Main Project 111

8/8/2019 Main Project 111

1/52

A PROJECT REPORT

ON

STUDY OF HOME LOAN

FOR

HDFC BANK LTD

SUBMITTED TO UNIVERSITY OF PUNE

IN PARTIAL FULFILLMENT OF 2 YEAR FULL TIME COURSE

MASTER IN BUSINESS ADMINISTRATION (MBA)

By

HITESH PARSEWAR

BATCH (2010-2011)

UNDER THE GUIDANCE OF

DEEPALI PUJARI

(MBA)

JSPMS

JAYAWANTRAO SAWANTINSTITUTE OF MANAGEMENT & RESEARCH,

INDRAYANI NAGER, HANDEWADI ROAD HADAPSAR.

PUNE-28

1


2/52

Acknowledgements

If words are considered to be signs of gratitude then let these words Convey the verysame My sincere gratitude to HDFC BANK for providing me with an opportunity towork with BANK and giving necessary directions on doing this project to the best ofmy abilities.

I am highly indebted to Mr. Vishal Patil (Sales Manager) and Mr. VishnuShinde company project guide,(HDFC Home Loan) who has provided me with thenecessary information and also for the support extended out to me in the completionof this report and his valuable suggestion and comments on bringing out this report inthe best way possible.

I also thank Mr.Kiran Deshmkh and Mr. Sagar Waikar who hassincerely supported me with the valuable insights into the completion of this project.I am grateful to all faculty members of Jayawantrao Sawant institute Of

Management and Research, my friends who have helped me in the successfulcompletion of this project.

2


3/52

EXECUTIVE SUMMARY

Home is a dream of a person that shows the quantity of efforts, sacrificesluxuries and above all gathering funds little by little to afford ones dream. Home is

one of the things that everyone one wants to own. Home is a shelter to person wherehe rests and feels comfortable. Many banks providing home loans whethercommercial banks or financial institutions to the people who want to had a home. Thehousing sector plays an important role in the economic development of the country.

My project title is A STUDY ON HOME LOANS. I selected this topicbecause The Indian housing finance industry has grown by leaps and bound in fewyears. Total home loans disbursements by banks have raised which witnesss

phenomenal growth from last 5 years. There is greater number of borrowers of homeloans. So by this study we can find out satisfaction level of customers and problemsfaced by them in obtaining home loans.My objectives of study are-

To make comparative study of Disbursement of home loans by commercial banks. To study the satisfaction level of customers about home loans. To study the problems faced by customers in obtaining the home loans.For this I had taken two commercial Banks in Aurangabad city namely HDFC Bank,SBH. It includes one public sector banks and one private sector banks. The period ofstudy is five years commencing from 2006-2009.In the research methodology had taken both primary data as well as secondary data ,in the primary data I had make a questionnaire to check the satisfaction level ofcustomers about home loans . In the secondary data I had studied the annual reports ofcommercial banks & broachers of these banks.

And problems face by customers in obtaining home loans are

The customer does not have proper knowledge about different Home loan

products so they face problem in making a good deal.

There are procedural delays, which harass the customers lot this will crush the

curtsy of customers to avail the home loan.

The attitude of bank employees sometimes non cooperative and it creates a

hurdle in building trust and Confidence among customers about banks.

The banks do not take into account the paying capacity of customers. So somecustomers are not able to get amount of Loan needed by them.

Finally the whole research was carried out in a systematic way to reach at exactresults. The whole research and findings were based on the objectives some of thelimitation faced in collecting the data were Lack of time, lack of data, non-response,reluctant attitude and illiteracy of respondents, which posed problems in carrying outthe research.

INTRODUCTION

3


4/52

HDFC Bank

HDFC Bank Ltd.

Type Type

IndustryBanking

Financial services

Founded August 1994

Founder(s) Deepak Parekh

Headquarters Mumbai, India

Key people

Jagdish Capoor

(Chairman)

Aditya Puri

(MD)

Products

Investment Banking

Commercial Banking

Retail Banking

Private Banking

Asset Management

MortgagesCredit Cards[1]

Revenue Rs 20,266.99 crore (US$ 4.32

billion) (2010)[2]

Operating

income

Rs. 4,419.01 crore (US$ 941.25

million) (2010)[2]

Profit Rs. 3,032.92 crore (US$ 646.01

million) (2010)[2]

Total assets US$ 39.723 billion (2009)[2]

Total equity Rs 21,158.15 crore (US$ 4.51

billion) (2010)[2]

Employees 51,888 (2010)[3]

Website HDFCBank.com

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a majorIndian financial servicescompany based in Mumbai, incorporated in August 1994, after the Reserve Bank of

India allowed establishing private sector banks. The Bank was promoted by theHousing Development Finance Corporation, a premier housing finance company (set

4
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Bankinghttp://en.wikipedia.org/wiki/Financial_servicehttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Deepak_Parekhhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Investment_Bankinghttp://en.wikipedia.org/wiki/Commercial_Bankinghttp://en.wikipedia.org/wiki/Retail_Bankinghttp://en.wikipedia.org/wiki/Private_Bankinghttp://en.wikipedia.org/wiki/Asset_Managementhttp://en.wikipedia.org/wiki/Mortgageshttp://en.wikipedia.org/wiki/Credit_Cardshttp://en.wikipedia.org/wiki/Credit_Cardshttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Credit_Cardshttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Websitehttp://www.hdfcbank.com/http://www.bseindia.com/stockreach/stockreach.htm?scripcd=500180http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/quickquote.html?ticker=hdbhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Financial_servicehttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Housing_Development_Finance_Corporationhttp://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Bankinghttp://en.wikipedia.org/wiki/Financial_servicehttp://en.wikipedia.org/wiki/Entrepreneurhttp://en.wikipedia.org/wiki/Deepak_Parekhhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Investment_Bankinghttp://en.wikipedia.org/wiki/Commercial_Bankinghttp://en.wikipedia.org/wiki/Retail_Bankinghttp://en.wikipedia.org/wiki/Private_Bankinghttp://en.wikipedia.org/wiki/Asset_Managementhttp://en.wikipedia.org/wiki/Mortgageshttp://en.wikipedia.org/wiki/Credit_Cardshttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-financialtables-1%23cite_note-financialtables-1http://en.wikipedia.org/wiki/Employmenthttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Websitehttp://www.hdfcbank.com/http://www.bseindia.com/stockreach/stockreach.htm?scripcd=500180http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/quickquote.html?ticker=hdbhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Financial_servicehttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Housing_Development_Finance_Corporation


5/52

up in 1977) of India. HDFC Bank has 1,725 branches and over 4,232 ATMs, in 779cities in India, and all branches of the bank are linked on an online real-time basis. Asof 30 September 2008 the bank had total assets of INR 1006.82 billion.[4] For thefiscal year 2008-09, the bank has reported net profit of Rs.2,244.9 crore, up 41% fromthe previous fiscal. Total annual earnings of the bank increased by 58% reaching at

Rs.19,622.8 crore in 2008-09.[5]

History

HDFC Bankwas incorporated in 1994 by Housing Development FinanceCorporation Limited (HDFC), India's largest housing finance company. It was amongthe first companies to receive an 'in principle' approval from the Reserve Bank ofIndia (RBI) to set up a bank in the private sector. The Bank started operations as ascheduled commercial bankin January 1995 under the RBI's liberalisation policies.

Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was mergedwith HDFC Bank Ltd., in 2000. This was the first merger of two private banks inIndia. Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75shares of Times Bank.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches tomore than 1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000crore and net advances of about Rs. 89,000 crore. The balance sheet size of thecombined entity is more than Rs. 1,63,000 crore.

Business focus

HDFC Bank deals with three key business segments - Wholesale Banking Services,Retail Banking Services, Treasury. It has entered the banking consortia of over 50corporates for providing working capital finance, trade services, corporate finance andmerchant banking. It is also providing sophisticated product structures in areas offoreign exchange and derivatives, money markets and debt trading and equityresearch.

Wholesale banking services

The Bank's target market ranges from large, blue-chip manufacturing companies inthe Indian corp to small & mid-sized corporates and agri-based businesses. For thesecustomers, the Bank provides a wide range of commercial and transactional bankingservices, including working capital finance, trade services, transactional services, cashmanagement, etc. The bank is also a leading provider of structured solutions, whichcombine cash management services with vendor and distributor finance forfacilitating superior supply chain management for its corporate customers. HDFCBank has made significant inroads into the banking consortia of a number of leadingIndian corporates including multinationals, companies from the domestic businesshouses and prime public sector companies. It is recognized as a leading provider ofcash management and transactional banking solutions to corporate customers, mutualfunds, stock exchange members and banks.

5
http://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-3%23cite_note-3http://en.wikipedia.org/wiki/HDFC_Bank#cite_note-4%23cite_note-4http://en.wikipedia.org/w/index.php?title=Reserve_Bank_of_India_(RBI)&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Reserve_Bank_of_India_(RBI)&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Scheduled_commercial_bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Centurion_Bank_of_Punjabhttp://en.wikipedia.org/w/index.php?title=The_Bank%27s_target_market_ranges_from_large,_blue-chip_manufacturing_companies_in_the_Indian_corp_to_small_%26_mid-sized_corporates_and_agri-based_businesses.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=The_Bank%27s_target_market_ranges_from_large,_blue-chip_manufacturing_companies_in_the_Indian_corp_to_small_%26_mid-sized_corporates_and_agri-based_businesses.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=The_bank_is_also_a_leading_provider_of_structured_solutions&action=edit&redlink=1http://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/HDFC_Bank#cite_note-3%23cite_note-3http://en.wikipedia.org/wiki/HDFC_Bank#cite_note-4%23cite_note-4http://en.wikipedia.org/w/index.php?title=Reserve_Bank_of_India_(RBI)&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Reserve_Bank_of_India_(RBI)&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Scheduled_commercial_bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Centurion_Bank_of_Punjabhttp://en.wikipedia.org/w/index.php?title=The_Bank%27s_target_market_ranges_from_large,_blue-chip_manufacturing_companies_in_the_Indian_corp_to_small_%26_mid-sized_corporates_and_agri-based_businesses.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=The_Bank%27s_target_market_ranges_from_large,_blue-chip_manufacturing_companies_in_the_Indian_corp_to_small_%26_mid-sized_corporates_and_agri-based_businesses.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=The_bank_is_also_a_leading_provider_of_structured_solutions&action=edit&redlink=1


6/52

Retail banking services

[[The objective of the Retail Bank is to provide its target market customers a fullrange of financial products and banking services, giving the customer a one-stop

window for all his/her banking requirements. The products are backed by world-classservice and delivered to customers through the growing branch network, as well asthrough alternative delivery channels like ATMs, Phone Banking, NetBanking andMobile Banking.]] [[HDFC Bank was the first bank in India to launch an InternationalDebit Card in association with VISA (VISA Electron) and issues the MastercardMaestro debit card as well. The Bank launched its credit card business in late 2001.By March 2009, the bank had a total card base (debit and credit cards) of over 13million. The Bank is also one of the leading players in the merchant acquiring

business with over 70,000 Point-of-sale (POS) terminals for debit / credit cardsacceptance at merchant establishments.]] The Bank is well positioned as a leader invarious net based B2C opportunities including a wide range of internet banking

services for Fixed Deposits, Loans, Bill Payments, etc.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange andDerivatives, Local Currency Money Market & Debt Securities, and Equities. Theseservices are provided through the bank's Treasury team. To comply with statutoryreserve requirements, the bank is required to hold 25% of its deposits in governmentsecurities. The Treasury business is responsible for managing the returns and marketrisk on this investment portfolio.

Distribution network

An HDFC Bank Branch

HDFC Bank is headquartered in Mumbai. The Bank has an network of 1,725branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through TelephoneBanking. The Bank has a presence in all major industrial and commercial centres

across the country. Being a clearing/settlement bank to various leading stockexchanges, the Bank has branches in the centres where the NSE/BSE have a strongand active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFCBank's ATM network can be accessed by all domestic and internationalVisa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American ExpressCredit/Charge cardholders.

The responsibility to provide Housing finance largely rested with the

Government of India till the mid-eighties. The setting up of National Housing Bank(NHB), a fully owned subsidiary of the Reserve Bank of India (RBI) in 1988 as the

6


7/52

apex institution marked the beginning of the emergence of housing finance as fund

based financial service in the country. It has growth in the volume and depth with

entry of number of specialized financial Institution / Companies in the public, private

and joint sectors, although it is at an early stage of development.

The Banking Industry has been undergoing some fundamental changes in its

approach to banking. There has been a perceptible shift towards Customer

Relationship Management (CRM) mainly arising out of the element of intensive

competition infused into the industry by the arrival of private players. With the free

economy reforms government permitted private players to inter in banking business

along with existing nationalized Banks.

In 2002 government allowed foreign banks to enter in Indian Market. The

concept of retail banking introduced with the increase in no of banks, private players

introduce especially this concept. The banks are segmenting their portfolio into

different segments like Personal Banking, Retail Banking, Corporate Banking, Agri

Banking and Investment banking. In Retail Banking, banks are concentrating on SME

(Small and Medium Entrepreneur(s) and Individual finance like Vehicle finance,

Housing finance etc. As large no of customer can be tap with diversification of risk as

it evolved lower risk than corporate banking. All banks are increasing their exposure

to this area.

Credit has done a thousand times more to enrich mankind than all the gold

mines in the world. It has exalted labor, stimulated manufacture, and pushed

commerce over every sea.

Credit provided by banks is an important driver of national economy. In olden

days when commercial banking had not taken the present shape, individuals or

families traditionally involved in money lending as source of finance. Present days

economy is vastly different from old economy. Due to industrialization, need for

finance change drastically. With change in population as well as industrialization

demand and supply increased more over the sources of supply no longer confine to

the area where the demand exists with the improvement in transport and

communication system the demand can be easily met by suppliers made from sources

7


8/52

located in fair flung areas. Today the total out put of the our industrial sectors is very

large the finance requirements of which cannot be met by the traditional means of

finance hence the role of modern Private bank as credit providers to the economy

begins at this point.

INDUSTRY PROFILE

Early history:

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India, which started in 1786, and the Bank of

Hindustan, both of which are now defunct. The oldest bank in existence in India is the

State Bank of India, which originated in the Bank of Calcutta in June 1806, which

8


9/52

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 1925 to form the Imperial Bank of India, which, upon

India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed

in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank,

established in 1865 and still functioning today, is the oldest Joint Stock bank in India.

It was not the first though. That honour belongs to the Bank of Upper India, which

was established in 1863, and which survived until 1913, when it failed, with some of

its assets and liabilities being transferred to the Alliance Bank of Simla.

When the American Civil War stopped the supply of cotton to Lancashire

from the Confederate States, promoters opened banks to finance trading in Indian

cotton. With large exposure to speculative ventures, most of the banks opened in India

during that period failed. The depositors lost money and lost interest in keeping

deposits with banks. Subsequently, banking in India remained the exclusive domain

of Europeans for next several decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The

Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in

Bombay in 1862; branches in Madras and Pondichery, then a French colony,

followed. HSBC established itself in Bengal in 1869. Calcutta was the most active

trading port in India, mainly due to the trade of the British Empire, and so became a

banking centre The Bank of Bengal, which later became the State Bank of India.

The first entirely Indian joint stock bank was the Oudh Commercial Bank,

established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National

Bank, established in Lahore in 1895, which has survived to the present and is now one

of the largest banks in India. Around the turn of the 20th Century, the Indian economy

was passing through a relative period of stability. Around five decades had elapsed

since the Indian Mutiny, and the social, industrial and other infrastructure had

improved. Indians had established small banks, most of which served particular ethnic

and religious communities.

The presidency banks dominated banking in India but there were also some

exchange banks and a number of Indianjoint stockbanks. All these banks operated in

9
http://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Joint_stock_companyhttp://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Joint_stock_company


10/52

different segments of the economy. The exchange banks, mostly owned by

Europeans, concentrated on financing foreign trade. Indian joint stock banks were

generally under capitalized and lacked the experience and maturity to compete with

the presidency and exchange banks. This segmentation let Lord Curzon to observe,

"In respect of banking it seems we are behind the times. We are like some old

fashioned sailing ship, divided by solid wooden bulkheads into separate and

cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired

by the Swadeshi movement. The Swadeshi movement inspired local businessmen and

political figures to found banks of and for the Indian community. A number of banks

established then have survived to the present such as Bank of India, Corporation

Bank, Indian Bank, Bank of Baroda,

The period between 1906 and 1911, saw the establishment of banks inspired

by the Swadeshi movement. The Swadeshi movement inspired local businessmen and

political figures to found banks of and for the Indian community. A number of banks

established then have survived to the present such as Bank of India, Corporation

Bank, Indian Bank, Bank of Baroda, Canara Bankand Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks

in Dakshina Kannada and Udupi district which were unified earlier and known by the

name South Canara ( South Kanara ) district. Four nationalised banks started in this

district and also a leading private sector bank. Hence undivided Dakshina Kannada

district is known as "Cradle of Indian Banking".

Nationalisation

By the 1960s, the Indian banking industry has become an important tool to

facilitate the development of the Indian economy. At the same time, it has emerged as

a large employer, and a debate has ensued about the possibility to nationalise the

banking industry. Indira Gandhi, the-then Prime Minister of India expressed the

intention of the GOI in the annual conference of the All India Congress Meeting in a

paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with

positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued

an ordinance and nationalised the 14 largest commercial banks with effect from the

midnight ofJuly 19, 1969. Jayaprakash Narayan, a national leader of India, described

10
http://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/July_19http://en.wikipedia.org/wiki/1969http://en.wikipedia.org/wiki/Jayaprakash_Narayanhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Indian_economyhttp://en.wikipedia.org/wiki/Indira_Gandhihttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/July_19http://en.wikipedia.org/wiki/1969http://en.wikipedia.org/wiki/Jayaprakash_Narayan


11/52

the step as a "masterstroke of political sagacity." Within two weeks of the issue of the

ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer

of Undertaking) Bill, and it received thepresidential approval on 9 August, 1969.

A second dose of nationalization of 6 more commercial banks followed in

1980. The stated reason for the nationalization was to give the government more

control of credit delivery. With the second dose of nationalization, the GOI controlled

around 91% of the banking business of India. Later on, in the year 1993, the

government merged New Bank of India with Punjab National Bank. It was the only

merger between nationalized banks and resulted in the reduction of the number of

nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks

grew at a pace of around 4%, closer to the average growth rate of the Indian economy.

The nationalised banks were credited by some, including Home minister P.

Chidambaram, to have helped the Indian economy withstand the global financial

crisis of 2007-2009. The next stage for the Indian banking has been setup with the

proposed relaxation in the norms for Foreign Direct Investment, where all Foreign

Investors in banks may be given voting rights which could exceed the present cap of

10%, at present it has gone up to 49% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till

this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of

functioning. The new wave ushered in a modern outlook and tech-savvy methods of

working for traditional banks. All this led to the retail boom in India. People not just

demanded more from their banks but also received more.

With the growth in the Indian economy expected to be strong for quite some

time-especially in its services sector-the demand for banking services, especially retail

banking, mortgages and investment services are expected to be strong. One may also

expect M&As, takeovers, and asset sales.

Major Players:

1. Housing Development Finance Corporation Limited (HDFC)Housing Development Finance Corporation Ltd (HDFC) is one of theleaders in the Indian housing finance market with almost 37% marketshare. Serves more than 26 laks customers across the nation, HDFCalso offers customized solutions that fit to the need of the customer. Inthe FY 2008, it registered a net profit of Rs. 2,282.54 crore. It also

11
http://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Home_Minister_of_Indiahttp://en.wikipedia.org/wiki/P._Chidambaramhttp://en.wikipedia.org/wiki/P._Chidambaramhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Financial_crisis_of_2007-2009http://en.wikipedia.org/wiki/Financial_crisis_of_2007-2009http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/President_of_Indiahttp://en.wikipedia.org/w/index.php?title=New_Bank_of_India&action=edit&redlink=1http://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Home_Minister_of_Indiahttp://en.wikipedia.org/wiki/P._Chidambaramhttp://en.wikipedia.org/wiki/P._Chidambaramhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Financial_crisis_of_2007-2009http://en.wikipedia.org/wiki/Financial_crisis_of_2007-2009http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Retail_banking


12/52


13/52

crore. As on December 31, 2008, the company has a net worth of Rs.50,035 crore.

6. IDBI Home finance Limited (IHFL)Founded in January 10, 2000, IDBI Homefinance Limited has becomeone of the major players in the Indian housing finance market. It offersa range of housing financial solutions to its customers includingIndividual Home Loans, Home Improvement Loan, Home ExtensionLoan, Home Loans for NRIs, Plot Loans, and Loan Against Home etc.In the financial year 2008-09, IDBI Homefinance Limited registered aprofit of Rs. 3209.93 lakhs, comparing to a net profit of Rs. 2988.62lakhs in the previous financial year.

7. PNB Housing Finance LimitedPNB Housing Finance Limited offers a wide range of loans forpurchase/construction of property to resident Indians as well as NRIs.It also offers housing finance for renovations, repairs andenhancement of immovable properties. In the last financial year(ended on March 31, 2009), PNB Housing Finance Limited registereda net profit of Rs. 534.1 million, which is 32% more than the net profitof its previous financial year of Rs. 405.9 million.

8. Dewan Housing Finance Corporation Limited (DHFL)Dewan Housing Finance Corporation Limited is one of the largesthousing finance solution providers in India with an extensive networkof 74 branches, 78 service centers and 35 camps spread across thenation. The company registered a net profit of Rs. 8,631.83 laks in2008-09, comparing to a net profit of Rs. 8,257.74 lacks in thepreviousfinancial year. In the quarter ended on September 30, 2009, DHFL

earned a profit (after tax) of Rs. 3,751.09 lacks.

9. GIC Housing Finance LimitedGIC Housing Finance Limited, one of the leading housing financecompanies in India, was initially established as GIC Grih Vitta Limitedon December 12, 1989. Promoted by General Insurance Corporationof India, GIC Housing Finance Limited offers extensive range ofhousing finance solutions to its customers through its wide network of24 Business Centers and 3 Collection Centers across the nation. Inthe financial year 2008-09, GIC Housing Finance Limited registered a

profit (after tax) of Rs. 5714 lacks. Furthermore, in the last quarter(ended September 30, 2009), it registered a profit of Rs. 1713 lacks.

13


14/52

10. Can Fin Homes Limited (CFHL)Can Fin Homes Limited is another big player in the Indian housingfinance market with an extensive network of 40 branches. It is also the

first and one of the biggest bank-sponsored (sponsored by CanaraBank) housing finance companies in India. In the financial year 2008-09, Can Fin Homes Limited registered a net profit of Rs. 3,152.9 lakhs.It also registered a net profit of Rs. 790.9 laks in the quarter ended onJune 30, 2009.

COMPANY PROFILE

The road to success is a tough and a challenging journey in the dark whereonly obstacles light the path. Individual aim is how to get success and the

solution for success is customer satisfaction. All we need is the courage to

innovate, the skill to understand your clientele and the desire to give them

your best. Today, nearly three million satisfied customers whose dream we

helped realize, stand testimony to our success. Our objective, from the

beginning, has been to enhance residential housing stock and promote home

ownership. Now, our offerings range from hassle-free home loans and deposit

products, to property related services and a training facility. We also offer

14


15/52

specialised financial services to our customer base through partnerships with

some of the best financial institution worldwide.

HDFC Housing Finance is a vital zone of HDFC bank, which has

presented attractive housing finance schemes for the customers. With more

than 25 years of experience in Indian finance market, HDFC stands head and

shoulder above its competitors in the housing loan segment. HDFC Housing

Finance has got a strong impact on the customers who are looking for some

housing finance.

HDFC Housing Finance has got 3 types of housing finance for their

customers. HDFC Housing Finance provides Home Loans for the

individuals to purchase fresh or resale house/flat as well as to construct

houses. Home Improvement Loans are for facilitating internal and external

repairs and other structural improvements like painting, waterproofing,

plumbing and electric works, tiling and flooring, grills and aluminum windows.

Home Extension Loan is for the extension of an existing dwelling unit. You

can apply for HDFC Home Finance individually or jointly. Adding up the

income of the co-applicant would enhance your eligibility for the home loan.

However, the co-applicants need not to be a co-owner of the house.

HDFC Housing Finance pays a maximum of 85% of the total project cost. The

maximum loan amount is based on the repayment capacity of the applicant.

You have to repay the loan amount within 20 years, subject to your retirement

age. You can definitely go for some lesser term loan. There is an 'Adjustable

Rate Home Loan' plan available in HDFC Housing Finance.

There are Multiple Repayment Options available in HDFC Housing Finance.

Step Up Repayment Facility, Flexible Loan Installment Plan, and Accelerated

Repayment Scheme are there to give you a wide range of options to choose

your plan from.

When you go for HDFC Housing Finance, you have to pay a fee of 1% of the

loan amount. Service taxes are extra as applicable. There are no charges for

15


16/52

prepayment. In order to learn more about housing finance companies in India

browse through the site.

16


17/52

Be aware of frauds

Security Tips

Security measures at HDFCBank

Shareholding pattern

History of Share issues

Bonds Issue History

Phishing

Money Mules

Internet Banking

Online Shopping /Payments

Computer security

Internet Browsing

Email Security

Awards and Achievements - Banking Services

HDFC Bank began operations in 1995 with a simple mission: to be a"World-class Indian Bank". We realised that only a single-minded focuson product quality and service excellence would help us get there. Today,we are proud to say that we are well on our way towards that goal.

It is extremely gratifying that our efforts towards providing customerconvenience have been appreciated both nationally and internationally.

2010

Avaya Global Connect

2010

Customer Responsiveness Award -

Banking & Financial Services category

Financial Express -Ernst Young Survey2009-10

Best New Private Sector Bank

Asian BankerExcellence Awards2009

Best Retail Bank in India Excellence in Automobile Lending Bank M&A Integration Technology Implementation

The Asset Triple AAwards

Best Cash Management Bank in India

Euromoney Private

Banking and WealthManagement Poll 2010

1) Best Local Bank in India (second

year in a row) 2) Best Private BankingServices overall (moved up from No. 2last year)

Financial InsightsInnovation Awards 2010

Innovation in Branch Operations -Server Consolidation Project

Global Finance Award Best Trade Finance Provider in Indiafor 2010

17
http://www.hdfcbank.com/aboutus/security/detecting_fraud.htmhttp://www.hdfcbank.com/aboutus/security/security_tips.htmhttp://www.hdfcbank.com/aboutus/security/security_measures.htmhttp://www.hdfcbank.com/aboutus/security/security_measures.htmhttp://www.hdfcbank.com/common/pdf/corporate/shareholding.pdfhttp://www.hdfcbank.com/common/pdf/corporate/historyofshareholding.pdfhttp://www.hdfcbank.com/common/pdf/corporate/Website_updation_Bonds.pdfhttp://www.hdfcbank.com/aboutus/security/phishing.htmhttp://www.hdfcbank.com/aboutus/security/money_mules.htmhttp://www.hdfcbank.com/aboutus/security/internet_banking.htmhttp://www.hdfcbank.com/aboutus/security/online_shopping.htmhttp://www.hdfcbank.com/aboutus/security/online_shopping.htmhttp://www.hdfcbank.com/aboutus/security/computer_security.htmhttp://www.hdfcbank.com/aboutus/security/internet_browsing.htmhttp://www.hdfcbank.com/aboutus/security/email_security.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/security/detecting_fraud.htmhttp://www.hdfcbank.com/aboutus/security/security_tips.htmhttp://www.hdfcbank.com/aboutus/security/security_measures.htmhttp://www.hdfcbank.com/aboutus/security/security_measures.htmhttp://www.hdfcbank.com/common/pdf/corporate/shareholding.pdfhttp://www.hdfcbank.com/common/pdf/corporate/historyofshareholding.pdfhttp://www.hdfcbank.com/common/pdf/corporate/Website_updation_Bonds.pdfhttp://www.hdfcbank.com/aboutus/security/phishing.htmhttp://www.hdfcbank.com/aboutus/security/money_mules.htmhttp://www.hdfcbank.com/aboutus/security/internet_banking.htmhttp://www.hdfcbank.com/aboutus/security/online_shopping.htmhttp://www.hdfcbank.com/aboutus/security/online_shopping.htmhttp://www.hdfcbank.com/aboutus/security/computer_security.htmhttp://www.hdfcbank.com/aboutus/security/internet_browsing.htmhttp://www.hdfcbank.com/aboutus/security/email_security.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htm


18/52

PRODUCT PROFILE

A Home Loan for every need of yours!

HDFC provide not just the most competitive interest rates & best level of

service, but also products designed to cater to the specific needs of consumer. New

products / new features in existing products are introduced based on customer

feedback. Choose the HDFC that suits your needs.

1. Home loan for ready and under construction property

2. Home Improvement loan

3. Home extension loan

4. Home conversion loan

5. Nri home loan

6. Top up loan

18
http://www.icicibank.com/Pfsuser/loans/homeloans/hlhomepage.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.hdfcbank.com/aboutus/awards/default.htmhttp://www.icicibank.com/Pfsuser/loans/homeloans/hlhomepage.htm


19/52

OBJECTIVES

The credit Manager plays a crucial role in increasing banks profitability as The

major portion of funds are utilized by bank for the purpose of lending of Loans and

Advances to get more return on account of the Interest and reducing risk in

financing.

Objectives of the Study

To understand the process and key issues in Sanctions

To understand the process and key issues in Disbursement

To study the Credit Policy of HDFC

To study the Restricted Areas of Credit of the Bank.

To study the Comparative Analysis of the Credit Appraisal System of HDFC with

one of the leading nationalized bank i.e. ICICI Home Finance Co.Ltd.

19


20/52

SCOPE

Indian Banking has witnessed tremendous changes in the wake of the new

economic reforms in the year 1992. The reforms have positively impacted on the

banking system, which have become more resilient competitive and efficient, with the

better productivity. Its a role of primacy in financial intermediation and has not been

challenged by other financial entities. On the contrary, it has become more entrenched

and diversified having mode forays into insurance and investment banking. Some of

the banks have acquired the status of universal banks.

The Credit Manager plays most important role as a part of the Institution. The

Institution should utilized maximum funds for the purpose of lending by considering

both important functions of the Sanction as well as Disbursement. It is necessary that

the Proposal which is sanctioned must be disbursed. The Process of sanctioning has to

go from various crucial stages. this study definitely help to understand what is the

basic criteria for the same and what are the key issues are involved in the processing.

This study is useful for the purpose of How to overcome the issues and the

Queries related to the Credit norms which should be arises while processing and what

are the ideal solutions on the problem according to the Credit Policy of the Bank.

This study clarify that what are basic facts and requirements of the

Disbursement; what are the general causes by which the proposal should be rejected.

The Study deals with the Credit policy of the Bank and shows the importance of the

Credit Appraisal System for securing the Credit or the Loan Given by the bank.

This is useful for knowing the Restricted areas of Credit in which the Credit

policy restrict the Bank to grant the Credit. It is most important fro the Security of the

loan granted. The Comparative study shows what are the major distinguishing facts

between the credit policy of the HDFC bank and the ICICI home finance housing

scheme. It shows the Strengths of both the Institutions..

The study shows that Credit Appraisal System playing very important role.

Recently RBI interrelated the interest rates on Loans and Deposits. Even today all

banks Increase rate on Deposits when they increase the interest rate on loans. There is

perfect correlation between interests rates on loans and interest rates on Deposits.

20


21/52

THEORETICAL BACKGROUND OF THE STUDY

The Credit Risk is defined as the Risk that the Borrower will fail to satisfy the

terms of the obligation with respect to the timely payment of Interest and Repayment

of the Amount Borrowed. This form of Credit Risk is also called Default Risk.

The Credit manager analyses the Borrowers Financial Information and

Specification of Debt instrument in order to estimate the ability or eligibility of the

Borrower to live up to its future contractual obligation. This activity known as Credit

Appraisal System.

Credit Appraisal System playing significant role in Securing the Credit of the

Financial Institution. The Loan Eligibility appraised on the basis of various credit

norms as per the Credit policy and then final eligibility of Borrower is calculated. If

the Proposal is appraised properly then the risk of Default should be reduced and the

Credit will become secure. At the time of Appraisal various internal and external

factors are taken into consideration which may be affect the Credit Appraisal System.

The Internal factors include Credit Scoring skills of the Manager or Efficiency of the

Manager, Target Completion which means manager has sanction the loan to meet

sanction targets. The external factors play the major role in rising the levels of the Bad

loans; it includes the Economic downturns, Plant Closure., willful default of

Borrower, Government Intervention, and Political Interventionetc.

If these factors taken into consideration while appraising. Then definitely the

Risk of Default should be reduced.

The Credit Appraisal System playing the significant role in securing the Credit

of reducing the Risk of Default.

21


22/52

RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One can also

define research as a scientific and systematic search for pertinent information on a

specific topic. In fact research is an art of scientific investigation. Another meaning of

research as a careful investigation or inquiry especially through for new facts in any

branch of knowledge.

Redman and Morry define research as a systemized effort to gain new

knowledge. Some people consider as movement a movement from the known to the

unknown it is actually a voyage of discovery.

Data Sources:

In the Preparation of this project it is necessity to collect the Primary data and

Secondary data

Primary Data:

The first-hand information bearing on any research which has been collected

by the researcher may be called primary data. Collecting information various with

the help of proposals credit policy of the Bank.

Secondary Data:

The Secondary Data on the other hand, are based on second-hand information.

The data which have been already been collected, compiled & presented easier by any

agency may be used for the purpose of investigated such data may be called

Secondary Data. Collecting the in formation with the help of Annual Reports,

Magazines, Internet, and Reference Book. The Secondary data provide by

organization. The needed information is collected from Journals Annual Reports,

Magazines, etc.

22


23/52

DATA ANALYSIS AND INTERPRETATION

SANCTIONING OF LOAN PROPOSAL

Basic Eligibility Criteria For Resident Indians

Borrowers Resident Indian

SalariedSelf Employed

Professional

Self Employed

Non ProfessionalCriteria

Classification 1) Worksite

Channel

2) Others :

(Cheque

Salary and

Cash Salary)

1) CA/ICWA/CS

2) Architects,

Lawyers

3) Consultants like

MBA

4) Chemist with

B.Farm

5) Doctors /

Pathologists

1) Individuals:

Propriters,

Partners &

Directors of

Pvt.Ltd Co.

2) Non

Individuals:

Private Ltd Co.

Minimum Gross

Income

1) Applicant

fromDEL/MUM/BL

R: Rs.9000 p.m.

2) For other

locations:

Rs.7000 p.m.

1) For lawyers Net

profit should be Rs.2laks p.a

2) For Consultants

like Engineers,

MBAs etc.Net profit

should be Rs.1 Lac

p.a

3) For others Net

Profit should be Rs

1) Retail: Rs.

60,000 p.a.2) Non Retail: Rs.

100,000 p.a.

23


24/52

60,000

Age Norms 1) Minimum 21

yrs on

application

2) Maximum 65

yrs at maturity

1) Minimum 21 yrs on

application

2) Maximum 65 yrs at

maturity

1) Minimum 21

yrs on application

2) Maximum 65

yrs at maturity

Minimum

Qualification

SSC (X

standard)

Professional

Qualification

Required

Not Applicable

Minimum No. of

Years in Total

Employment

1 Year 1) 3 Years as

Practicing

Professional

2) 1 Year as

Practicing

Professional, if

employed previously

for 2 Years

Minimum 3 Years

No. of

Dependents

Not to Exceed 4 Not to Exceed 4 Not to Exceed 4

No. of Co-Borrowers

Maximum 2 Maximum 2 Maximum 2

24


25/52

Customer- Basic Eligibility Calculation

1) Resident Indian - Salaried

ITEM % CONSIDERATION

REG.ITEMS (PAYSLIP) 100%

HRA 100%

PENSION INCOME 100%

BONUS 100%

ANNUAL BENEFITS 50%

FIXED REIMBURSEMENTS 50%

VARIABLE ITEM 50%

2) How we treat income from other sources?

Source % Eligibility Proof

Agricultural income (As stated

in ITR)

50 % of average of last 2

years

3 years ITRs and 7/12

extract or ownership

document copy.

Rental Income 100% of average of last 2

years

03 ITR

Rental Income 100% of current rental

income as per leaseAgreement

Lease Agreement for 3

years

Rental Income 50 % of current rental income

as per leave & License

Agreement

Leave & License

agreement

copy of current period

LIC /Broker commission i.e.

NSC, KVP, IVP postal

50 % of new business &

100% of renewal business

Certificate / original

commission slip of

Cos.

25


26/52

Interest / Dividend Income 50 % of average of last 2

years

03 years ITRs

The agreement of the eligibility from other sources of income must not bemore than 100 % of the agreement of the main salary income.

3) FOIR: Fixed Obligation to Income Ratio:

3.1 Resident Indian Salaried:

Income Applicable FOIR

5500 8000 40%

8000 20000 45%

20000 25000 50%

25000 and Above 55%

3.2 INSR: Income to Net Salary Ratio:

MAXIMUM 70%

3.3 Resident Indian SEP: 55%

For calculation purpose SEPs can be classified as per following pattern

Doctors

Allopathic (MBBS plus)

Other (BHMS, BAMS, etc)

Others (CA, CWA, CS, Lawyer, Consultant etc)

Methods Used

GPR Multiplier Method

Eligibility based on Net Profit

3.4 Resident Indian SENP: 55%

Business IncomeAv. Net Profit (PAT) for last two years Net ProfitAdd: Depreciation* Depreciation

------------------Business Income

Personal Income (Salary / Remuneration)(Avg. For last two years) Personal Income

--------------------

Total Appraised Income = BI + PI

26


27/52

*(Depreciation is higher of 2/3rd of Last years depreciation or average for last two

years.)

4) Income from other sources

*Average of the last two years amount

Income from above sources should not exceed

50% of the Total Appraised Income

5) Eligibility calculation

Total Appraised Income xxxxx

Add: Income from other sources xxxxx

--------

Total Income xxxxx

Total Income p.m. (TI / 12) xxxxx

Less: Obligations xxxxx

-------

Maximum Payable EMI (HDFC Bank) xxxxx

DOCUMENTATION CRITERIA

Write all the documents of HDFC

1) Salaried:

Photograph

Type Eligibility Proof

Agricultural Income 50%* ITRs

Rental Income 100%* ITRs

Interest/Dividend

Income

50%* ITRs

27


28/52

6 months Bank statements ( 3 months for work site)

KYC documentation

Age Proof

Latest Salary slip / certificate

4 salary slips for variable salary

Form 16 / PF Statement

Administrative Fee Cheque

Signature Proof [In case if DD is given)

2) Self Employed Professionals:

Photograph

Age Proof

KYC Documentation

Income Documents

Latest three* ITRs , both personal and business along with

computation of income

Latest three* years P&L accounts and B/S ( with schedules) duly

certified by a CA-both personal & business

Advance tax challans if available

6 months Bank Statements

Proof of Existence*

Partnership deed copy / MOA / article of association if

applicable

Office address Proof

Shop & establishment act certificate

Processing Fee Cheque


Qualification Certificate

3) Self Employed Non Professionals:

Photograph

28


29/52

Age Proof

KYC Documentation

Income Documents

Latest three* ITRs , both personal and business along with

computation of income

Latest three* years P&L accounts and B/S ( with schedules) duly

certified by a CA-both personal & business

Advance tax challans if available

6 months Bank Statements

Proof of Existence*

Partnership deed copy / MOA / article of association if applicable

Office address Proof

Utility bill telephone bill ,electricity bill

Shop & establishment act certificate

Sales tax certificate

Latest list of Directors & Shareholding Pattern certified by Company

Secretary

Business Profile on the Letter Head



4) Salaried (NRI):

Photograph

6 months Bank statements

KYC documentation

Age Proof

Latest Two Months Salary slip / certificate

6 salary slips for variable salary

Appointment Letter / Employment Contract Letter / Increment Letter /

CDC (in case of Merchant Navy)

General POA

29


30/52

Work permit related documents like Labour card, Identity Card or

Work Permit, if applicable

Form 16 / PF Statement (if there is an Indian income)



30


31/52

ANALYSIS OF THE INCOME DOCUMENTS

1) Salary Slip Analysis

Name of the Applicant whether matches with the salary slip or not?

Designation

Name of the Employer

Is the latest salary credit as per the salary slip

Are the salary credits in the bank statements as per the salary slip

Is the salary fixed or variable

Any regular deductions reflecting in the salary slip.

2) Understanding Bank Statements

In case of Salaried, number of credits to be checked Fixed & Variable

In case of Self Employed check the average balance for liquidity

Large credit or debit entries

Recurring debits on account of loan repayment

Inward Cheque bounces

Outward Cheque bounces

Stop Payment / Minimum Balance charges

3) Form 16 Salaried / Form 16A Other than salaried

Name & address of the employer

Name and designation of the employee

Details of the salary paid / other income

Details of the tax deducted

Information of Housing loan availed

Information on Mediclaim, pension policy etc

Information on other savings like PPF, NSC, Mutual funds etc

31


32/52

4) Understanding Profit & Loss Account

Expense heads

Trend in Profitability & Sales over the years

Depreciation charged

Any unusual expenditure

5) Why do we require a Balance Sheet?

To understand the business of the customer in terms of :

Owners involvement

Profitability of the business

Asset base

His Customer Base & Liquidity

His Suppliers

6) What to read out of Schedules?

Understanding the list of his Customers

Understanding the list of his Suppliers

Understanding the value of assets as on date

Understanding various loans availed by the loan applicant

32


33/52

RESTRICTED AREAS OF CREDIT

NEGATIVE PROFILES

Daily wage laborers / Mathadi Workers

Drivers and Conductors of SRTC / Taxi drivers / Auto Rickshaw Drivers /

Commercial Vehicles Drivers

Anti Social Elements

Politicians

Garment Exporters

Watchmen

Security Services - Companies and their Employees

Stock Brokers

Real estate agents

Tour Operators

Cable Operators

Mine and Quarry workers

Firms engaged in parcel movement

Plantation / Time Share companies

Employees of Chit fund/Stock Broking/Investment companies

Bar Owner

Film stars (The negative list includes all persons associated with the Film

Industry i.e. whose income / cash flows are linked with the film industry)

Class 4 employees

Employees of Dot-Com companies

Builders and their relatives

33


34/52

GENERAL CAUSES OF REJECTION OF THE PROPOSAL

1) Documentation / Property:

1.1 Credit Documentation not as per Policy.

1.2 Technical Norms not met

1.3 Legal Documentation not as per Policy.

1.4 Fraud Document Submitted

2) Financial Reasons:

2.1 AF Cheque Bounce

2.2 Income Norms not met

2.3 High Outstanding of Debtors

2.4 Too many existing Obligations

3) Geographical Reasons:

3.1 Outside Geo Limits

3.2 Property in Negative Area

3.3 Residence in Negative Area

4) Personal Profile:

4.1 Negative Proff

4.2 Income Ownership norms not met

4.3 Poor Banking /Saving Habits

34


35/52

4.4 Dependents > 4

4.5 Age norms not met

4.6 Customer withdrawing

CASE NO.1

1) Applicant Name : Mr.Dhawane Atul Ramdas

2) Co-Applicant Name : Mrs. Dhawane Pranita Atul

3) Loan Amount Applied : Rs.20,00,000

4) Tenor Requested : 18 Yrs

5) Profile :

Applicant : Salaried

Organization : geo technology

Co-Applicant : housewife

6) Monthly salary:

Applicant : Rs.32,131 p.m.

Co-applicant : nil

7) Strength of the Case:

Bank Salary

Qualified Profile

No Existing obligation

Super Worksite Company

Less no. of Dependents

8) Findings:

1) Field Investigation report is Negative due to House found locked at the

time of Visit

2) FOIR is exceeding the limit of 55.00%

35


36/52

9) Suggestions:

Field Investigation Report is Negative and FOIR is exceeding hence; Approval

should be taken from higher authority i.e. Regional Business Head (L3Prime), As

per Annexure

CASE NO.2

1) Applicant Name : Mr.Pankaj Khairnar

2) Co-Applicant Name : Mrs.Hemangi Khairnar



5) Profile :


Organization : HAL

Co-Applicant : Salaried

Organization : Swami Vivekanand School

6) Monthly salary:

Applicant : Rs.14,200 p.m. & Incentive Rs.14,700 p.m.

Co-applicant : Rs.10,000 p.m.


Bank Salary

Good Bank Balance

PF Balance Approx.Rs.1.25 Lacks

LIC Policy worth Rs.1.50 Lacks

Clubbing of Income case

Super Worksite Company

8) Findings:

Applicant has borrowed HAL Credit Society Loan and the deduction of which

shows in The Salary Slip

36


37/52

9) Suggestions:

As per discussion with Applicant he is not going to nil that loan hence the said

EMI should be considered as obligation in loan eligibility calculation.

CASE NO.3

1) Applicant Name : Mr.Bhavesh Patadia

2) Co-Applicant Name : Mr.Sona Patadia

3) Loan Amount Applied : Rs.1500000


5) Profile:

Applicant : Self Employed Non Professional

Organization : JHP Securities

Co-Applicant : House wife

6) Monthly Income:

Applicant : Rs.74053 p.m.


Good Bank Balance

Good RTR of Existing Hsg.Loan

Low LTV

8) Findings:

1) Applicant Bank Statement showing monthly deduction of Rs.8500

as EMI of Hsg. Loan

2) Applicant going to purchase second property

9) Suggestions:

1) As per discussion with Applicant he is not going to nil that

Housing loan hence the Said EMI should be considered as obligation in

loan eligibility calculation.

37


38/52

2) Applicant going to purchase second property hence LTV should be

restricted to Max.75% as per Credit Deviation Sheet in Annexure.

CASE NO.4

1) Applicant Name : Mr.Dilip Nikam

2) Co-Applicant Name : Mr.Anjali Nikam

3) Loan Amount Applied : Rs.1500000


5) Profile :


Organization : MICO BOSCH Ltd

Co-Applicant : Salaried

Organization : Nirmala Convent high School

6) Monthly Income:

Applicant : Rs.42600 p.m.

Co-applicant : Rs.14700 p.m.


Good Bank Balance

Good RTR of HDFC Bank Ltd

Income Clubbed Case

8) Findings:

1) Applicant Bank Statement showing monthly deduction of EMI of HDFC

Bank and the Said was reflected in CIBIL Verification report.

2) Applicant salary slip shows deduction of society loan

3) Applicant going to purchase second property

9) Suggestions:

38


39/52

1) Applicant is not going to nil that Housing loan of HDFC as well as Society

loan; hence The said EMIs should be considered as obligation in loan

eligibility calculation.

2) Applicant going to purchase second property hence LTV should be restricted

to Max75% as per Credit Deviation Sheet in Annexure.

CASE NO.5

1) Applicant Name : Mr.Sanjay Sagdeo

2) Co-Applicant Name : Mr.Shubha Sagdeo



5) Profile :


Organization : MSPG Co.Ltd.

Co-Applicant : House wife

6) Monthly Income:

Applicant : Rs.48,153 p.m.


Bank Salary

Stable / Govt.Job

Worksite Company

No any Obligation

PF Balance worth Rs.20 Lacks

Owned House worth Rs.24 Lacks

Qualified Profile

8) Findings:

Applicants Age is 54 years

9) Suggestions:

39


40/52

Loan Amount possible for only 4 years remaining in the service and 1 extended

year hence maximum loan tenor should be restricted to 5 years

DISBURSEMENT OF LOAN PROPOSAL

WRITE ALL THE DOCUMENTATIONS OF HDFC BANK

Legal verification

The borrower has to submit the original property documents as per the

indicative list given by HDFC along with letter acknowledged by the registrar for

pending documents if any and NOC from the landowner as per HDFC standard

format. The copies of the same are forwarded to an empanelled lawyer who has to

peruse the documents, provide a legal opinion and a title clearance certificate to

ensure a clear and marketable legal title. If there are any documents pending as per the

lawyers report, the same have to be collected from the borrower.

Legal report should mention that the title of the borrower is clear and

marketable and acceptable to ICICI as security

Should be signed by the empanelled lawyer

Should mention the address of the property as detailed in the sale

agreement / sale deed

Should list down documents to be collected for security

Should mention correct property type transaction

40


41/52

LEGAL DOCUMENTATION FOR DISBURSEMENT:

1) Direct From Builder Case:

Agreement of Sale

Sub Registrar Receipt

No objection certificate from builder

Own contribution receipt from builder

2) Direct from Registered Co-op Hsg Society Ltd.:

Share Certificate

Allotment Letter

No Objection Certificate from Society

Own contribution receipt from Society

Copy of Society Bye Laws

Society Registration Certificate

Registered Agreement if not Orginal member

3) Own Construction Case:

Original Sale Deed with Registration Receipt.

NA Order Copy

Latest Title Clearance Certificate

Original Architect Estimate

Commencement Certificate

41


42/52

4) Resale Case:

Sale Deed/Agmt with Registration Receipt

Previous Customers Sale Deed/Agmt with Registration Receipt

Own Contribution Receipt

NOC from Builder/Society

Title Certificate

Share Certificate & Allotment Letter (if applicable)

7/12 & 6-D Extract (Xerox)

Commencement Certificate & Completion Certificate (Xerox)

Society Registration Certificate & Bye-Laws (Xerox)

Title Certificate (Xerox)

Building Plan (Xerox)

Title Certificate

Society Registration Certificate

42


43/52

TECHNICAL APPRAISAL

Technical Appraisal is done prior to disbursement in order to assess the stage

of completion of the property financed and to determine the amount of loan to be

disbursed. In addition, technical appraisal also serves the following purposes:

It confirms that the property really exists.

An assessment of available infrastructure is done.

Check the quality & speed of the progress of construction

For resale cases, the site engineer has to confirm the external

condition of the building and the internal condition of the flat/property

For resale cases, the term of the loan should not exceed residual age

of the property as per the site engineers report

All disbursements in self-construction cases are linked to stage of

construction

Address of the property should be mentioned, should match with the

address on the legal report

Stage of construction and recommended disbursement should be

mentioned

Signed by technical officer / empanelled technical agent

Value of the property is cleared from Technical Report

Residual age of the property is cleared from Technical

Report

43


44/52

Types of disbursement:

First and part disbursement

Full and Final Disbursement

Balance Transfer

Top Up Disbursement (Balance Transfer and Top Up)

Accepted Sanction Letter should be collected.

Accepted by all applicants and co-applicants

Letter should be in format specified

Check for post sanction conditions

Check for rate validity

Check date of letter for validity

Disbursement Request Form should be collected.

Why? To ensure that the amount to be released is in accordance with the

request of the customer

This is a part of the sequence to form a contract

44


45/52

To be filled by the customer

Details of cost of property as appearing in the agreement for sale/ sale deed.

Address of the property as appearing in the agreement for sale / sale deed

Details of cheque favoring and amount and mode of payment.

Cheque favoring should include Bank and account no. of payee.

There is an option of changing communication address.

ANALYSIS OF LEGAL DOCUMENTS

All owners of the property should be applicants

Check for cost of property and OCRs paid

Signature of the owners should match with the application form

Witness should sign the agreement

Priority and Non Priority documents to be collected as per legal report

NOC From builder/ society / development authority as the case may be

Own contribution receipts

1) Agreements

Current agreement must be registered

Stamp Duty receipt required

Registration receipt required

Stamp duty receipt and registration receipt amount to be added to cost of

property and calculated as OCRs too.

2) NOC

NOC should be on the letterhead of the Society/ Builder / Development

Authority

Should have the stamp of the society / Builder / Development Authority

Address should match as per the agreement, Flat No., Wing No. etc..

45


46/52

Should be as per the procedures and drafts for different transaction types.

Must be dated

3) Own Contribution Receipts

Must have a revenue stamp

Cash payments cannot be more than Rs.20000/-

Should give details of the property like flat No. etc

In case of refinance > Rs.1 lack

Builder case Receipts from builder & debits in bank account

Resale Agreement for sale / Sale deed to be registered before

refinance

Property Norms:

Property should not be in negative area

Property should be within geographic limits

Property should be self contained

Maximum age of property less than 35 years at loan application

Loan tenor not to exceed residual age of the property

Minimum Built up area > 400 sq. ft

In case of row house of ground floor only

Minimum Built up area 275 sq.ft with unutilized FSI of first floor

46


47/52

FINDINGS

1) Credit Appraisal plays the most significant role in funding the eligible person

2) There is heavy risk involved in funding of any property like double funding.

3) In case of the borrower lost his job or meets with accident, which results into

permanent disability or the person died, in that situation the loan repayment

responsibility comes on his family. It is major problem

47


48/52

RECOMMENDATIONS

1) Risk of default should be reduced by funding the right customer, by using

various tools of appraising like Deduping, CIBIL Report, Field

Investigation, and RCU Verification.

2) The Bureau / Software like CIBIL should be formed and developed

which records every detail regarding the Property.

3) At present Insurance is optional but to secure the Loan the Insurance of

the Borrower and Property should be mandatory.

4) The cases should be rejected if the Customer Bounces the cheques

intentionally it shows the carelessness of the customer; and the case

should be done which have technical reason of cheque bounces and

minimum balance charges.

5) The minimum income criteria should be increased up to Rs.8,000

p.m.from Rs.5,500p.m. or Fixed Obligation to Income Ratio should

restricted up to 40% from 50% for the income less than

48


49/52

Rs.20000,because the customer can manage easily the residential as well

as other expenses after payment of the housing loan EMI

6) On the basis of comparison between UBI and ICICI Home Finance

Company Ltd, I recommend that ICICI continue this strategy of

Equitable Mortgage, Guarantor is not mandatory and Door Step Service

to attract more customers and capture the major share in the Market.

CONCLUSION

The Project based on An Analytical Study of Credit Appraisal System

Which is a Research project done with special reference to Home Loan. After overall

study I observed that what are the key issues in Sanction as well as Disbursement ofthe Loan Proposal, I studied the Credit policy of the Financial Institution, I Observed

that what are the General causes of the Rejection of the Proposal. And also what are

the restricted areas of Credit. And after the Comparative study I understood that what

are the Credit norms of both institution and how it differs from each other. The most

important part that I came to know what is the Importance of the Credit Appraisal

System and how the case is appraised for securing the Credit.

Credit Appraisal System playing most important Role in reducing the Risk of

Default And by adopting the said Recommendations the HDFC Home Finance

Company Ltd should function very smoothly and the Default Risk should be reduced.

49


50/52

BIBLIOGRAPHY

Credit Policy of HDFC Home Finance Company Ltd

Websites:

http://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfcho

mefinance.htm

www.google.co.in

Books:

Foundations of Financial Markets And Institutions- Published by

Pearson Education Asia Third Edition by the Author Frank

J.Fabozzi,Frank Modigliani, Frank J.Jones,Michael G.Ferri; Page

numbers: 381 & 382.

Research Methodology by Shailesh Kasande published by Nirali

Prakashan.

50
http://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfchomefinance.htmhttp://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfchomefinance.htmhttp://www.google.co.in/http://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfchomefinance.htmhttp://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfchomefinance.htmhttp://www.google.co.in/


51/52

Journal:

Journal of Management Research, Volume 7, Number 1.Issue April2007, Article by Mr.Gunjan M.Sanjeev on Bankers Perceptions on

Causes of Bad Loans in Bank. Page numbers: 43, 44, 45 & 46

ANNEXURE

EMI Chart

Credit Deviation Sheet

51


52/52

RATE OF INTEREST

8.00

%

8.25

%

8.50

%

8.75

%

9.00

%

9.25

%

9.50

%

9.75

%

10.00

%10.25%

10.50

%

NOOFYEARS

1 8699 8711 8722 87348746 8757 8769 8780 8392 8804 8815

2 4523 4535 4546 45584569 4580 4592 4603 4615 4627 4638

3 3134 3146 3157 31693180 3192 3204 3215 3227 3239 3251

4 2442 2454 2466 24772439 2501 2513 2525 2537 2549 2561

5 2028 2040 2052 20642076 2088 2101 2113 2125 2138 2150

6 1754 1766 1778 17911803 1815 1828 1841 1853 1866 1878

7 1559 1572 1584 15971609 1622 1635 1648 1661 1674 1687

8 1444 1497 1440 14531466 1479 1492 1505 1518 1531 1545

9 1302 1315 1328 13421355 1368 1381 1395 1408 1422 1436

10 1214 1227 1240 12541267 1231 1294 1308 1322 1336 1350

11 1142 1156 1169 11831197 1210 1224 1238 1252 1267 1281

12 1083 1097 1111 1124

113

9 1153 1167 1181 1196 1210 1225

13 1034 1048 1062 10761090 1105 1119 1134 1148 1163 1178

14 992 1006 1020 10351049 1064 1079 1094 1109 1124 1139

15 956 971 985 10001015 1030 1045 1060 1075 1090 1106

16 925 940 955 970 985 1000 1015 1031 1046 1062 1078

17 899 914 929 944 959 975 990 1006 1022 1038 1054

Main Project 111

Documents

Transcript of Main Project 111