Personal Loan Public V/s Private

Member’s Involved : Samiran Roy

Rupankar Das

Soumyadeep

Shodhan R.Shetty

Sabhyasachi

Saurabh Choudhary

BANKING HISTORY

The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

Public Sector Bank

• A Public sector bank is a bank that is owned by the government. The government owns and controls the banks operations. The chairman, managing director and other senior officials of the bank are answerable to the ruling government regarding their functions and operations

Public Sector Banks

Private Sector Bank

• Private sector banks are the banks which are controlled by the private lenders with the approval from the RBI their interest rates are slightly costly as compared to Public sector banks.

Personal loan• Personal loan is a lump sum amount that you take either

from a bank or building society or another lender.• Such loans help you to take care of your immediate

requirements without much of a hassle. • In fact, personal loan is one of the quickest ways of

borrowing money. • You can use the loan amount for any purpose such as

home renovation, marriage expenses, medical expenses, holidays, consumer durables, higher education etc.

• While applying for the loan, the lender usually conducts a credit worthiness check, before giving the loan.

• Personal loans are repayable in equal monthly installments (EMIs) and the loan tenure varies from 1 to 5 years. 

• The maximum amount of personal loan for which you are eligible depends upon your take-home salary.

• The exact loan amount depends on your eligibility and takes into account many other things as well, like your credit rating, job security, residential location and the ability to repay the loan amount in time.

• You can also apply jointly with a co-applicant, say your spouse for personal loan. This allows you to increase your loan eligibility, as the income of your spouse is also added to your income, for the purpose of calculating the total loan amount.

• The loan range in case of personal loan is Rs. 50,000 to

Rs. 20, 00,000. 

• As personal loans are given without any security and involve a high risk, the interest charged is usually more as compared to other loans, usually varying from 12 to 24%.

• Apart from this, interest processing fee is also charged from the borrowers. Processing fee is payable at the time of processing of loan application. A pre-payment fee is payable in case you decide to pre-close your loan account. Both processing fee and pre-payment fee are in the range of 2-3%.

• You can get the benefits of preferred interest rates, priority processing and simpler documentation, if you are an existing customer with the bank.

• Generally, personal loans are sanctioned within 72

hours. 

Types of Personal Loans

• A secured loan is one in which you need to attach a guarantee against the sum of money borrowed. This can either be in the form of your property or any fixed/movable asset. Upon default, there is a risk of the asset being taken over by the bank and sold off.

• An unsecured loan is one in which no security needs to given for the money borrowed. However, in this case, the lender would be charging a higher rate of interest, taking into account the high risk involved in lending the sum. In case the recipient fails to repay the loan, the lender can seek legal help to make up for the loss incurred.

Benefits of Personal loan•

1. A Loan without security : A Personal Loan is not a secured loan (bank doesn’t ask for any security or collateral) as against a Secured Loan where one is required to pledge a house or other security to acquire a loan.

2. Simple Documentation: A Personal Loan can be accessed with minimal paperwork or documentation & doesn’t take much time to procure as against a Secured Loan.

3. No specification about the end use of the loan amount : You are not required to disclose the end use of the money borrowed, Banks are concerned about the fact that whether the borrower is able to pay back the loan with interest before the due date or not and they confirm this by checking the income, employment or business & other factors of the borrower.

4. Big Loan amount : Personal Loan is a means to fulfill bigger loan requirement, you can take a loan ranging from Rs. 50,000 to Rs. 20 lakh.

Eligibility Criteria for Personal Loans Salaried Individuals

• Minimum Age of the Applicant - 21 years

• Maximum Age of Applicant at Loan Maturity - 58 years

• Minimum Employment Period - 2 years in total and 1 year at present organization

• Minimum Income - Rs. 8000 per month

Self Employed Professionals & Businessman

• Minimum Age of the Applicant - 25 years

• Maximum age of Applicant at Loan Maturity - 65 years

• Minimum Business Period - Minimum 3 years in current business and 5 years total experience

• Minimum Annual Income - Rs.60,000

Documents Required for Personal Loan

• Bank Statement for last three months (where salary/income is credited)

• Salary Slips for last three months (if salaried) or ITR for the last two years (if self employed)

• Proof of Continuity in Current Job - Form 16 / Company Appointment Letter (if salaried)

• Proof of Identity (Copy Of Passport / Driving License / Voters ID / PAN Card / Photo Credit Card / Employee ID Card)

• Proof of Residence (Copy Of Ration Card / Utility Bill / LIC Policy Receipt)

• Proof of Qualification Highest Degree (for Professionals / Govt. employees)

• For Professionals - proof of qualification, say degree, registration with professional council, etc.

• Two passport size photographs

Personal loan Scheme of public sector bank

• Central Bank of India has created personal loan for different section of society keeping in mind their requirements. Bank gives personal loan to employees of corporate clients, personal loan scheme for (Non-corporate), personal loan for commission agents of life insurance corporation of India and personal loan for teachers.

CRITERIA

• Loan Type Salaried Self Employed

Term Loan Term Loan

• Loan Amount Min. - Rs 50000 Min. - Rs 50000

Max. - Rs 200000 Max. - Rs 100000

Tenure Min. - 12 months. Min. - 12 months. Max. - 48 months Max. - 36 months.

• Interest Rate Min. - 13.5 % Min. - 12.5 % Max. - 13.5 % Max. - 12.5 %

Time to Process Loan 7 days 7 days

• .

Details of SBI Personal Loan.

Interest Rate 16% fixed (SBAR + 4.25%). SBAR is currently 11.75%

(Daily reducing balance)

Processing Fees2% to 3% of loan amount

Loan Tenure1 year to 4 years

Pre-closure Charges1% of pre-closed amount

Loan AmountMetro cities: Up to to Rs. 5 lakhs. Non-metro cities: Up to Rs.

2.5 lakhsIf salary account with SBI, then cap increased to Rs. 10 lakhsMaximum loan amount cannot exceed 12 times net monthly income

• Minimum Income Requirement: Rs.24,000/- in urban centres. Rs.10,000/- in rural centres

Guarantor Requirement: Guarantor is mandatory

Documents:Proof of Identity : Passport or voter's card or driving licence or PAN card and photograph

Proof of Residence : Ration card or passport or latest electricity bill or latest telephone bill or latest credit card bill bank statements, last 6 months bank statements

Income proof : Latest salary slip and Form 16 (Salaried) or Income Tax Returns of last 2 years(Self employed) of applicant and guarantor

PL SCHEME OF PRIVATE SECTOR BANK

• Details of HDFC Bank Personal Loan. 

• Interest Rate (Monthly reducing balance) 14% to 24% fixed

• Processing Fees 2% to 2.5% of loan amount• Loan Tenure 1 year to 5 years• Pre-closure Charges 4% of pre-closed amount.• Loan Amount Rs. 1 lakh to Rs. 15 lakhs• Guarantor Requirement No guarantor required

• Details of ICICI Personal Loan. 

• Interest Rate (Monthly reducing balance) 16% to 24% fixed

• Processing Fees 2% to 3% of loan amount• Loan Tenure 1 year to 4 years• Pre-closure Charges 4% of pre-closed amount• Loan Amount Rs. 1 lakh to Rs. 10 lakhs• Guarantor Requirement No guarantor required• Documents• Proof of Identity (any one of Passport, Driving License, Voters ID or PAN

Card)• Proof of Residence (any one of Ration Card, Electricity/Phone Bill,

Passport, LIC Policy Receipt)• Latest 3 months Bank Statement (where salary/income is credited)• Salary slips for last 2 months

Difference between Interest rates of Private and Public sector Banks causes home loan borrowers

to switch to latter

• Home Loan borrowers, to take advantage of the falling interest rates in Public Sector Banks are increasingly opting for these rather than going with the Private players.

•Such a decline in rates has been found to trigger demand in home loan applications.

• JM Garg, Chairman at Corporation Bank informed that a rise in the number of queries (wanting to switch to public sector banks) is an evidence of the change in trend. The bank presently, offers loans at 8.5%- 10.5%.

• However, HDFC ruled out any such indications of customers hopping from private banks to the public sector counterparts. The Bank’s spokesperson said that no such requests from the existing customers were received.

 • SBI recently decided to provide home loans at

8% to new customers. The ones who shift from any other bank to SBI will also be considered the new borrowers and the loan will be offered at same rate

THANK YOU