d)Poor  50
  51. 51. 51