PROJECT

RESEARCH REPORT
On
COMPARATIVE STUDY AND ANALYSIS OF HOME LOAN SCHEMES
OFFERED BY
DIFFERENT BANKS IN LUCKNOW

SUBMITTED IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
(2017-2019)

Affiliated to Dr. A.P.J Abdul Kalam Technical University

Lucknow
( UPTU Code: 336)

Submitted to: Submitted by:

Miss Vaishali Jain Ashutosh Kaushik
(HOD) 1733670002
 ACKNOWLEDGEMENT

Perfect is a famous saying and when a person gets practical experience under the guidance
of experts of the respective field, the knowledge gained is priceless.
With a sense of great pleasure and satisfaction, I present this project report entitled
“COMPARISON OF HOME LOAN OFFERED BY

DIFFERENT BANKS IN LUCKNOW” completing a task successfully is never a one-

man effort. Similarly completion of this report is a result of invaluable support and
contribution of number of people in direct and indirect manner.

In the light of the foregoing, first of all my heartfelt gratefulness and thanks goes to Mr.
AMIT RASTOGI as a manager of ICICI HOME FINANCE, LUCKNOW for giving me
the opportunity to work for his highly esteemed organization and for being a constant
source of inspiration and guidance throughout the Project. Without his able support the
project would not have seen the light of the day.
At this juncture, I would also like to thanks Mr. AMIT RASTOGI (MANAGER OF ICICI
HOME FINANCE) LUCKNOW, without his indispensable cooperation the project won’t
have been completed within the stipulated timeframe.
Finally, I would like to thank all the people, without whose insights and opinions, this
project would have been impossible.
Ashutosh kaushik
 DECLARATION

I hereby declare that this project report entitled “A STUDY ON CREDIT PROCESS OF
MICRO BAKING LOAN IN ICICI BANK” has been prepared by me during the year
2017-2019 under the guidance of Miss Vaishali Jain(HOD) management faculty of
ROORKEE ENGINEERING & MANAGEMENT TECHNOLOGY SHAMLI, U.P.

I also hereby declare that this project report has not been submitted at any tie to any other
university or institute for the award of degree or diploma.

Ashutosh Kaushik
 CONTENTS

1. Introduction
2. Objective
3. Company Profile
4. Industry Scenario
5. Analysis of Different Banks
 ICICI
 HDFC
 IDBI
6. Comparison of Homesaver with Normal Home Loans
7. Comparative analysis of Home Loan and Home Saver
8. Research Methodology
9. Data Analysis
10. SWOT Analysis
11. Conclusion
12. Recommendation
13. Bibliography
 OBJECTIVE OF THE STUDY

The objective of this research is to analyse the home loans with a view to arrive at
the most popular loan schemes offered by the banks in Lucknow under study
and to conclude from the analysis the best possible schemes which would keep the
bank ahead of competition.

The purpose of the study is to find the critical factors that are essential for any
housing loan to become the most favored scheme in the Indian scenario. The
reasons being the features that the scheme provides are not being provided by many
of the housing finance companies.
 INTRODUCTION

A roof over one's head and ground beneath one's feet count as the bare
necessities of life. There’s nothing quite like owning a home, however
humble, to give one that warm and glowing feeling. But when one buys a
home, one has much more than a feel-good purchase in mind: it’s also a
crucial investment decision, perhaps the biggest spending decision of one's
life. There are ample opportunities today for young salaried investors to plan
their moves early and buy a house at the right time — and at the right price.
In the process, not only do they fulfill that cherished dream of owning a
house, but also put themselves on the path to acquiring property that would
meet the needs and aspirations of their growing family, even as it leads to
wealth creation. Every individual aspires to own a home. But many either
spend a lifetime saving to purchase a house or exhaust money on monthly
house rents.

Take a house loan and let the monthly rent (easily converted into
affordable EMIs) build dream home.
Profitable Proposition
“The overall demand in the residential sector has grown by about 7-8 per
cent in the past few months as compared to the same period last year. The
growth is on account of two main factors:
 One, income-tax exemption;
 Two, with no similar rebates available for individuals in the high-
income group, they are creating a second asset.

Add to this the stable property prices over the last year and plunging interest
rates, planning for dream home could not have been better timed. Rock-
bottom interest rates, standardization of the periodicity of interest
calculation across lenders (which makes it easier to compare loans), lower
interest charges, waiver of loan application processing fees and, a customer-
friendly attitude is reason enough to celebrate the ascension of the home
loan consumer as the king.
In response, private players like ICICI Bank, IDBI Bank, Standard
Chartered Bank and a few others too lowered their rates. Market leader
HDFC also brought down its interest rates to 12.5%, very recently, to
participate in the interest rate war. If one is still not satisfied with the
lowered loan rates, there’s more. Some industry watchers believe the
floating home loan rate will slip to 8 per cent for long-term loans in another
two to three years.

Most banks have changed the way interest is calculated from annual rests to
monthly rests. Under the annual rests method, the EMIs (equated monthly
installments) one pays through a year are factored in as part-repayment of
the principal component only at the end of each year. In other words, one
has to pay interest even on the installments one has paid until they’re
reduced from the principal at the end of each year. Under monthly rests, the
principal is lowered by the appropriate amount each month. The thumb rule
being that the more frequently interest is calculated, the better for the
creditor. Recently, HDFC added monthly rests on its fixed-interest loans
apart from annual rests. As a result, the fall in EMIs on fixed-interest loans
(where the interest rate is constant for the entire tenure of the loan,
irrespective of changes in the lending rates) is more pronounced than on
floating-rate loans (where the loan interest rate varies with changes in the
interest rates). For example, the EMI on a 15-year, fixed-interest loan for Rs
15 lakhs has come down by Rs 1240; the corresponding fall in the EMI on a
floating-rate loan is only Rs 665. Apart from lowering the cost of one's loan,
the switchover to monthly rests has another advantage: it makes it easier to
compare loans.
 COMPANY PROFILE

ICICI HOME FINANCE COMPANY LIMITED

Consumer friendly housing finance company History:

ICICI Home Finance Company Limited was incorporated on May 28, 1999 as 100%
subsidiary of ICICI Personal Financial Services Limited (ICICI PFS). ICICI Home
Finance Company Limited, was set up with the objective of providing long term housing
loans to individuals and corporate. The Company was registered on March 30, 2000 with
National Housing Bank (NHB) under National Housing Bank Act, 1987 in terms of
Housing Finance Companies (NHB) Directions, 1989. With effect from May 3,2002,
ICICI Home Finance has become a 100% subsidiary of ICICI Bank Limited.
Overview:
ICICI Home Loans are at present available to customers in 150 cities/towns across the
country. Loans are offered for purchase of new homes, purchase of resale homes and home
improvement. Besides, the company also offers loans for commercial property and loans
against existing property. The loans are offered for tenors up to 30 years. The company has
also introduced several customer friendly services such as 'door-step' service, 'know your
loan on phone' facility and 'ICICI Home Search' - free property brokerage services.
ICICI Personal financial services limited (ICICI PFS), FORMERLY
ICICI- CREDIT, was one of the first four companies to obtain registration
as a non-banking financial company (NBFC) from the Reserve Bank of India
(RBI) on September 10, 1997 under the new section 45 IA of the Reserve
Bank of India Act, 1934.

During the year 1998-99, there was a significant shift in the company’s
operations from leasing and hire purchase to distribution and servicing of all
retail products for the ICICI Group. It is now a focal point for marketing and
distribution of all retail asset products for ICICI, including auto loans,
consumer durable finance and other financial products. The company has
thus become a critical part of ICICI’S retail strategy aimed at offering a
comprehensive range of products and services to retail customers.
In view of this reorientation of the business, the name of the company was
changed from ICICI CREDIT CORPORATION LIMITED to ICICI
PERSONAL FINANCIAL SERVICES LIMITED (ICICI PFS) effective
March 22, 1999.

ICICI commenced its custodial services business in 1992 and played a

pioneering role in the business when it accepted the custodian role for the
first ever GDR issue by Indian corporate (Reliance Industries. ICICI has a
major market share in the segment and acts as custodian of 41 ADR/GDR
issues and, in the process, has established relationships with all the major
overseas depository banks operating in the Indian Market. After its success
in the GDR segment, ICICI expanded its custodial operations by offering
custodial services to overseas institutional investors including foreign
institutional investors (FII’S) and as on June 30, 1999, the value of assets
held in our custody exceeded US 2 billion.
At present, ICICI offers a full range of custodial services for primary and
secondary market operations pertaining to debt, equity, money market
instruments GDR/EURO issues conversions and GDR arbitrage to:
1. Overseas Institutional Investors like
a. FIIs
b. OCBs
c. OFFSHORE FUNDS
d. VENTURE FUNDS
2. Overseas Govermental Agencies
3. Institutions looking for proprietary investments
4. Mutual funds
5. Private investment companies
6. Large corporate
7. High net worth individuals
As a value added service ICICI custodial services division assists the clients
in preparation, submission and follow up for various applications for
regulatory approvals including initial application by FII’S/OCB with
SEBI/RBI.
PERSONAL BANKING
At ICICI BANK, they are committed to making banking a pleasure. This
commitment is manifested in the services they offer – a wide range of
accounts, investment schemes, and facilities. Each service offers their
customers security, flexibility of operation and maximum returns. The
various services provided under this is as follows:
 Maxi Cash – savings Account
 Quantum – Fixed Deposits
 Quantum optima – Value added Savings Account
 Money plus – Current Account
 ATM
 Phone Banking
 Treasure Chest – Locker facility
 Power Pay Payroll
 Retail Treasury Instruments

CORPORATE BANKING
MOBILE COMMERCE
ICICI Bank now brings Bank Account and ICICI Credit Card to customer’s
fingertips. With Mobile Commerce, customers can perform a wide range of
query-based transactions from their OrangeTM (MUMBAI) and AIRTEL
(DELHI) Mobile Phone, without even making a call.

 Access multiple accounts

 Balance enquiry to the linked accounts
 Cheque book requests
 Mini statement – Listing of last three transactions
 Request for account statements (by mail or fax)
ICICI
Attractive interest rates
Door-step service from enquiry stage till final disbursement
No guarantor required
Can transfer your existing high-interest rate loan
Can transfer your existing high-interest rate loan
Special 100% funding for select properties

Home loan
 Customer must be at least 21 years of age when the loan is sanctioned.
 The loan must terminate before or when you turn 65 years of age or
before retirement, whichever is earlier.
 Customer must be employed or self-employed with a regular source of
income.

Loan Amount
A number of factors are taken into account when assessing repayment
capacity. Customers income, age, number of dependants, qualifications,
assets and liabilities, stability/ continuity of customer employment/ business
are some of them. However, there are ways by which you can enhance your
eligibility.
 If customer spouse is earning, put him/her as a co-applicant. The
additional income shall be included to enhance loan amount. Incidentally,
if there are any co-owners they must necessarily be co-applicants.
 customer fiancée's income can also be considered for sanctioning the
loan on your combined income? The disbursement of the loan, however,
will be done only after submit proof of marriage.
 Providing additional security like bonds, fixed deposits and LIC
policies may also help to enhance eligibility.
While there is no need for a guarantor, it could be that having one might
enhance your credibility with us. If so, our loan officer would provide
customer with the necessary details.
The final amount to be sanctioned will depend on your repayment capacity.
However, what customer ultimately are entitled to will have to conform
within the limits fixed for each loan.
Also, when the company looks at the total cost, registration charges, transfer
charges and stamp duty costs are included.

HOME LOANS

We at ICICI Bank understand the value of owning your own home. Our
affordable home loans can make all the difference to their dream of owning
home.

0% processing fee for a limited period.

Refer to the table for a loan option that suits their need best

FIND THE RIGHT HOME

Introducing Home Search - Our FREE online property search facility. A one-
stop shop for all their real estate needs.

What you get

0% brokerage on first sale properties
Access the entire market under one roof
Site visits to properties short listed by you
Help in negotiating the best price
Help with legal documentation

Documents
Passport size photograph. Age verification: PAN card, Voters ID, Passport,
License. Bank statement for the last six months. Income Documents e.g.
Latest Form 16, Certified IT returns for latest 3 years. Processing Fee
cheque. Loan Enclosure letter. These are the documents required for
sanctioning a loan. Customer may be asked to submit further legal
documents if required by ICICI or its approved lawyers. Do retain
photocopies of all documents being submitted by them.

Disbursement
Customer loan will be disbursed after you identify and select the property or
home that customer are purchasing and on their submission of the requisite
legal documents.
While customer may be under the impression that the list of documents
asked for is rather extensive. Each and every single document asked for will
be verified and checked to ensure their safety.

This may take some time but the bank want to ensure a clear title and will
complete all the legal and technical verifications to ensure that they have
full rights to their home.
The 230 A Clearance of the seller and / or 37I clearance from the appropriate
income tax authorities (if applicable) is also needed.
On satisfactory completion of the above, on registration of the conveyance
deed and on the investment of your own contribution, the loan amount (as
warranted by the stage of construction) will be disbursed by ICICI.
The disbursement will be in favour of the builder/seller.
List of documents for disbursement

Standard documents:
Loan Agreements Disbursement Requests Post-dated cheques Personal
guarantor's documents, as the case may be adjustable Rate Loans

Home Loans/Land Loans: Special offer - 0% processing fee

ICICI Bank Home Loans announces it's Special Interest Rates.These interest
rates are valid for new home loans for a limited period only. The interest rate
on these loans is linked to the ICICI Home PLR and moves up or down with
the ICICI Home PLR The ICICI Home - PLR for ICICI Home Loans is
currently 12.50% p.a.The EMI table for ARHL is given below:

Fixed Rate Loans

Home Loan: Special offer - 0% processing fee
ICICI Bank Home Loans has now brought Fixed Rate Home Loans at par
with Adjustable Rate Home Loans, starting from January 17, 2003. The EMI
table for Fixed Rate Home Loans is given below:
Exhibit 2.3: Product Process Flow for Housing Finance

Enquiry

Application with processing fee submission

Credit Appraisal

Interview Checking with Verification with employer

Recommendation to the Sanctioning Authority

Sanction by
committee

Letter to Reject
Defer
applicants

Approval
guarantor

Acceptance Letter with Administrative fees

Legal title Documents review

Signing loan disbursement documents

EMI repayment Prepayment Penalty Charge

Listed below are the steps involved in availing of a home loan:

Step 1 A person applies for a home loan.

The executive meets the applicant and briefs him the entire loan
Step 2
process, requirements and the various options available.
The applicant chooses a Housing Finance Company (HFC) and
Step 3
hands over the income documents to the executive.
The income documents are handed over to the HFC for eligibility
Step 4
and approval.
The HFC verifies the documents and checks the repaying capacity,
Step 5 saving habits, tenure of service, etc. of the applicant and approves
the loan amount.
After approval, an offer letter is given to the applicant by the HFC,
Step 6 along with a list of original property title documents that have to
be handed over to the HFC.
The applicant gives the original property title documents to the
Step 7
HFC.
The HFC scrutinizes the legal and technical aspects of the original
Step 8
title documents.
If the HFC is satisfied as to the legal & technical aspects of the
Step 9
documents then the applicant is called to sign the loan agreement.
The loan disbursement schedule is decided by the HFC according
Step 10 to the stage of construction (if property under construction)or a
one time payment is made if property is ready for possession
The applicant gets possession of the property depending upon the
Step 11
level of completion of the property.
Step 12 The applicant starts paying the EMIs.

WHAT ALL CAN ONE TAKE A LOAN FOR:

There are different types of home loans tailored to meet ones needs. Here’s
are some of them:
Home Purchase Loans: This is the basic home loan for the purchase of a
new home.
Home Improvement Loans: These loans are given for implementing repair
works and renovations in a home that has already been purchased by the
client.

Home Construction Loan: This loan is available for the construction of a

new home.

Home Extension Loan: This is given for expanding or extending an

existing home. For e.g.: addition of an extra room etc.

Home Conversion Loan: This is available for those who have financed the
present home with a home loan and wish to purchase and move to another
home for which some extra funds are required. Through home conversion
loan, the existing loan is transferred to the new home including the extra
amount required, eliminating the need of pre-payment of the previous loan.

Land Purchase Loans: This loan is available for purchase of land for both
construction or investment purposes.

Bridge Loans: Bridge loans are designed for people who wish to sell the
existing home and purchase another one. The bridge loans help finance the
new home, until a buyer is found for the home.

Amount
This largely depends on a number of factors like ones age, profession,
salary, the city one resides in among other such factors. It varies between
Rs. 2.1 lac to Rs. 1 crore depending on the lender. As a rule of thumb,

depending upon the HFC, one will have to cough up 15%-20% of the loan
amount as a down payment. For smaller amounts, this may not be much. But
for figures running into lakhs, this could make loads of difference. For eg.
An apartment costing Rs 10 lakh may get 85 per cent financing. So, one will
have to arrange for the remaining Rs 1.5 lakh. If one takes this into account,
the additional thousands will definitely put a strain on ones finances.

Tenure
Generally, the maximum tenure of home loans is 15 years, with a few
lenders offering tenure of 20 years or more (ICICI has recently launched a
30 year loan). The longer the tenure, more one pays in total interest, but
ones monthly payments will be less. So depending on ones earning potential
and bank balance, one can choose an appropriate tenure. An important
requirement of most banks/HFCs is that one pays up the entire loan before
one retires. One can always prepay ones entire loan amount before it is due.
There is a trend to do away with the pre-payment penalty being imposed by
some lenders so its best one checks on this as well.
Interest Rate
Without doubt the most important parameter to factor into ones calculations.
The interest rates may vary from institution to institution and generally
range from about 7.0% to around 8.0%. Repayment is in the form of EMI's
(equated monthly installments). The longer the tenure, the more one pays in
interest, but ones monthly payment will be less.
Refinance
This is a concept that is yet to catch on in the home loan market but is bound
to be a major service in the months to come. Under this facility, one can take
a new loan from another bank/HFC to pay back an old loan before its natural
tenure. It gives one the opportunity of prepaying ones high cost debt and
gets a lower cost one. In today's falling interest rate scenario one should use
this vehicle to lower ones debt payments as much as possible. The lender
facilitates the shift by paying the outstanding and transferring the asset to
their portfolio.

Miscellaneous charges
A heading that should be ignored at one’s peril! The interest rates and EMIs
are not the only cost factor. Never underestimate how much the processing
and administration fees amount to. A 0 .5% administration fee and a 0.5%
processing fee on, say, a Rs 5,00,000 loan, would amount to Rs 5,000. Other
times, it could be just one fee (either administration or processing) but could
yet work out to be much more if it is considerably higher at, say, 2.5 per cent
or 3 per cent. The various other fees, which one is required to pay along
with the margin amount, are:
a) Interest Tax
This is the tax payable on the interest paid on a home loan and not the
principal. This tax is some times included in the interest rate of the loan, or
may be charged separately as interest tax.

b) Processing Charge
It's a fee payable to the lender on applying for a loan. It is either a fixed
amount not linked to the loan or may also be a percentage of the loan
amount. The loan amount received by you can be less than the processing
fee.

c) Prepayment Penalties
When a loan is paid back before the end of the agreed duration a penalty is
charged by some banks/companies, which is usually between 1% and 2% of
the amount being pre paid.

d) Commitment Fees
Some institutions levy a commitment fee in case the loan is not availed of
within a stipulated period of time after it is processed and sanctioned.
e) Others
It is quite possible that some lenders may levy a documentation or
consultant charge.
 INDUSTRY SCENARIO

The housing finance industry, encompassing banks and housing finance

companies (HFCs), has exhibited a 36 per cent growth between April and
December 2004 despite the high prepayment levels experienced by some
HFCs.

Were it not for prepayments, the industry's outstanding assets would have
grown at a higher 43 per cent. Aggressive marketing efforts of banks and
HFCs have further precipitated this trend.

Banks have an inherent advantage in retail finance, especially in housing

loans, because of the lower cost of funds, existing retail relationships in
liability products and large branch network.

It is expected that banks will further iLUCKNOWease their market share in

the housing finance sector in the medium term.

It is also expected that the housing finance sector will maintain its high
growth rates in future given that the key growth drivers the government's
thrust on the housing sector in terms of fiscal incentives for individual
housing loans coupled with the demand-supply gap in housing - would
remain strong.
 STANDARD CHARTERED BANK

Overview
Standard Chartered is the world's leading emerging markets bank. It employs
27,000 people in over 500 offices in more than 50 countries in the Asia
Pacific Region, South Asia, the Middle East, Africa, United Kingdom and
the Americas.

The Bank serves both Consumer and Wholesale banking customers. The
Consumer Bank provides credit cards, personal loans, mortgages, and
deposit taking activity and wealth management services to individuals and
medium sized businesses. The Wholesale Bank provides services to
multinational, regional and domestic corporate and institutional clients in
trade finance, cash management, custody, lending, foreign exchange, interest
rate management and debt capital markets.

With nearly 150 years in the emerging markets the Bank has unmatched
knowledge and understanding of its customers in its markets.

Standard Chartered recognises its responsibility lies to its staff and to the
communities in which it operates.

A brief history of Standard Chartered

Standard Chartered is the world's leading emerging markets bank
headquartered in London. Its businesses however, have always been
overwhelmingly international. This is summary of the main events in the
history of Standard Chartered and some of the organisations with which it
merged.
The early years
Standard Chartered is named after two banks, which merged in 1969. They
were originally known as the Standard Bank of British South Africa and the
Chartered Bank of India, Australia and China. Of the two banks, the
Chartered Bank is the older having been founded in 1853 following the grant
of a Royal Charter from Queen Victoria.

Standard Chartered Bank – Vision and Strategy

Standard Chartered Bank has been established for over 140 years. Its spans
the developed and emerging economics of the world with a network of over
500 officers in more than 40 countries.

With a mission to build a world class bank, Standard Chartered has adopted
the strategies of:
· Building a world class business: Focus on core business, provide
superior customer service, and generate maximum returns and benefits for
shareholders.
· Staying lean and focused: Is vest in core business, optimal usage of
resource, and manage performance by balancing cost and risks.
· Recognised as a winning organization: Develop capability to the fullest,
instill global thinking, and inject of pride in to people to get connected to
Standard Charted Bank.

Standard Chartered in the 1990s

Even within this period of apparent retrenchment Standard Chartered
expanded its network, re-opening in Vietnam in 1990, Cambodia and Iran in
1992, Tanzania in 1993 and Myanmar in 1995. With the opening of branches
in Macau and Taiwan in 1983 and 1985 plus a representative office in Laos
(1996), Standard Chartered now has an office in every country in the Asia
Pacific Region with the exception of North Korea. In 1998 Standard

Chartered concluded the purchase of a controlling interest in Banco Exterior

de Los Andes (Extebandes), an Andean Region bank involved primarily in
trade finance. With this purchase Standard Chartered now offers full banking
services in Colombia, Peru and Venezuela. In 1999, Standard Chartered
acquired the global trade finance business of Union Bank of Switzerland.
This acquisition makes Standard Chartered one of the leading clearers of
dollar payments in the USA. Standard Chartered also opened a new
subsidiary, Standard Chartered Nigeria Limited in Lagos, acquired 75 per
cent of the equity of Nakornthon Bank, Thailand; and agreed terms to
acquire 89 per cent of the share capital of Metropolitan Bank of the
Lebanon.

Today-Standard Chartered
Today Standard Chartered is the world's leading emerging markets bank
employing 30,000 people in over 500 offices in more than 50 countries
primarily in countries in the Asia Pacific Region, South Asia, the Middle
East, Africa and the Americas.
The new millennium has brought with it two of the largest acquisitions in
the history of the bank with the purchase of Grindlays Bank from the ANZ
Group and the acquisition of the Chase Consumer Banking operations in
Hong Kong in 2000.

These acquisitions demonstrate Standard Chartered firm committed to the

emerging markets, where they have a strong and established presence and
where they see their future growth.

At Standard Chartered they are committed to the communities and

environments in which they operate. Their Operations are focused on the
emerging markets and they believe that with appropriate policies and
practices in place they can be a legitimate influence for good by promoting
the highest standards of responsible business.

HOME SAVER FROM STANDARD CHARTERED BANK:

 A revolutionary home loan that gives the customer the potential
to save thousands of Rupees in interest on home loan.
 Lets the customer make additional deposits to reduce the loan
outstanding, without any penalties.
 Lets use the surplus funds in the account to invest when the
right opportunity arises.
 Finally, a home loan that easy access to surplus funds every
day, 24 hours a day through a globally valid ATM-cum-Debit card

At Standard Chartered, recognize that owning a home is a very important

goal, and probably the largest investment in a lifetime. That's why the
company has created Home Saver.

Home Saver is a revolutionary new concept in home loans designed to save

interest thereby letting to pay off loan faster.
Here's how one can enjoy the Home Saver advantage
Every month, all the customer need is to do is deposit surplus funds, be it
there salary or other savings into Home Saver, instead of letting them lie idle
in different accounts. All this money then works towards reducing there
interest payable because the deposits automatically reduce the balance
outstanding on which the interest is calculated on a daily basis.
So, more the number of days one place into HomeSaver, greater is the
interest saving!

What's more, the customer continue to have total access to these funds 24
hours a day through the globally valid ATM-cum-Debit card!

Unique Features
 Freedom to save more
 Freedom to reduce your loan period
 Freedom to take a break from EMI payments
 Freedom to access your money - anytime, anywhere

HomeSaver is currently available in Bangalore, Chennai, Delhi, Kolkata,

Mumbai and Pune.
All the customer have to do is to call Phone Banking or contact us at any of
their branches and they'll assist you with a better understanding of the
products and in taking care of the formalities.
Still deciding which home loan to take? Choose the one that sets free.
 Terms, conditions and RBI regulations apply. All loans at the sole
discretion of Standard Chartered Bank.

Freedom to save more

With HomeSaver, there is more to save than a normal low-cost home loan.
Because interest is calculated on daily balances, customer can reduce
interest cost substantially even if surplus savings are in the account for only
a day. For each day that outstanding balance reduces, one pay less interest
for that day.
Since that's interest saved not earned, customer save on taxes that would
otherwise pay on interest earned!
HomeSaver gives the flexibility and freedom to make excess payments so
that you can reduce the duration of your loan anytime, without penalties.
Only HomeSaver gives you the flexibility to defer your EMI payment. So if
at any time, you are faced with an emergency and find it difficult to pay
EMI, customer can take a payment holiday* once every year- after the first
year without any penalty.

You have the flexibility of depositing and withdrawing cash just as you
would with your normal bank account. HomeSaver comes with a globally
valid ATM-cum-Debit Card, which allows you free* access to your money
from over 2000 ATMs across the country. Anytime, anywhere.

That's not all, customer also get a personalized cheque book, Phonebanking
and Internet banking - to add to the convenience of banking with us.
The product is a combination of home loan and bank account that helps
reduce the interest and tenure of the loan. HomeSaver allows the customer
to pay back the home loan principal by utilising the excess funds in the
HomeSaver account. This reduces the overall interest payment and the
tenure of the loan.

The product allows customers to pool their salary, savings and surplus funds
lying in other accounts into HomeSaver that goes towards reducing the
balance principal outstanding. Since the interest is calculated on daily
outstanding balance, every rupee kept in HomeSaver each day goes towards
prepaying the loan that helps the customers pay back the loan faster and save
substantial interest.

One of the key benefits of HomeSaver is that customers need not

consciously work towards making partial prepayment to reduce interest on
the loan. All deposits and excess money lying in HomeSaver account would
automatically be used to reduce the balance outstanding. At the same time,

customers would continue to enjoy the flexibility and liquidity of a normal

bank account.

Further, the customers also enjoy the privilege of taking a payment holiday
on their equated monthly instalment (EMI) once a year after the first year
for any loan taken under HomeSaver.

This would allow the customer the flexibility to tide over a tight financial
situation without having to pay a penalty for skipping an EMI. "This is a
feature again unique to HomeSaver and not provided by any traditional
home loan,".

HomeSaver offers an opportunity to maximise savings whilst providing

flexibility and convenience to manage personal finances more efficiently.
Customers can pool their salary, savings and surplus funds lying in other
accounts ultimately reducing the balance principal outstanding.

As the interest is calculated on a daily outstanding balance, funds kept in the

account go toward pre-paying the loan, rather than the interest component,
helping customers pay back faster and save substantial interest, the bank
claims.
The HomeSaver account further offers the same liquidity and flexibility of a
normal bank account and comes with an ATM - cum- debit card and
chequebook facility.

A customer can save up to 43 per cent or more on the interest component

depending on the deposits maintained by him in the account. Loans from
other institutions can be balance transferred to this account at a cost of 1 per
cent of the outstanding loan amount.
 HDFC BANK
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The Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an ‘in principle’ approval from the Reserve
Bank of India (RBI) to set up a bank in the private sector, as part of the
RBI’s liberalization of the Indian Banking Industry. It was incorporated in
August 1994 in the name of ‘HDFC Bank Limited’, with its registered
office in Mumbai. HDFC began operations as a Scheduled Commercial Bank
in January 1995.

About the Promoter

HDFC, the promoter, is India’s premier housing finance company and enjoys
an impeccable track record in India as well as in international markets.

Since its inception in 1997, HDFC has maintained a consistent growth in its
operations and profitability and over the past 5 years has achieved annual
growth rate of 25 – 30 %.

Its outstanding loan portfolio covers over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base in
relation to its housing related credit facilities and its investment portfolio.
With its tremendous brand equity, strong reputation in the Indian and
international financial services market, large shareholder base and unique
consumer franchise, HDFC was ideally positioned to promote a bank in the
Indian environment. HDFC (together with its fully owned subsidiary HDFC
Investments Ltd.) owns about 31% of the equity.

They had started with a strategic alliance with the NatWest group in UK
with 20% equity, which was divested later on. The bank also signed a
memorandum of understanding for strategic business collaboration with the
Chase Manhattan Bank in February 2 nd 1999.
Business Philosophy
The mission of HDFC Bank is to be world class Indian bank. This would
imply a bank that would meet various financial needs of its customers in a
convenient and cost effective manner at international standards of service.
The bank seeks to achieve the status of a "preferred organization" among its
major constituents- customers, shareholders, regulators, employees,
suppliers etc.-while maintaining the highest levels of integrity and corporate
governance.

The business philosophy at HDFC Bank is based on four core values

:Operational Excellence, Customer Focus, Product Leadership and People.

Competitors
Bank faces strong competition in all of their principal lines of business.
Their primary competitors are large public sector banks, other private sector
banks, foreign banks and, in some product areas, non-banking financial
institutions.

Wholesale Banking: Principal competitors in wholesale banking are public

and new private sector banks as well as foreign banks. The large public
sector banks have traditionally been the market leaders in commercial
lending. Foreign banks have focused primarily on serving the needs of
multinational companies and Indian corporations with cross-border
financing requirements including trade, transactional and foreign exchange
services, while the large public sector banks have extensive branch networks
and large local currency funding capabilities.

Retail Banking: In retail banking, their principal competitors are the large
public sector banks, which have much larger deposit bases and branch
networks, other new private sector banks and foreign banks in the case of
retail loan products. The retail deposit shares of the foreign banks is quite
small by comparison to the public sector banks, and have also declined in
the last five years, which we attribute principally to competition from new
private sector banks. However, some of the foreign banks have a significant
presence among non-resident Indians and also compete for non-branch-
based products such as auto loans and credit cards. They face significant
competition primarily from foreign banks in the provision of debit cards and
also expect to face competition from foreign banks when we begin offering
credit cards. In mutual fund sales and other investment related products,
their principal competitors are brokers and foreign private banks.

Treasury: In treasury advisory services for corporate clients, they compete

principally with foreign banks in foreign exchange and derivatives trading,
as well as the State Bank of India and other public sector banks in the
foreign exchange and money markets business.

Loans
HDFC Bank brings you a wide range of loans to cater your financial needs.
The bank offers the following loans-
· Personal Loans
· Consumer Loans
· Auto Loans
· Loans against shares
· Loans against RBI Bonds
· Loans against Insurance policy
. E-instant loans-gives the facility of loan approval in 60 seconds on the
internet.

HDFC has offices spread all over the country. This extensive network helps
HDFC in providing service to large and well spread out clients. This
network of interconnected offices (on Data Circuits) helps HDFC to process
applications for purchase of property anywhere in India. HDFC has further
established an office in Dubai and Service Associates in Kuwait, Oman and
Qatar to make it easier for Middle East based Non-Resident Indians to apply
for a loan to HDFC - India.
HDFC is the pioneer of housing finance in India and has been a leader in the
business for the last 23 years. HDFC has vast experience and a very
committed and skilled staff to handle housing loan applications and solving
customer problems.

HOME LOAN SCHEMES

PURPOSE
HDFC Ltd. offers loans for the following purposes:
 Land Purchase
 Home Construction/Purchase
 Home Extension
 Home Improvement loans
 Short-term Bridge Loans
 Non-Residential Premises Loans For Professionals
2-in-1 Home Loan scheme
A home-loan scheme that’s twice as good!
Confused whether to opt for an Adjustable Rate or Fixed Rate Loan?
HDFC brings you the best of both options with 2-in-1 Home Loan.
2-in-1 Home Loan provides customers with a choice of breaking up the loan
requirement into Adjustable and Fixed Rate loans.
Customers benefit both ways, as it helps them hedge their interest rate risk
against rising interest rates to the extent of the fixed rate portion of the loan
and take the advantage of falling interest rates, with the Adjustable Rate
portion.
2-in-1 Home Loans can be taken in any proportion. With no prepayment
charges under the Adjustable Rate Home Loan, customers planning to make
part prepayments can take a portion of the loan intended for prepayment
under Adjustable Rate loan option; the rest can be taken under Fixed Rate
Loan option.

LOAN AMOUNT
Loans can be availed up to a maximum of 85% of the cost of the property
(including the cost of the land). HDFC lends up to a maximum of Rs.
1,00,00,000 on a Home Loan to an individual.

LOAN TENURE
You can repay the loan over a maximum period of 20 years.

RATE OF INTEREST
Interest is calculated on annual rests. Principal repayments are credited at
the end of HDFC's financial year. The effective rate of interest varies
depending on the term of the loan. For a loan with a term of 15 years, the
effective interest rate would be higher by 0.37% per annum than the
indicated rate of interest.

SECURITY
Typically the security for the loan is a first mortgage of the property to be
financed, normally by way of deposit of title deeds and/or such other
collateral security as may be necessary.
Interim security may be additionally required, if the property is under
construction. Collateral or interim security could be assignment to HDFC of
life insurance policies, the surrender value of which is at least equal to the
loan amount, guarantees from sound and solvent guarantors, pledge of
shares and such other investments that are acceptable to HDFC.
The title to the property should be clear, marketable and free from
encumbrance. To elaborate, there should not be any existing mortgage, loan
or litigation which is likely to affect the title to the property adversely.

Interim security may be additionally required, if the property is under

construction. Collateral or interim security could be assignment to HDFC of
life insurance policies, the surrender value of which is at least equal to the
loan amount, guarantees from sound and solvent guarantors, pledge of
shares and such other investments that are acceptable to HDFC.
DOCUMENTATION
Following documents should be produced for approval of loan:
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.
6. Any other information regarding your repayment capacity that is
necessary and will assist HDFC in appraising the case.

b) Additionally,
If borrower is 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
installment towards repayment of the loan from your salary. This will
expedite the processing of your loan application.

If borrower is 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.
2. A note giving information on the nature business/profession, form of
organization, clients, suppliers, etc.

ELIGIBILITY
The repayment capacity as determined by HDFC will help in deciding how
much one can borrow (the cost of the property or Rs. 1 crore, whichever is
lower). Repayment capacity takes into consideration factors such as income,
age, qualifications, number of dependants, spouse's income, assets,
liabilities, stability and continuity of occupation and savings history. And, of
course, HDFC's main concern is to make sure customer can comfortably
repay the amount they borrow
TAX BENEFIT
Resident Indians are eligible for certain tax benefits on principal and interest
components of a loan under the Income Tax Act, 1961. Interest repayment of
Rs. 1,00,000 p.a. (for a loan on or after April 1, 2000) can get borrower a tax
saving up to approximately Rs. 33,000 p.a. Moreover, customer can get
added tax benefits under Sec 88 on repayment of principal amount up to Rs.
20,000 p.a. which can further reduce borrower’s tax liability by Rs. 2,000
p.a.
About the product

HDFC's Home Loans offers you various unique benefits and are easy to
arrange and repayable in easy monthly installments. The terms of the loan
can be structured according to customer unique requirements.

Home Loans can be applied for by either individually or jointly. Proposed

owners of the property, in respect of which the loan is being sought, will
have to be co-applicants. However, the co-applicants need not be co-owners.
Loans can be availed upto a maximum of 85% of the cost of the property
(including the cost of the land). HDFC lends upto a maximum of Rs.
1,00,00,000 on a Home Loan to an individual. You can repay the loan over a
maximum period of 20 years . They determine the loan amount after
evaluating the repayment capacity of the individual. HDFC's main concern
is to help individuals comfortably repay the borrowed amount.

Get in touch with your nearest HDFC office today. We will be pleased to
discuss and help you realise your plans for a house
USP
Superior Processing Capacity: HDFC has over the years invested
substantially into computer systems and training. This has enabled HDFC to
respond to customer needs and build up capabilities to approve loans on the
spot or disburse them fast.

Branch Network: HDFC has offices spread all over the country. This
extensive network helps HDFC in providing service to large and well spread
out clients. This network of interconnected offices (on Data Circuits) helps
HDFC to process applications for purchase of property anywhere in India.
HDFC has further established an office in Dubai and Service Associates in
Kuwait, Oman, Qatar, Bahrain and Saudi Arabia to make it easier for Middle
East based Non-Resident Indians to apply for a loan to HDFC - India.

Experienced and Trained Staff: HDFC is the pioneer of housing finance in

India and has been a leader in the business for the last 25 years. HDFC has
vast experience and a very committed and skilled staff to handle housing
loan applications and solving customer problems.

Free Counselling: HDFC believes that it is in the business of providing

solutions to an individuals need for owning a house, and not just in the
business of providing finance. Keeping this in mind HDFC will provide free
counselling to on how and where to buy a house in India (Property Services)
or what are the prices and trends in the real estate market or what
precautions one should take before buying a house. This service is offered at
any of HDFC's offices.

Legal and Technical Guidance: HDFC has qualified Legal and Technical
staff who liase with the developers to collect and scrutinise the property
documents and permissions. We have Master Files of most projects being
developed by reputed developers. It has always been HDFC's endeavor to
protect the interest of the borrower, as we believe that buying a house is one
of the most important decisions in his life.

Extension Products: Over the last 25 years, HDFC has developed various
products in response to the needs of our customers. Today we offer Home
Loans, Adjustable Rate Home Loans, Home Extension Loans, Home
Improvement Loans, Home Equity Loans, Short Term Bridging Loans and
Land Purchase Loans.
Flexible (Customized) Repayment Schemes: Keeping in mind the fact that
each individual has a unique problem requiring unique solutions, HDFC has
developed various repayment options like Step Up Repayment Facility,
Flexible Loan Installment and Balloon Payment Scheme.
Pari Passu/ Second Mortgage Arrangements: HDFC has a tie-up with a
large number of Public Sector Organizations and banks which enables us to
offer loans to your employees with the flexibility of their spouse also
availing a loan from his/her own employer.
Safe Document Storage Facilities: HDFC has state of art storage facilities,
which are theft and fire proof, at various locations where loan and property
documents are stored. In this way valuable documents are stored safely over
the period of the loan and are released almost immediately after a customer
repays his loan.
Post disbursement services:
a) T
he exemption in respect of interest on borrowed capital is Rs 1,50,000
under section 24 (b) of the Income Tax Act. Further interest on housing
loans can now be taken into account by an employer while computing
the tax to be deducted from an employee's salary.
b) H
DFC sends interest certificates to its customers well in advance which
enables them to take advantage of the tax exemption in their monthly
salary
c) W
e can transfer files of customers from one location to another in case of
transfer of the customer in course of his job.
d) A
customer, after availing of a loan can approach HDFC anytime
thereafter to iLUCKNOWease the Equated Monthly Installment, which
will help him repay the loan faster. This facility is offered free of charge
to our customers.
Electronic Mail: HDFC through its e-mail service can promptly respond to
queries. In addition, HDFC can promptly send it is application form cum
brochure and other details on its loan products by e-mail to interested
individuals. For Non-Resident Indians, our interactive Website offers
another means for contacting us. In our effort to reach out globally dispersed
Non-Resident Indians, we will continuously enhance our Website.

Home Conversion Loans: HDFC offers the option of a Home Conversion

Loan to its existing customers who are interested in moving to a new house.
Through this scheme customers can apply to have their existing loan
transferred towards the purchase of the new home. Customers may also
apply for an additional loan amount for the purchase of the new house. This
gives the customer the option of selling their existing house, if they wish to,
without having to repay their old loan.

Applications can be made before selecting property : Individuals may

make an application for a loan even if the property has not been selected or
the construction has not commenced. HDFC can provide assistance in
locating an appropriate house to such customers.

Home Improvement Loans: As an exclusive offer to it's existing customers

HDFC offers Home Improvement Loans upto 100% of the improvement cost
as compared to Home Improvement Loans of upto 70% of the improvement
cost offered to the general public.

Fee
A processing fee of 0.5% of the loan amount applied for i.e. Rs. 5 per Rs.
1000 of the loan applied for is payable when the application form is
submitted to HDFC. This fee is in respect of costs incidental to the
application.

For example :
Loan applied for Fees
Rs. 20,000 Rs. 100
Rs. 1,00,000 Rs. 500

On approval of the loan, a loan offer is made to you. On acceptance of the

offer, you will have to pay an administrative fee of 0.5% of the loan
approved. You can also pay the processing and administrative fees upfront
i.e. 1% of the loan at the time of submission of the loan application itself.

Rate of Interest
Adjustable rate of Interest
The interest rate on your ARHL is linked to HDFC's Retail Prime Lending
Rate (RPLR). The rate of interest is revised every three months from the
date of first disbursement, if there is a change in RPLR. However, the EMI
on the ARHL will not change. For instance, if the interest rate
iLUCKNOWeases, the interest component in EMI will iLUCKNOWease; the
principal component would reduce, resulting in an extension of the term of
the loan and vice-versa when the interest rate decreases. customer will be
provided with an annual statement indicating the details of the interest and
principal payments made during the year.
Annual Rest Option
Term of Loan (No. of Years) Rate Per Annum (%p.a)
1 – 20 11.50-12.75
Monthly Rest Option
Term of Loan (No. of Years) Rate Per Annum (%p.a)
Upto 5 11.50
6 - 10 12.25
11 – 20 14.00
Rate of interest under ARHL is linked to HDFC's RPLR (Retail Prime
Lending Rate) which currently is 12.50% per annum.
customer repay the loan in EMIs comprising principal and interest. Pending
final disbursement, you pay interest on the portion of the loan disbursed.
This interest is called pre-EMI interest .

EMI per Rs.1,00,000 for Annual Rest Option

Term of loan (No. of years)

Rupees
20 1379
EMI per Rs.1,00,000 for Monthly Rest Option
Term of loan (No. of years) Rupees
5 2276
10 1,381

20 1049

There is no early redemption charge on repayment of a loan ahead of

schedule.
Fixed rate of interest
The current applicable fixed rate of interest in respect of the total loan
approved is are as follows:
Annual Rest Option
Term of Loan (No. of Years) Rate Per Annum (%p.a)
Upto 5 11.50
6 - 10 12.25
11 – 20 14.00
Monthly Rest Option
Term of Loan (No. of Years) Rate Per Annum (%p.a.)
Upto 5 11.50
6 - 10 12.25
11 – 20 14.00
You repay the loan in Equated Monthly Instalments (EMIs) comprising
principal and interest.
EMI per Rs.1,00,000 for Annual Rest Option
Term of loan (No. of years) Rupees
5 2276
10 1,381
20 1049
EMI per Rs.1,00,000 for Monthly Rest Option
Term of loan (No. of years) Rupees
5 2,288
10 1,394
20 1066

Pending final disbursement, customer pay interest on the portion of the loan
disbursed. This interest is called pre-EMI interest .
An early redemption charge of 2% of the amount being prepaid is payable
on repayment of a loan ahead of schedule.

How to Apply
customer can either download (in a pdf format) the application form or, get
the application form by email or normal mail. Alternately, customer can
collect the application forms from any of your nearest HDFC Offices.

customer need to submit it along with supporting documents and the

processing fees at any HDFC office that is convenient to the customer.
customer can make payments by cheque marked "Payee's account only"
drawn on a bank in a city where HDFC has an office, by demand draft
(payable at par to HDFC) or by cash.
Customer can make an application at any time after they have decided to
acquire a house, even if the house has not been selected or the construction
has not commenced.

HDFC will consider your application, make enquiries as it deems necessary

and convey its decision to you. On approval of the loan, a loan offer is made
to you. On acceptance of the offer, you will have to pay an administrative
fee for the loan approved.
customer can take disbursement of the loan after the property has been
technically appraised, all legal documentation has been completed and you
have invested your own contribution in full (Own contribution is the total
cost of the property less HDFC's loan). The loan will be disbursed in full or
in suitable instalments (normally not exceeding three in number) taking into
account the requirement of funds and progress of construction, as assessed
by HDFC and not necessarily according to a builder's agreement.
Supporting Documents to be attached :
For approval of loan
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.
6. Any other information regarding your repayment capacity that is
necessary and will assist HDFC in appraising the case.

b) Additionally,
If You Are Employed:
1. Latest salary slip/salary certificate showing all deductions.
2. If job is transferable, permanent address where correspondence
relating to the application can be mailed.
3. A letter from employer agreeing to deduct the monthly instalment
towards repayment of the loan from the 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.
2. A note giving information on the nature of business/profession,
form of organisation, clients, suppliers, etc.
 IDBI

IDBI, the tenth largest development bank in the world has promoted world
class institutions in India. A few of such institutions built by IDBI are The
National Stock Exchange (NSE), The National Securities Depository
Services Ltd.(NSDL), Stock Holding Corporation of India (SHCIL) etc.
IDBI is a strategic investor in a plethora of institutions which have
revolutionized the Indian Financial Markets.

IDBI promoted idbi bank to mark the formal foray of the IDBI Group into
commercial Banking. This initiative has blossomed into a major success
story. idbi bank, which began with an equity capital base of Rs.1000 million
(Rs.800 million contributed by IDBI and Rs.200 million by SIDBI),
commenced its first branch at Indore in November 1995. Thereafter in less
than seven years the bank has attained a frontranking position in the Indian
Banking Industry.

idbi bank successfully completed its public issue in February 99 which led
to its paid-up capital expanding to Rs.1400 million. The promoters holding
consequent to this public issue stood reduced to 71% with IDBI holding 57%
and SIDBI 14% of the paid up capital of IDBI Bank. This is in line with the
requirement of RBI which stipulates that eventually the promoters holding
should be brought down to 40%.

The Bank
The birth of idbi bank took place after RBI issued guidelines for entry of
new private sector banks in January 93. Subsequently, IDBI as promoters
sought permission to establish a commercial bank and retained KPMG a
management consultant of international repute to prepare the groundwork
for establishing a commercial Bank. The Reserve Bank of India conveyed
it's in principle approval to establish idbi bank on February 11th, 1994.
Thereafter the Bank was incorporated at Gwalior under Companies Act on
15th of September 1994 (Registration No. 10-08624 of 1994) with its
Registered Office at Indore. The Certificate for Commencement of Business
was received on 2nd of December 1994.

Management Team - The Core Strength of The Bank

Since August 2000 idbi bank has witnessed a transformation in the top
management structure with top talent from foreign banks and private banks
coming together to create a world-class management team. Mr Gunit Chadha
joined idbi bank as its Managing Director & CEO after spending 16 years
with Citicorp in New York and India, on 22nd August 2000. He laid out the
bank's immediate priorities, amongst them being building up a performance
driven customer-focused organization. Existing talented people within the
bank were re-aligned to a functionally driven Product & Sales organizational
structure. Also, to align employee interests with shareholder interests
founder Stock Options (ESOPs) in October 2000 covering 75 % of the
existing employees of idbi bank were distributed.

Key recruits into the top management team were:

In January 2001, Janak Desai joined in as Country Treasurer after an
outstanding innings at Standard Chartered Bank and ABN Amro.

In February 2001. Ajay Bimbhet joined as Head-Retail Banking to lead retail

banking at idbi bank. Ajay comes after a strong and brilliant 25 year career
at ANZ Grindlays.

In December 2000, Neeraj Bhushan Bhai joined idbi bank as the Chief
Technology Officer. Neeraj has been a major success story in the

assignments handled by him earlier as Chief Information Officer of

Sharekhan.com and Chief Technology Officer of ICICI Infotech in their
technology initiatives.
In April 2001, Subramanian Kumar joined idbi bank as Head - Operations
after earning accolades during his stint at Standard chartered Bank, Dubai
and previously at HDFC Bank.

In May 2001, Ulhas Deshpande joined as Head - HRD. He has more than 18
years of rich human resource experience, of which over 10 years has been in
heading the HR function in premier organizations- Hindustan Ciba Geigy,
Merind, Parke Davis and most recently as Head-HR at Tata-AIG.

In August 2001, Susheel Kak joined as Head - Corporate Banking after a 25

years of varied banking experience in SBI and Deutsche Bank in Singapore
and India.

Idbi bank is growing at a very fast pace. Recently, the no. of employees have
crossed 1000 mark from 777 employees as on 1st April 2001 and it is
expected to cross 1200 by the end of this financial year. The Bank also has a
state-of-the-art-training center at Belapur and every employee receives on an
average at least 40 hours of training in a year.

Technology and Tech Initiatives

Keeping in line with its policy of leveraging technology to drive its
business, idbi bank deployed Finacle, the e-age banking solution from
Infosys to consolidate its position, meet challenges and quickly seize new
business opportunities. Entire Finacle rollout was remarkable considering
the fact that it was implemented across all branches in a record time-frame
of 5 months. Finacle will provide the critical technology platform to propel
the bank's new thrust and direction.

The bank has also implemented Kondor+ - a treasury Front Office software
from Reuters and ITMS- treasury back office software from Synergy Login.
Achievement of these significant milestones is consistent with idbi bank's
continued focus to create customer and shareholder value through
deployment of superior technology.
Investments in technology is part of the plan to put in place building blocks
for creating the right organisational infrastructure which will help idbi bank
in consistently delivering superior products, convenient access channels and
efficient service to our retail and corporate customers. Of the total
investments of over Rs. 75 crs, large investment has been made in back-end
technology to strengthen processes, systems and control. This, in the long
run, propelled by a top quality management team will clearly set idbi bank
apart from its competitors.

Strategic Retail Initiatives

idbi bank in the previous calendar year initiated its formal foray into retail
banking. idbi bank's depository services product E-Sec is a major success
story and the bank today is in the top three league in India in this segment. A
spate of retail products were introduced such as home finance, loans against
shares, educational loans, car loans, Sweep in account, SMS/WAP mobile
banking etc. on very competitive terms.

Retail Bank has acquired software for its Retail Assets products. Also, on its
way is Internet Banking with Bancaway, from Infosys. idbi bank has
recently launched its upgraded, state-of-the-art telebanking product across
17 centres with latest software from BK Systems. Mobile banking

(WAP/SMS) from Hexaware, which is mobile service provider independent,

launched during FY01. We have also migrated to an Open Architecture
"Oasis" ATM Switch capable of providing features like Bill Presentation
Payment and personalised messaging.

The bank has recently announced its strategic alliance with TATA AIG
General Insurance Company for selling General Insurance Products through
select branches & ATMs of idbi bank.
The bank announced a landmark strategic alliance to make available widely,
both organisations' products through each other’s distribution channels. Now
you can buy coveted savings Products like the National Savings Certificates
and Kisan Vikas Patra on Internet.

The New products, which are going to be announced shortly, are Credit
Cards, Debit Cards etc.

Idbi bank is continuously looking for ways to leverage its technical strengths
and bring to the retail customer convenience products at reasonable cost.

Corporate Banking and Credit

Idbi bank has launched its Cash Management Services in the 2nd quarter of
FY02 with powerful software from Cash Teck. The bank has also invested in
Credit Rating System software from CRISIL to strengthen its corporate risk
assessment mechanism. This goes live from the first quarter of 2001-2002.
Morevover, the bank is in the process of investing in more back-end systems
for Fixed Assets, Payables, FTP and ALM.

Stronger Capital Adequacy

Capital Adequacy ratio of idbi bank is well above the RBI norm of 9% and
as on 30th June 2001 stood at 12.01%.-->
idbi bank has adopted Governance standards based on best practices
prevalent internationally. It has a structure of governance which meets with
the requirements prescribed by the Kumarmangalam Birla panel and fully
meets the recommendations by internationally acclaimed and recognised
norms of governance addressed by the Cadbury, Greenbury and Meryn King
committees.
Employee Contribution
idbi bank has more than 1000 talented and highly motivated employees as on
date.
The average age of the employee at idbi bank is 31 yrs.
85% of the employees are MBAs/CAs/ Professionally Qualified Bankers.
 The bank has rolled out broad based grant of stock options covering 75% of
the employees to align their interests with those of its shareholders.
Buying a home of one's own is every individuals first stop in life. . Which is
precisely why, we at idbi bank, have pulled out all the stops to sew together
a home loan product that has flexibility as its very foundation. Bank have
created a product that is competitively benchmarked, that is amply
affordable and one that is customer-sensitive. Only because when it comes
to buying a house, the first thing customer need to do is to feel at home with
their bank.

Advantage
Interest Rate on Monthly Reducing
Balance
Home Loan services at Door Step
Simple Documentations
Personalized Service
Legal and Technical Assistance

Housing Loan Rates :

Floating rate loans have been institutionalized as the standard offering,
making it simple for new customers to benefit from favourable interest rate
changes in the future too.

SL#
Tenure (yrs) Rate of Interest * EMI per Lac
Upto 5years 11.25 2388.00
6 - 10 years 11.75 1408.00
11 – 20 years 12.25 1082.00

Pre-payment Fees
Pre-payment Fee of 2% on principal outstanding if the prepayments are
through institutional / HFC s Cheque / pay order. In case of customer
premature closing his home loan account with his own funds no prepayment
will be levied
 COMPARISON OF HOME SAVER WITH
NORMAL HOME LOAN
Let’s suppose that the customers have a home loan of Amount RS. 10 lakhs
Repaid in 16 years (192 months) at an interest rate of 11 (monthly rests)

Some Interesting facts about you home loan

You owe the bank

25
Principal Paid
Total Payments In

20 Interest Paid
Rupees Lakhs

10
15
4.98
4.13
10
1.5 11.6
9.37 10.09
5
5.25

0
60 120 134 192
Months

Imaging how much the value of their home will have to appreciate to just be
worth the value you finally paid for it!
 COMPARATIVE ANALYSIS OF
HOME LOAN AND HOMESAVER

Home Loan Homesaver

 A fixed repayment structure with  The interest customer pay may be

high interest & low principal recovery substantially reduced & consequently
repayment towards principal can be
high. The interest you pay depends on
their loan balance each day. When you
loan balance is reduced the interest
component comes down.

 Inflexible repayment plan  Customer has option to make excess

payment over & above your EMI to
reduce their balance daily. Payment
holidays also available.

 Prepayment may be subject to many  No prepayment hassle & no penalty

constraints including penalties. is chargeable on any excess customer
use to reduce their loan principal. They
can also with draw any surplus at your
convenience anytime & anywhere.

 Interest is calculated on a monthly  Interest is calculated daily on net loan

balance & applied monthly balance & applied monthly

 Their home loan A/C in kept separate  Homesaver is one single A/C where
from their bank A/C. Saving & other home loan & deposits or surplus funds
surplus reside in a separate is integrated together. Every rupee they
current/saving account where money is pay goes to repaying the loan rather
earning either Zero or low interest. than repaying interest. So they can use
their surplus cash to save there as much
interest as in charged on Homesaver
 A/C.

HOW DOES HOMESAVER COMPARE WITH

A NORMAL HOME LOAN ?

Normal home loan HomeSaver

 A fixed repayment structure with  The Potential to substantially

high interest and low principal reduce interest and consequently
recovery repayment towards principal can be
high

 Inflexible repayment plan  Flexible repayments including

Payment Holidays

 Prepayment are subject to many  No part prepayment hassle or

constraints, including prenalties penalty

 Interest is calculated on monthly  Interest calculated on daily

balance and applied monthly balances and applied monthly

 Their home loan account is  One single account where home

separate from bank account loan principal is integrated with their
deposits and credits
 THE HOMESAVER ADVANTAGE

Reduction in Interst Paid Reduction in Tenure

12.00 200
180
Interst Paid (in Rs. lakhs)

10.00 74

Tenure (in months)

5.00 160
140
8.00
120
11.60 192
6.00 100
80
4.00 6.60 118
60
2.00 40
20
0.00 0
Normal hom e loan HomeSaver Normal home loan HomeSaver
 RESEARCH METHODOLOGY

Research Methodology is an important part of every project. Because it help in knowing

how to select representative sample from the world or the general population, the right
research tools and techniques to complete the research.

To satisfy the customer the study of comsumer behavior is important because he is the
king. The Research Process is based on survey method, so in order to implement the
survey we go to Service Provider and the Services user which is the customers.

The research involves the following steps :-

Define the problem & research objective - The problem and objective is to assess the
services offered by various service provider and what the consumer wants.

Developing the research Plan - The second stage of research methodology is to develop
a research plan.The research plan desigined to take decesion on the data soruces, research
approaches, research, instruments, sampling plan and contact methods.

Survey Research – It was a descriptive research.

Research Instrument – The use of an effective research instrument is very important.
Because through this instrument we collect data. In this project through observations &
personal interviews were conducted.

 Personal Interview – As we were doing direct selling. we interacted with my

customers are asked about there views in selecting a service and what are there wants
and expectations from a service provider

Sampling Plan - After finalizing the research approch and instruments a sampling must
be designed.

 Sampling Unit –data have been collected from banks

 Sample size – It has been collected from four banks.

  Sampling Procedure :- What process should be used to collect the sample.
So, representation samples, convenience sampling is used.

Collect the Information :-After completing all the steps, the data are collected from
different sources.
Analyze the Information:-After the data is collected they are analyzed to Know the
findings. The data is then tabulated to develop frequency distribution.
Present the findings:-As the last step, the findings are presented that are relevant to the
major marketing decisions.
 DATA ANALYSIS

The home loans provided by various banks are more or less same at a basic
level. The banks generally try to go ahead of other banks in terms of
attracting number of customers to their countries. For this they are trying to
offer some unique services as per the unique requirements of the unique and
important customers.

In the next page various data’s have been shown which shows that are the
home loans provided by various banks and SCB have also tried to compare
the services offered by the banks,.

TRENDS IN INTEREST RATES OF HOUSING LOANS

Interest Rates Have Dropped
And Housing Loan Disbursement Have Soared
 MARKET SHARE OF MAJOR PLAYERS

Market Share of Players

8
5
32 Standard Chartered Bank
10
Citibank
ICICI
HDFC
IDBI

5 OTHERS

45

PROPERTY RATES IN LUCKNOW

 COMPARISON OF MAJOR PLAYERS

The market for home loans has been sizzling in India. The spurt in growth in
recent years and the prospects of continued buoyancy in demand have
attracted many players to the industry, which till a couple of years back had
two major players - HDFC and LIC Housing Finance. The result - cut throat
competition, which has benefited the loan seeker.
The home loan market has grown at a compounded rate of over 40% over the
last four years. And from what industry experts will have us believe, there is
little chance that there will be any significant decline in growth rates going
forward. So what have been the key factors in triggering of this high growth
period?
There are several reasons for the same. On the demand side -
Faster rise in incomes as compared to property prices, thus making housing
more affordable
Declining interest rate, which has greatly reduced the cost of servicing a
loan.
Tax benefits, which further reduced the effective cost of borrowing (both on
interest and capital)
Then there are factors on the `supply side' too, which have supported this
growth -
More competition in the housing finance sector resulted in companies
charging lower interest rates, sometimes even at the cost of the spread (i.e.
profit margin)
The fee for getting a home loan has reduced dramatically over the last
couple of years, from over 2% of the loan amount to as low as 0.25% (some
companies are known to waive off the fee entirely!)
Housing finance companies have introduced several new products to meet
the needs of a wide variety of customers. One such scheme, the step up loan,
where the EMIs iLUCKNOWease as the income of the individual
iLUCKNOWease has been a big hit with individuals just starting off with
their careers.
One other factor is the iLUCKNOWease collaboration between housing
finance companies and builders. Such partnerships minimize service and
funding related issues significantly, thus making it easier to buy property.

One innovation in the housing finance sector has been the introduction of
`floating rate' home loans. Simply put, the cost of such loan, or the interest
rate, is not fixed during the tenure of the loan. Instead the interest rate is
benchmarked against some index/indicator. So as the benchmark rate moves
up/down, the cost of your loan too changes, at some predetermined
frequency (usually once a quarter).
Ideally, loan seekers should opt for a floating rate home loan when it is
expected that interest rates will decline going forward. Fixed rate loans
should be preferred when interest rates are expected to rise.
But is making a choice that simple? In today's environment, when there is a
lot of talk about rising interest rates, should investors shun floating rate
home loans altogether? Or is there still some merit in this instrument? “In
the last one year, there was a trend of floating rate home loans being more
popular as compared to the fixed rate loan. As of now, this trend is
continuing.” says Mr. Suresh Menon, GM (Mumbai Region), HDFC Ltd.
There are three important issues which one needs to consider before opting
for one type of a loan over the other.
First, an important determinant of what you go in for should be the long-
term expectation of interest rates. For example, if you (or the experts) expect
rates to rise for the next one-year, but then decline gradually over the next
several years, a floating rate product may be preferable. The other option of
going in for a fixed rate product and then switching at the end of the year
will entail costs (there could be a penalty of 1% - 2% of the outstanding loan
amount) and may not make financial sense. Moreover, floating rate home
loans do not change the rate of interest every quarter (even though they may
review the rate every quarter). Mr. Menon points out “The attraction of a
floating rate home loan is that it does not attract a part prepayment charge.
This could appeal to individuals who get lump sum bonuses which they can
use to reduce their loan exposure”.
Second, the issue whether fixed rate home loans are actually `fixed rate'.
When considering a fixed rate home loan over a floating rate home loan a
strong selling point is that if interest rates were to rise dramatically you will
be `protected'. Apparently the reality is somewhat different. It seems that
companies that have given out fixed rate loans can revise their rates upwards
in exceptional circumstances (significant rise in interest rates for one). So if
you think rates will remain range bound over the near term and decline over
the long term, you are still better off with a floating rate product.
Third, a fixed rate loan is generally priced higher as compared to a floating
rate product. This holds true in the current environment where the fixed rate
loan is at a higher interest rate as compared to a floating rate loan. The
difference is currently about 0.25% to 1.00%. So if you expect that interest
rates are likely to move up, but only to the extent of this differential, then
you should ideally be indifferent between the two types of a loan. The
deciding factors then should be when you think the rates will
iLUCKNOWease, and also the long-term expectations of interest rates.
As always, there is no one answer to whether you should go in for a floating
or a fixed rate home loan. If you are person with very little appetite for risk
or negative surprises, opt for the fixed rate home loan. But in case you can
take on some risk, a floating rate home loan is worth a look!
Five steps to picking the right loan
1. Gather data on interest rates
Get interest rate information from more than one source, and get the same
information from each so you can compare the offers.
2. Get info on fees
Find out about processing fees, administration charges and other costs that
may be involved in taking the home loan. A written statement of all fees
from the housing finance companies will ensure that there are no surprises
later on. Use the lowest amount of fees to negotiate with the other lenders.
3. Get a pre-approval letter
This gives you substantial leverage as you are then seen as a serious buyer
by the seller of the property. Also, having the letter in your hand will set a
limit to the amount of money you can commit to a property. This will help in
identifying the right property.
4. Bargain for a lower rate of interest
housing finance companies will reduce their `rack' rates for customers with a
good credit record. A bargain deal will easily fetch a home loan at
significantly lower rates (at times you can get a discount of as high as
0.50%). Here again, get a confirmation of the rate (and for how long it will
remain fixed) via a letter.
5. Watch out for predatory lending
Don't include false information on your home loan application to get quick
approval. Also do not borrow more money than you need or can afford.

A floating interest rate allows customer to take advantage of interest rate

movements --they get immunity from adverse movements and reap the
benefits of any fall in interest rate. But a floating rate loan makes sense only
when interest rates are high, so that they can take advantage of a possible
fall. But predicting interest rate movements could confound even seasoned
market-watchers.

If they are looking for a home loan, be prepared to cough up a pretty sum as
down payment. The Reserve Bank of India, in a recent meeting with
bankers, cautioned banks against lending 100 per cent of the property value.
That’s because given the iLUCKNOWease competition in home loans, some
banks have been funding even 110 per cent of the agreement value. This
means your loan not only pays for the property, it helps with stamp duty and
registration charges, and even furnishings. It’s been a sweet deal so far, as
borrowers not only need have no access to other funds, they also get tax
breaks.

The RBI’s position is that lending such sums will mean additional risk for
the bank. In case of default, the bank may not have sufficient collateral to
recover dues, and may have to write off the additional borrowings. However,
bankers do not seem unduly worried. Non-performing assets in the housing
segment are quite low--below 1 per cent--and that, say bankers, is due to the
high asset quality.
As per officials of IDBI Bank: "For a house to become a home, there are
additional costs incurred by the borrower, which he meets by borrowing
from friends or family members. Also, the default risk in housing loans is

Quite low, so they think that with proper checks, there’s nothing wrong in
lending more." IDBI Bank was the first to see this and slashed the interest
on its 15-year. They want to achieve a serious leadership position in home
loans, so they thought of giving the best possible rate to the customers.

Housing finance companies like HDFC, however, lend only up to 85 per cent
of the agreement value. There has to be some equity and commitment from
the house buyer, so we ask for at least 15 per cent down payment from the
house buyer. They try to make sure that their risks are well covered.

For the moment, however, banks can continue lending more than 100 per
cent of the property value. But if push comes to shove, and if RBI makes its
suggestion a rule, this sweet deal may not last long.

More proof that home is indeed sweet home. Bimal Jalan’s latest
announcement of a cut in bank rate is a clear signs that the soft interest rate
policy is all set to continue. The 25 basis points decrease in the bank rate
means the central bank has reduced the rate at which banks borrow from it.
This means that banks, in turn, could reduce the interest rates they charge on
housing mortgages.

Already, State Bank of India, one of the biggies in the housing finance
business, has announced a rate cut of 25 basis points. Its rates for loans up to
10 years have been reduced to 8.75 per cent from 9 per cent, and for loans
over 10 years to 9.25 per cent from 9.5 per cent. The cost of funds has come
down; therefore, they have decided to reduce their home loan rates.

When interest rates fall, lenders lower not the EMI amount but the number
of months that you pay those EMI’s. The table shows the number of months
by which your loan tenure is cut when interest rates are lowered by 0.25 to 1
percentage point.
There's good news for those wanting a home loan. Over the past few months,
lenders have been cutting interest rates on home loans by 25-50 basis points.
Banks like HDFC, ICICI Bank, and State Bank of India have cut rates by
0.75 per cent in the last two weeks to 9.75 per cent for 15-year loans.

One reason for the rate cut is that borrowing costs have come down, which
is a result of a cut in interest rates in the general economy.

The general economy apart, lenders have been forced to cut rates to keep up
with competition. More players want to enter the home loan market, and
existing players are fighting for a larger share.

HDFC has also felt the heat. It has decided to reduce the review time of its
variable interest rate from 6 months to 3 months, so that existing variable
rate borrowers can benefit faster in the falling interest rate scenario. ICICI
too has kept pace with its peers. While interest rates on fixed mortgages tend
to be higher, ICICI has decided to offer the same rate it charges floating rate
borrowers.

Fixed rate products are not widely available now; lenders like IDBI and
Citibank do not offer fixed rate home loans. Others like Corporation Bank

are not extending fixed rates loans beyond a 10-year period. This is good in
the short-term, but if rates go up, floating rate borrowers may be in for a
tough time.
 SWOT ANALYSIS OF THE HOUSING FINANCE INDUSTRY

STRENGTHS
 The industry has been witnessing a very fast growth rate, which is 6%
growth in the first quarter of 2002-2003 as against 3.5 % growth recorded in
the first quarter of 2001-02.
 The market faces a high demand curve, thoroughly mismatched by a
low supply curve
 Investment is based in assets that are securities and those that have
historically appreciated rapidly.
 Tax benefits and other facilities provided on loan repayments

WEEKNESSES:
 The foreclosure rules of court of
law such as provision regarding the ownership of not more than one house
(In Lucknow) binds the industry.
 The health of an HFC depends upon
its ability to mob up low cost funds.
 An HFC is unable to tap the rural market due to lack of
proper retrieval procedures, so whilst the rural market offers a higher rate of
return, it has a higher risk and default rate.
 Many legal impediments exist,
deferring purchase of certain types of property beyond a certain extent
thereby negatively impacting the housing finance industry. Weak mortgage
laws, resulting in an iLUCKNOWease in risk compound this

OPPORTUNITIES:
 The housing industry faces a severe
shortage of houses. The total demand for houses is expected to touch around
19.40 million units by the year 2003. Of these 12.8 million dwelling units
(65.98 per cent) would be in rural areas and 6.6 million dwelling units (34.02
per cent) in urban areas.
 While the loan facility is backed by the security of the
 property this sector represents a low margin but on same line low risk segment.
To address this market the ones lies on the HFCs to device bold and innovative
alternatives like mortgage based securities, use of methods such as door to door
collection of installments, assessing the creditworthiness of the prospective
client and providing for group security.
 The roles of NHB in refinancing and
providing regulation of housing finance system.
 The government's initiative to promote the sector and
its contribution in uplifting the sector

THREATS:
 The industry faces iLUCKNOWeased competition as more and more
foreign backs and housing finance companies are providing loan facility.
 SWOT ANALYSIS OF ICICI HOME FINANCE

STRENGTHS:
 Save substantial interest
 Prepay whenever the customer wants
 Reduce their loan outstanding without any penalties
 Access the surplus funds anytime
 Use surplus funds to invest when the right opportunity arises

WEAKNESS:
 Product is very good but it is mainly suitable for the higher income
group and is not suitable for the middle income group.

OPPORTUNITIES:
 Ample scope for financing flats and apartments for the salaried class
in the higher income group.

THREATS:
 Nationalized banks like SBI, Union Bank and PNB
 Private Banks like HDFC and Standard Chartered and Citibank with
its Home Credit scheme.
 CONCLUSIONS

The Indian customer has come a long way from purchasing to fulfilling their needs from
buying a house. Customers now grab everything that comes their way but they do their
own survey of optimum loans; same is the case with banks, and housing loans. With
innumerable choices before him, the customer is indeed the king. It is therefore
imperative that if a bank has to succeed in the competitive world, it should be
technological savvy, customer centric progressive driven by highest standards of corporate
governance and guided by sound ethical values and above all should be cordial and should
have personalize customer services.

There is scope of exploiting the vast middle income group by releasing loans with special
interest rate which would be beneficial to both parties.
 RECOMMENDATIONS

The following suggestions are strongly recommended:

1. To broaden the customer base the vast middle income strata should be fully
exploited
2. Simplify the procedure, reduce service charges, and demand only the basic
essential proof.
3. Most banks are reluctant to advance loan to the service class e.g. lawyers, police
officers etc.. This aspect must be exploited.
4. Adoption of flexible and more lenient penalty should the customer fail to deposit
the payment on time. The penalty should be on case to case basis rather then the same
for the entire customer base.
5. Restriction to be reduced to bare minimum for loan advances and for repayment.
For e.g. offer long-term repayment facilities and have no age restriction to choosing
repayment.
6. The maximum age for repayment could be iLUCKNOWease to 65-70 years of age.
Such facility will help grow fast retail segment of the bank.
7. Offer multiple repayment loans.
8. Service class to be exploited by offering special reduced rates and linking the
repayment from the source from where the pay-cheque to the employee is issued. This
needs to undergo special contract with government organization to ensure
implementation.
 GLOSSARY

Equal Monthly Installment (EMI) :

Loan repayments are usually in Equal Monthly Installments over the tenure
of the loan. Some banks also offer a Variable Installment Scheme were in
repayments are higher in the beginning of the loan period. This is beneficial
for those individuals who are trying to maximize their tax breaks in the
initial years and expect future tax breaks to fall (we believe that the opposite
is more likely!)
Fixed /Floating rate:
Under a floating rate loan, the interest rate on the loan varies from time to
time depending on the Prime Lending Rate fixed by the Reserve Bank. This
change can happen as frequently as one in six months. If the PLR falls, you
benefit as the effective interest rate on your remaining loan falls. However,
your payments every month stay the same. The Finance Company will
refund some of your EMI cheque and effectively compensates you by
reducing the tenure of the loan. The reverse happens if the PLR rises, much
to your disadvantage.
Choosing between fixed and floating loans:
In the last 2-3 years the PLR has fallen as the Indian economy had slowed
down and demand for money was low. If you expect this trend to continue,
you stand to benefit from a floating rate loan. If interest rates begin to rise
again, you can prepay your floating rate loan and lock in to fixed rate loan.
You must them choose a floating rate loan with no repayment charges (one is
offered by HSBC). However, if you do not want to speculate on interest
rates and need a stable loan to help planning the future, then go for a fixed
rate loan.
Rest:
Interest rates are quotes on a daily rest, monthly rest or annual rest basis.
The annual rest quote implies that the company gives you the credit for the
monthly principal repayments only at the end of each year. Such loans are
therefore more expensive than a monthly /daily rest loan. The shorter the
tenure of the loan, the greater the effective interest rate difference will be.
AbodesIndia.com has standardized all interest rate quotes from companies
on a MONTHLY REST basis (rates will therefore look different from
Company brochure quotes which maybe on a annual rest basis)
Processing Fee:
A one time fee which is normally non-refundable and payable along with
your initial loan application. Rates can vary from 1-2% of the loan amount.
Administrative Fee:
A one-time fee, which is normally non-refundable and payable before your
loan, is disbursed. Rates can vary from 1-2% of the loan amount.
Commitment fees:
This interest is charged if you do not draw the sanctioned loan within a
period of 6-9 months. The rate of interest is usually about 1-2% a months.
Interest Tax:
Housing Finance companies have to pay a tax on the interest income they
receive from you. They sometimes pass this on to the customer. Always
check with the company if the interest rate they are quoting includes interest
tax or not. This tax normally about 2% of the interest rate charged. E.g. if
the interest rate quoted is 14% then the actual interest rate including interest
tax is about 14.28%. AbodesIndia.com has standardized all rates AFTER
Interest Tax, on a monthly rest basis to aid comparison across companies.
This rate is called the Effective rate.
Prepayment charge:
Most Housing Finance companies charge a fee for prepaying your loan
before its full tenure is over. This helps them plan their finances, at your
expense. Your earning capacities will normally iLUCKNOWease with age
and a prepayment fee can be a big cost. This fee also limits your ability to
refinance the loan if interest rates fall after a few years. The fee is normally
in the range of 1-2% of the prepaid amount.
Refinance Charge:
Some Housing Finance companies do not charge you for prepayments from
your own savings. However, if you retire a loan using money borrowed from
another Finance Company, you will have to pay a Refinance charge of 1-2%
of the loan outstanding.
Down payment:
Housing finance companies would normally give a loan up to 80-85% of the
value of the property. The remaining amount would have to paid by the
buyer (to the seller), as a down payment before the he draws on the loan.
Tenure of the loan
Normally, loans are given for a period of 1-15 years. Some companies also
give loans Upto 20 years at an additional interest cost of 0.25% -0.5%. Most
companies do not allow loans for a fraction of a year.

BIBLIOGRAPHY

 www.indiaproperties.com
 www.apnaloan.com
 The Economic Times, 15 JULY 2015
 The Financial Times, 07 JULY 2015
 Philip Kotler, Marketing Management, 9th edition
 Akkar ;Marketing Research
 Business Today, July 20 2015 issue