CHAPTER NO 1

INTRODUCTION
1.1 EXECUTIVE SUMMERY. 1.2 SECURITY AND LOANS. 1.3 TYPES OF LOANS. 1.4 LOANS AND ADVANCES. 1.5 RESEARCH OBJECTIVES. 1.6 RESEARCH METHODOLOGY. 1.7 RESEARCH LIMITATIONS.

1.1 EXECUTIVE SUMMARY.

The project was title security and loans. The survey was limited for Yeola region only. During this project I have surveyed whole Yeola City, which includes small villages Aurangabad- Nasik Highway, The project was divided into two difference Segments. They are viz.

1) Borrowers Survey.
Survey was carried out for housing loans borrowers throughout the Yeola region, with respect to other competitor private banks, such as Andarsul urban co-operative bank, N.D.C.Bank ltd. Nasik.

2) Comparison of Housing Loan with Other Banks.

In this assignment of comparison of housing loan with other banks I studied various methods, which may use by bank of Baroda for providing the loans to customers/ borrowers

3) Scope of the Study.

The study project gives the view in aspect of bank of Baroda Yeola (Nasik region) it limits its scope within the branch level. The project is having narrower aspect, as it doesnt cover changes, which commonly takes place in home loan due to speculative interest rate. The bank because of confidential problem and there Banking Regularity Act 1949.was unable to disclose the complete information.

1.2

SECURITY AND LOANS:

1. Security:Security is the degree of protection against danger, loss, and frauds.

Security has to be compared and contrasted with other related concepts: Safety, continuity, and reliability. The key difference between security and reliability is that security must take into account the actions of people attempting to cause destruction

Definitions:The word security is derived from the Ancient Greek "Se-Cura" and literally translates to "without fear" Security' is therefore the state of being secure, or the actions employed to achieve that state, i.e. to be secure is to be without fear of harm A form of protection where a separation is created between the assets and the threat. This includes but is not limited to the elimination of either the asset or the threat. In order to be secure, either the asset is physically removed from the threat or the threat is physically removed from the asset There are various modes of creating charge a) b) c) d) e) f) Lien: Pledge: Hypothecation: Mortgage: Assignments: Set-off

1. PLEDGE:Section 172 of the Indian Contract Act, 1872 defines the term pledge as under. The bailment of goods as security or payment of debts or performance of a promise is called pledge. The bailor jailor is, in this case, called the pledger and the bailee is called pledgee.

Pledge means bailment of goods Its purpose is to secure payment of a debt or To sure performance of a promise. Any movable property can be pledge.
Delivery (actual or constructive) is necessary to complete a pledge. 2. HYPOTHECATION:-

In hypothecation, the possession of the property in the goods and other movable offered as security remains with the borrower and an equitable charge is created in favor of the lender.

Charge against property for an amount of debt where neither ownership nor possession is passed on to the creditor. Hypothecation is defined in none of the acts. 3. MORTGAGE:Mortgage is the transfer of an interest is specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debts or the performance of the agreement Which way lead to a pecuniary liability. The borrower is called the mortgagor and the lender the mortgagee 4. ASSIGNMENT:Assignment means transfer of a right of an actionable claim, existing or future. Actionable claim means a claim to any debt other than a debt secured by mortgage of immovable property, by hypothecation or pledge of movable property, either actual or constructive of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. 5. LIEN:Lien is the right of a creditor to retain in his possession the goods and securities owned by the debtor unit the debts has been discharged, but has no right to sell the goods and securities so retained. In lien two types particular lien and general lien. 6. SET-OFF:Banker has right of set off between two or more accounts maintained by a customer, if one of them is in debit and their relationship in both the accounts is of debtor and creditor

For example A has taken an overdraft of Rs. 10000/- in his current a/c. He also has a saving bank account which shows a credit balance of Rs. 12000/- bank can combine this a/c and can set off dues of current account from customers saving bank account.

2. Loan:Loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender later. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

1.3 TYPES OF LOANS:

1. Secured

Loan:-

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security a lien on the title to the house until the Mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer. A type of loan especially used in limited partnership agreements is the recourse note. A stock hedge loan is a special type of securities lending whereby the stock of a borrower is hedged by the lender against loss, using options or other hedging strategies to reduce lender risk.

A pre-settlement loan is a non-recourse debt; this is when a monetary loan is given based on the merit and awardable amount in a lawsuit case. Only certain types of lawsuit cases are eligible for a pre-settlement loan. This is considered a secured non-recourse debt due to the fact if the case reaches a verdict in favour of the defendant the loan is forgiven.

2. Unsecured
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages.

Credit card debt Personal loans Bank overdrafts Credit facilities or lines of credit Corporate bonds The interest rates applicable to these different forms may vary

depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
3. Abuses

In Lending:-

Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, it could be considered a loan shark. Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has
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varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous "extra charges". Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with intent to defraud the lender.

4.

Second Lien Loan:

Second Lien Loan (or last-out participation) is a form of loan with a

security interest in the assets of a company that are second in ranking behind a traditional senior credit facility. A lien is a form of security interest granted over an item of property to secure the payment of a debt. The second lien lender will typically be required to agree contractually (through an intercreditor agreement or other contract) to subordinate its claims on the assets to the first lien secured lenders. The vast majority of all second lien loans are senior secured obligations of the borrower. Second lien loans differ from both unsecured debt and subordinated debt.

4.1 Second Lien Loans in the Capital Structure

4.1.1Second Lien and First Lien Secured Loans

In the event of a bankruptcy or liquidation, the assets by the company as security would first be provided to the first lien secured lenders as repayment of their borrowings. To the extent that the value of the assets is sufficient to satisfy the company's obligations to the first

With almost no exceptions, a borrower will take a second lien loan either at the same time or after taking a traditional first lien secured loan and the secured lenders will place limitations on the borrower's ability to pledge its assets or borrow additional secured debt. The specific rights of the first lien and second lien lenders are established in the credit agreements between the borrower and each class of lender as well as in an intercreditor agreement. As the name implies, an intercreditor agreement is a contract between multiple classes of lenders where each class of lender agrees to specific procedures and preferences in the event of a bankruptcy or liquidation. Secured lenders will routinely require an intercreditor agreement to protect their interests before allowing a borrower to obtain a second lien loan.

4.1.2 Second Lien and Unsecured Debt:Unlike unsecured debt, second lien loans receive a pledge of specific assets of the borrower (e.g., buildings, land, equipment, intellectual property, receivables and other financial assets).

4.1.3 Second Lien and Subordinated Debt:Subordinated debt refers to a class of obligations that are contractually subordinated in ranking to all of the senior obligations (i.e., general nonsubordinated obligations) of the company, whether they are secured or unsecured. Although the second lien loan's security interest is subordinated to the first lien loan's interest in the pledged assets of the company, the ranking of first lien and second lien loans are the same in the event the pledged assets are not sufficient to satisfy the outstanding borrowings. By way of illustration, in the event of a liquidation of a company, both the first lien and second lien loans would likely be repaid in full (along with trade and other general creditors) before the subordinated lenders receive any repayment of their obligations.

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1.4 LOANS AND ADVANCES:

Loan & Advances is a major service provided by the banks. The major portion of the bank deposits is employed by the way of loans and advances, which is the most profitable employment of its funds. Loans may be provided for a short term, long term & medium term. The loans may be provided against some security, guarantee etc. the borrower may use these funds for starting a new venture, housing purpose, for expansion, for personal purpose. Normally

11

these

loans

are

paid

in

installments.

Before granting a loan to any borrower bank has to scrutinize the project or the various documents. If this is not taken due care of the assets may turn into a bad debts thus resulting into losses for the bank i.e. default.

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1.5 RESEARCH OBJECTIVES.

1) To calculate interest rates differentiate in various loans. 2) To study priority sectors credit. 3) To find comparative differentiation in housing loan interest with other banks. 4) To study of the both types of EMI calculation.

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1.6

RESEARCH METHODOLOGY
There are various methods of data collection such as primary and

secondary, I have used the secondary method of data collection i.e. desk research. The data has been collected from the banks reports so that I would analysis out above document.

Sources of Data collection

1. Data questionnaire was main tool to collect the required information 2. Secondary date they require information about the types of loans & security was taken from the books of boys & various websites

Research Instrument
Questionnaire was prepared to obtain the information regarding the customer preference while taking loan & also to know their awareness about bank int. rates.

Contact Method

Personal Interview:

Interview was also taken, as all the information was not collected through questionnaire. The views given by them were analyzed & then information was obtained.

Sampling Units:

The survey was conducted to know loans taken by the various types of customer like govt. servants, Pvt. Sectors employee & businessmans

Sampling Method: Contacted those respondents who are easy to

approach.

Sampling Territory: - Andarsul and Yeola Region Sample size: - 50

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Duration: - Two Months

1.7

RESEA

RCH LIMITATION

1.

The Survey was limited to Yeola city only i.e. limited farmers, businessmen's & government employees.

2.

Information, which is collected from salaried person or businessmen's, may be incomplete and in some cases may be wrong, i.e. information cannot be considered as authentic.

3. 4.

Specific prejudice for selection of borrowers i.e. previous loan borrowers. Due to Banks rules and regulations the detailed information about their strategies is not available.

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CHAPTER NO. 2 BANK PROFILE

2.1 INTRODUCTION OF BANK. 2.2 HISTORY. 2.3 VISION AND MISSION OF BANK. 2.4 BANKS CORPORATE GOALS & STRATEGY.

16

2.1

INTROCUCTION OF BANK
Head Office
Suraj Plaza 1, Sayaji Ganj, Baroda 390005

Corporate Centre
Bank Of Baroda Baroda Corporate Centre, Plot No. C-26, Block G, Bandra Kurla Complex, Bandra (East), Mumbai 400051

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Logo of BOB:-

Our new logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun. We call this the Baroda Sun. the sun is an excellent representation of what our bank stands for. It is the single most powerful source of light and energy its far-reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, we seek to be the sources that will help all our stakeholders realize their goals. To our customers, we seek to be one-stop, reliable partners who will help them address different financial needs. To our employees, we offer rewarding careers and to our investors and business partners, maximum Return on their investment. The single-colour, compelling vermilion palette has been carefully chosen, for its distinctiveness as it stands for hope and energy. Our new corporate brand identity is much more than a cosmetic change. It is a signal that we recognize and are prepared for new business paradigms in a globalize world. At the same time, we will always stay in touch with our heritage and enduring relationships on which our bank is founded. By adopting a symbol as simple and powerful as the Baroda Sun, we hope to communicate both.

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BRANCHES
Bank of Baroda has an extensive network of 3148 branches spanning the length and breadth of the country. There is a branch in the vicinity of everyone in need of a banking solution with a customer centric approach of being operational 24 hours a day, across 28 countries, the bank branches are the last door you will have to knock while on the lookout for an answer to your queries.

Brach Network (as of n1/7/2010)

Area Metro Urban Semi-Urban Rural Total (Indian) Foreign (Overseas) Total (Global) No. Of Branches 678 594 663 1132 3058 81 3148

Baroda offered loans:1) Home loans. 2) Mortgage loans. 3) Auto loans. 4) Personal loans. 5) Pensioners loans. 6) Education loans. 7) Consumer durable loans. 8) Loan against securities.

2.2 HISTORY
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No history is complete without mention of its heroes, mostly ordinary people, who turn in extra-ordinary performances and contribute to building an institution. Over the years, there have been thousands of such people. The Bank salutes these "unknown soldiers" who passionately helped to create the legend of Bank of Baroda. There were also the leaders, both corporate and royal, who provided the vision and guided the Bank through trail blazing years, and departing, left behind footprints on the sands of time. This Roll of Honor will be incomplete without mention of men, of the stature of Maharaja Sayajirao Gaekwad, Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey, Tulsidas Kilachand and NM Chokshi. Bank of Baroda salutes these leaders whose vision helped to create an institution it all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, the BANK OF BARODA It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn. The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development of art, industries and commerce of the State and adjoining territories."

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2.3VISION AND MISSION OF THE BANK

Vision
It has been a long and eventful journey of almost a century across 28 countries. Starting in 1908 from a small building in Baroda to its new hirise and hi-tech Baroda Corporate Centre in Mumbai is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution.

Banks Mission Statement

To be a top ranking National Bank of International Standards committed to augmenting stakeholders' value through concern, care and competence.

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2.4 BANKS CORPORATE GOALS & STRATEGY

To maximize quality growth and profit through enhanced customer orientation with prudent risk and liquidity management policies and practices in our Endeavour to consolidate Banks financial strength During the year 2010-11, the Bank would continue to perform with a thrust on Growth with Quality by focusing on low-cost deposits, by further reducing the dependence on bulk Business and by protecting the asset quality with a firm control on the process of credit origination. The Banks business plan and broad strategy in the year 2010-11 to achieve its corporate goals, objectives and to explore newer business opportunities in the domestic as well as overseas market would be as under: 1. Reorienting its systems and procedures towards customer convenience and enhanced customer satisfaction. 2. Formulating and adhering to the best corporate governance practices with an aim to set high standard of ethical values, transparency and disciplined approach to achieve excellence. 3. Focusing on a consistent and broad-based resource mobilization plan. 4. Enlarging the base of retail customers by leveraging technology and taking newer technology based initiatives. 5. Diversifying the loan book and managing the credit risk effectively. 6. Penetrating deeper into hitherto unbanked centers/customer segments. 7. Aggressively canvassing non-fund based business so as to improve the share of fee-based income. 8. Maintaining a fine balance between the size and the strength of the Balance Sheet by managing Net Interest Margin (NIM), Risk Profile of the Bank and improving the Cost-Income Ratio.

22

9. Enhancing the image of the Bank as a Customer Centric Organization.

During the year 2009-10, Bank of Baroda enhanced the strength of its balance sheet and proved its ability to deliver strong results even during turbulent times. With a sustained thrust on risk management, technology, marketing and customer centricity, it is well positioned to take advantage of the future opportunities. In our journey, I solicit your continued cooperation and patronage.

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CHAPTER NO 3: DATA ANALYSIS AND INTERPRETATION

3.1 INTEREST RATES DIFFERENTIATE IN VARIOUS LOANS. 3.2 PRIORITY SECTORS CREDIT. 3.3 COMPARATIVE DIFFERENTIATION IN HOUSING LOAN INTEREST WITH OTHER BANKS. 3.4 CALCULATION OF EMI. 3.5 DOCUMENTS REQUIRED FOR ALL TYPES OF LOANS.

24

3.1INTEREST RATES DIFFERENTIATE IN VARIOUS LOANS. Retail Loans:

Home loans sanctioned on or after 16.12.2009 and upto 1.07.2010 Under Special Home Loan Package Upto Rs. 5.00 Lacs Above Rs. 5 Lacs & upto Rs 20 Lacs 9.25%

Upto years

20

8.5%

The above rate is for the first 5 years. The rate of interest shall be reset after 5 years from the date of drawal of the first installment and borrower will then have the option for going for a fixed rate or floating rate of interest

Baroda Home Loan to Individuals / NRIs / PIOs: Sanctioned On Or After 01.04.10 Fixed Rate option Up to 5 years Over 5 years & up to 10 years Over 10 years & up to 15 yrs Floating Rate option Up to Rs. 30 Lacs Up to Rs. 30 Lacs 8.50% 8.75% 9.00% Above Rs. 30 Lacs and up to Rs. 50 Lacs Above Lacs 9.25% 9.50% 9.75% Above Rs. 50 Lacs Rs. 30

25

Up to 5 years

3.50% below BPLR i.e. 8.50%

2.75% below BPLR i.e. 9.25% 2.50% below

2.25% below BPLR i.e. 9.75% 1.75% below

Over 5 years up to 15 years

3.25% below BPLR i.e. 8.75%

BPLR i.e. 9.50%

BPLR i.e. 10.25%

Over 15 years up to 25 years

3.00%

below

2.25% below BPLR i.e. 9.75%

1.50%

below

BPLR i.e.9.00%

BPLR i.e. 10.50%

Baroda Home Improvement Loan (w.e.f. 01.04.2010)

2.50% below BPLR i.e. 10.50%.

Baroda Mortgage Loan (Realigned Product w.e.f. 01.04.10)

5.25% above BPLR i.e.13.25%

Baroda Advance Against Property (Resident/NRI) Accounts existing up to 31.03.10

Existing as on 14.02.08: 1.00% Above BPLR i.e. 13.00%. For advances sanctioned w.e.f. 15.02.08 and up to 31.12.2009: 1.50%

Above BPLR i.e. 13.50%

Advances sanctioned w.e.f. 01.01.2009: At BPLR i.e. 12.00% Advances sanctioned w.e.f. 10.11.2009 and upto 31.03.2010: 0.75% Above

BPLR i.e. 12.75%

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Baroda Traders Loan

Up to Rs.2/- Lacs: sanctioned on or after 01.04.10

0.75%

Above

BPLR i.e. 12.75%. Above Rs.2/- Lacs: sanctioned on or after 01.04.10 OD and loans up to 1 year Loans more than 1 year 1.25% Above BPLR i.e. 13.25%. 4.00% Above BPLR i.e. 12.00%.

Baroda Loan to Doctors (w.e.f. 01.04.2010) Up to Rs.2/- Lacs Above Rs.2/- Lacs 3.00 % below BPLR i.e. 11.00%. 2.25 % below BPLR i.e. 10.50%

Baroda Education Loan (w.e.f. 01.04.2010) Loans up to Rs.4.00 Lacs Loans above Rs.4.00 Lacs 2.00% below BPLR i.e. 10.00%. 4.00% below BPLR i.e. 12.00%

Baroda Career Development (w.e.f. 01.04.2010) 4.75% Above BPLR i.e. 12.75%

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Baroda Loan for Training, Skill Up gradation of Construction workers (w.e.f. 01.04.2010) 5.00% Above BPLR i.e. 13.00%

Baroda Auto Loan Baroda Car Loan

Existing A/Cs as on 10.08.2009: 2.50% below BPLR i.e. 9.50% Sanctioned on or after 11.08.2009: 2.00% below BPLR i.e. 10.00% Sanctioned on or after 01.04.2010: 2.50% below BPLR i.e. 10.50%

Baroda Car Loan to HNIs / Corporate

Existing A/Cs up to 31.03.09: 1.25% below BPLR i.e. 10.75% Sanctioned on or after 01.04.09: 3.25% below BPLR i.e. 11.25%

Baroda Loan for Two Wheelers (w.e.f. 01.04.2010)

4.00% above BPLR i.e. 12%.

Baroda Loan Against Future Rent Receivables (w.e.f. 01.04.2010) 6.50% above BPLR i.e.14.50%

Baroda Advance Against Securities (w.e.f. 01.04.2010) Against NSC/KVP Loan:3. 50% below BPLR or 0.50% over NSC / KVP rate, whichever is higher Overdraft: At BPLR or 0.75% over NSC / KVP, whichever is higher

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Life Insurance Policy / Relief Bonds

Loan :3. 50% below BPLR i.e. 11.50 % Overdraft: 4.00% above BPLR i.e. 12.00%.

Baroda Additional Assured Advance (AAA) (Resident / NRIs / PIOs) (w.e.f. 01.04.2010)

6.50% above BPLR 14.50% Baroda Personal Loan (w.e.f. 01.04.2010)

BARODA

PERSONAL

LOAN

(Realigned

on

01.04.10)

sanctioned on or after 01.04.10: 6.50% Above BPLR i.e. 14.50% Except for following Purpose

Loan to Pensioners: 5.25% Above BPLR i.e. 13.25% Loan to Defense Pensioners: 5.25% Above BPLR i.e. 13.25% Loan for Earnest Money Deposit: 3.75% below BPLR i.e. 11.25%.

Baroda Salary Advantage Savings Account (w.e.f. 01.04.2010) 5.50% above BPLR i.e.13.50% Baroda Ashray (Reverse Mortgage)(w.e.f. 01.04.2010)

Fixed Rate Option: 10.25% (Subject to re-set clause after every 5 years)

Floating Rate Option: 1.75% Below BPLR i.e. 9.75% p.a.

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3.2

PRIORITY SECTORS CREDIT

1. Salaried Individual. 2. Professional Self-Employed Individual. 3. Individual Business 4. Farmers.

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1 Salaried individual:
Eligibility
Salaried person having sufficient disposable income to meet the repayment the employment should be in state / central govt. public or private sector companies establishment of repute.

Age
1) Applicants minimum age at the loan starts 21 years.

2) Maximum age of termination of loan should be up to 50 or retirement period whichever is earlier

Quantum of loan
1) Equal to 50 times of monthly Gross salary/60 times of Net monthly salary whichever is higher? 2) 85% of the cost of house/ flat purchased or constructed. 3) Loan eligibility will be minimum amount of 1 & 2 above.

Maximum Amount
1) For purchase/ construction of House property no maximum limit for metro and urban area. In respect of semi urban and rural area the amount of loan does not exceed Rs.15.00 Lacs

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2) For repairs and innovation the loan amount does not exceed Rs.5.00 Lacs in all areas.

Margin
1) For purchase/construction of new House property: 15% minimum. 2) For purchase/construction of old House property: 25% minimum. 3) For repairs and innovations: 25% minimum.

Rate of interest
Fixed Rate option Up to 5 years Over 5 years & up to 10 years Over 10 years & up to 15 yrs Floating Rate option Up to Rs. 30 Lacs Up to Rs. 30 Lacs 9.50% 9.75% 10.00% Above Rs. 30 Lacs and up to Rs. 50 Lacs Above Rs. Lacs 10.25% 10.50% 10.75% Above Rs. 50 Lacs 30

Up to 5 years

3.50% below BPLR i.e. 8.50% 3.25% below BPLR i.e. 8.75%

2.75% below BPLR i.e. 9.25% 2.50% below BPLR i.e. 9.50%

2.25% below BPLR i.e. 9.75% 1.75% below BPLR i.e. 10.25%

Over 5 years up to 15 years

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Over 15 years up to 25 years

3.00% below BPLR i.e.9.00%

2.25% below BPLR i.e. 9.75%

1.50% below BPLR i.e. 10.50%

Processing fees
1) Up to Rs.5.00 lacsRs.10000. 2) Above Rs.5.00 Lacs Up to Rs.15.00 lake's Rs.2500. 3) Above Rs.15.00 lake's Rs.5000.

Repayment
1) For purchase of new/old house / flat 240 months. 2) For Repairs innovations 60 months 3) For extension of house 120 months. 4) Repayment will be equated monthly installments. 5) Repayment starts one month after full disbursement or 18 months whichever is earlier. 6) Depending upon the option exercised by the borrower, interest for the period be repaid as and when applied / capitalized by suitable EMI BE given 7) Total deduction inclusive of proposed repayments installments should not exceed 65% of Gross annual income.

Security
1) Loan amount up to Rs.25000 one acceptable guarantor having sufficient net income.

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2) Loan amount above Rs.25000 Registered / equitable mortgage of house property to be purchased and guarantee of the spouse. 3) In case house property cannot be mortgaged for some reason NSC (for BOB), government security or such acceptable security equal to quantum of loan.

2 Professional Self-Employed Individual

Eligibility
Professional/ businessmen having sufficient disposable income to meet the repayment the employment should be in state /central govt., public / private sector companies, establishment of repute. The sanctioning authority should be satisfied about repaying capacity of employee.

Age
1) Applicants minimum age at loan should be at least 21years. 2) Maximum age of termination of loan should be up to 55years

Quantum of loan
1) Equal to average annual income of last 3 years multiply by 4times to be worked out as eligibility for quantum of loan for e.g. if the average income of the businessmen professional is around Rs.5.00 lake's (to be ascertained from sources such as balance sheet, income tax return etc.)

34

then the case would be Rs.5.00 lake's multiplied by 4 times which works out to Rs.20.00 lake's. 2) 85% of the cost of the house / flat to be purchased / constructed. 3) Loan eligibility will be minimum amount of 1 & 2 above.

Maximum amount
1) For purchase/ construction of House property no maximum limit for metro and urban area. In respect of semi urban and rural area the amount of loan does not exceed Rs.15.00 lake's 2) For repairs and innovation the loan amount does not exceed Rs.5.00 Lacs in all areas.

Margin
1) General 25%. Which can vary according to the requirement and assessment

Rate of interest
Fixed Rate option Up to 5 years Over 5 years & up to 10 years Over 10 years & up to 15 yrs Floating Rate option Up to Rs. 30 Lacs Up to Rs. 30 Lacs 9.50% 9.75% 10.00% Above Rs. 30 Lacs and up to Rs. 50 Lacs Above Rs. Lacs 10.25% 10.50% 10.75% Above Rs. 50 Lacs 30

35

Up to 5 years

3.50% below BPLR i.e. 8.50% 3.25% below BPLR i.e. 8.75%

2.75% below BPLR i.e. 9.25% 2.50% below BPLR i.e. 9.50%

2.25% below BPLR i.e. 9.75% 1.75% below BPLR i.e. 10.25%

Over 5 years up to 15 years

Over 15 years up to 25 years

3.00% below BPLR i.e.9.00%

2.25% below BPLR i.e. 9.75%

1.50% below BPLR i.e. 10.50%

Processing fees
1% of loan for amount about Rs.25000

Repayment
1) For purchase of new/old house / flat 240 months. 2) For Repairs innovations 60 months 3) For extension of house 120 months. 4) Repayment will be equated monthly installments (EMI). 5) By EMI from short term to period generally ranging up to 5 years.

Security
36

Assets treated by loan to be charged to bank and others collateral security.

37

3 Individual businessmens:
Age
1) Minimum age start of the loan is 21 years. 2) The maximum age at the termination of the loan 50 years.

Quantum of loan
1) In case of individual businessmen / professionals, the income may be ascertained from different sources Such as balance sheet & income tax returns before considering the sources, consistency of income is professionals / self employed persons, the term total income would mean net profit +depreciation. However repayment obligation on account of term liabilities should be taken in to consideration while deciding the quantum of loan and EMI.

Maximum amount
1) For purchase/ construction of House property no maximum limit for metro and urban area. In respect of semi urban and rural area the amount of loan does not exceed Rs.15.00 lake's 2) For repairs and innovation the loan amount does not exceed Rs.5.00 Lacs in all areas.

Margin
1) For purchase/construction of new House property: 15% minimum. 2) For purchase/construction of old House property: 25% minimum. 3) For repairs and innovations: 25% minimum.

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Rate of interest
Fixed Rate option Up to 5 years Over 5 years & up to 10 years Over 10 years & up to 15 yrs Floating Rate option Up to Rs. 30 Lacs Up to Rs. 30 Lacs 9.50% 9.75% 10.00% Above Rs. 30 Lacs and up to Rs. 50 Lacs Above Rs. Lacs 10.25% 10.50% 10.75% Above Rs. 50 Lacs 30

Up to 5 years

3.50% below BPLR i.e. 8.50% 3.25% below BPLR i.e. 8.75%

2.75% below BPLR i.e. 9.25% 2.50% below BPLR i.e. 9.50%

2.25% below BPLR i.e. 9.75% 1.75% below BPLR i.e. 10.25%

Over 5 years up to 15 years

Over 15 years up to 25 years

3.00% below BPLR i.e.9.00%

2.25% below BPLR i.e. 9.75%

1.50% below BPLR i.e. 10.50%

Processing fees
1) Up to Rs.5.00 Lacs Rs.10000. 2) Above Rs.5.00 lake's Up to Rs.15.00 lac's Rs.2500. 3) Above Rs.15.00 lake's Rs.5000.

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Repayment
1) For purchase of new/old house / flat 240 months. 2) For Repairs innovations 60 months 3) For extension of house 120 months. 4) Repayment will be equated monthly installments. 5) Repayment starts one month after full disbursement or 18 months whichever is earlier. 6) Depending upon the option exercised by the borrower, interest for the period be repaid as and when applied / capitalized by suitable EMI BE given 7) Total deduction inclusive of proposed repayments installments should not exceed 65% of Gross annual income.

Security
1) Loan amount up to Rs.25000 one acceptable guarantor having

sufficient net income. 2) Loan amount above Rs.25000 Registered / equitable mortgage of

house property to be purchased and guarantee of the spouse. 3) of loan. In case house property cannot be mortgaged for some reason NSC

(for BOB), government security or such acceptable security equal to quantum

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4. For Farmers
Eligibility
Farmers having minimum 5 acres of irrigated land holding.

Age
1) Minimum age start of the loan 22 years. 2) Maximum age at the termination of the loan 50 years.

Quantum of Loans
For finalizing the quantum of loan, net annual income may be considered (i.e. 4 times of avg. Net income of the last 3 years) the branches may cross check the Gross and Net annual income of the applicant with reference to the land holding, cropping pattern, sugar factory bills / cotton bills, agricultural produce marketing committee bills etc.

Maximum Amount
1) For purchase or construction of the house property no maximum limit for metro and urban area. In respect of semi-urban and rural area the amount of loan should not exceed Rs. 15.00 lacs. 2) For repairs and renovations the amount of loan shall net exceed Rs.5.00 lacs in all the areas.

Margin
1) For purchase/construction of new House property: 15% minimum. 2) For purchase/construction of old House property: 25% minimum. 3) For repairs and innovations: 25% minimum.

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Rate of interest
Fixed Rate option Up to 5 years Over 5 years & up to 10 years Over 10 years & up to 15 yrs Floating Rate option Up to Rs. 30 Lacs Up to Rs. 30 Lacs 9.50% 9.75% 10.00% Above Rs. 30 Lacs and up to Rs. 50 Lacs Up to 5 years 3.50% below BPLR i.e. Over 5 years up to 15 years 8.50% 3.25% below BPLR i.e. 8.75% 2.75% below BPLR i.e. 9.25% 2.50% below BPLR i.e. 9.50% 2.25% below BPLR i.e. 9.75% 1.75% below BPLR i.e. 10.25% Above Lacs 10.25% 10.50% 10.75% Above Rs. 50 Lacs Rs. 30

Over 15 years up to 25 years

3.00% below BPLR i.e.9.00%

2.25% below BPLR i.e. 9.75%

1.50% below BPLR i.e. 10.50%

Processing Fees
1) Up to Rs.5.00 lac's Rs.10000. 2) Above Rs.5.00 lake's Up to Rs.15.00 lacks Rs.2500 3) Above Rs.15.00 lake's Rs.5000

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Repayment
1) For purchase of new/old house / flat 240 months. 2) For Repairs innovations 60 months 3) For extension of house 120 months. 4) Repayment will be equated monthly installments (EMI). 5) By EMI from short term to period generally ranging up to 5 years.

Security
1) Loan amount up to Rs.25000 one acceptable guarantor having sufficient net income. 2) Loan amount above Rs.25000 Registered / equitable mortgage of house property to be purchased and guarantee of the spouse. 3) In case house property cannot be mortgaged for some reason NSC (for BOB), government security or such acceptable security equal to quantum of loan.

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3.3 COMPARATIVE DIFFERENTIATION IN HOUSING LOAN INTEREST WITH OTHER BANKS How Banks Finance Companies Calculate The Interest Rate On Housing Loan Name of banks
Bank of Baroda Citibank HDFC LIC housing finance ltd. PNB housing finance ltd. Indian bank housing ltd.

Method of calculation
yearly reducing monthly reducing yearly reducing Yearly reducing Yearly reducing Half yearly reducing

Nature Of Interest
Monthly Reducing Loan
Under this scheme the principal on whom you pay interest reduces every month as you pay EMI.

Annual Reducing Loan

Under this scheme the principal reduces only at the end of the year. Hence the consumer continues to pay interest on a portion of the principal which he / she has actually paid back to the lender. In effect the consumer has to pay more under the annual reducing loan.

44

Fixed Rate of Interest

This means the rate of interest on the amount remains unchanged for the entire duration of the loan agreement. Irrespective of the change in the interest rate in the economy Hence if the consumer options for fixed rate of interest he will not be able to benefit.

Floating Rate
A floating rate of interest is one that is one that fluctuates according to the market lending rate hence in an environment were the interest rates are rising your budgeted expenditure on the house loan also goes up. In the flexible or floating rate plan the interest rate is pegged to the bank benchmark prime-lending rate (BPLR). And varies with fluctuations in the BPLR Since the risk of such fluctuations is borned by the borrower flexible rate plans quote lower interest rate as compared with fixed rate plan

Interest Rate
The principal outstanding on the date, which is considered to calculate the interest e.g. when we say monthly reducing balance, it would mean that interest is calculated on the principal outstanding at the end of every month after taking in to consideration payment of EMI .as a result for a loan of an identical amount, tenure an interest rate, the EMI is for monthly rate are lower than they are for a plan with annual rate.

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Other Terminologies
Equated Monthly Installments EMI
Every housing company charges an EMI from the borrower this EMI is calculated on the basis of loan amount and the interest rate charged for the same. It comprises of principal and interest. Repayment by way of EMI generally commences from the month following the month in which one takes disbursement .it can be calculated either on the basis of annual reducing rate monthly rate or daily rate. In the annual rate, interest is calculated on an annual basis on the outstanding at the beginning of the year. In this case EMI become 1/12 of the equated annual installments. In the monthly rate principal repayments are credited at the end of every month and interest I calculated on the outstanding principal at the end of every month. In the daily reducing principal repayment are credited at the end of the day an installment is paid.

Equated Mortgage
The customer has to just pledge the document with the housing finance companies (HFC) and he can get a loan against them he is not required to get the mortgage registered.

First Mortgage
The mortgage, which is the primary lien against a property

Fixed Rated Mortgage

A mortgage on which the interest rate is set the foot the term of the loan regardless of future interest rate fluctuations this makes payments precisely predictable, but it is not always the cheapest alternatives.
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Guaranty
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hidden Charges
The effective rate of interest might work our to be different from the relate announced by housing finance companies this could be due to several costs which are not apparent, up-front some of these are 1) Some HFC follow annual rate for taking in to account the reduced principal where as other HFC follow the monthly rate it goes without saying that the customer stands to gain in case of monthly rate. 2) There are certain processing overhead and administrative charges involve that they charged to the borrower these are one time payments made for initializing the process of housing loan administrative charges levid are generally taken as % of the loan amount subject to the maximum and minimum amount. 3) Some HFC levy a pre payment charges. This is so because the idea of repayment does not really appeal to the MFC due to the difficulty in the re investment of funds being prepaid as financial planning by the housing Financial companies is done keeping and the initial payment plant of the borrower moreover this is also done decide borrower-borrower from pri paying their loans when interest rate are on a decline. 4) Then their might be certain commitment charges as well as this is levied commences after a breathing period of a few months from the date of sanction. The charge is levied after this period till the borrower withdraws the funds. The reason is that once the HFC has made3 a commitment it has to maintain the liquidity to one end the funds when you desire this charges helps them cover this cost to liquidity.
47

5) Finally the borrower might be asked to bear the insurance premium expenses of the property being funded.

Therefore the interest charges are not the only outflow that the borrower has to shell out for a housing loan. There are other charges also which have to be taken in to consideration by the borrower which ultimately affect the effective analysis of the different schemes else he might your might end up shelling out higher money from your pocket in lie of that money.

IIR (Income to Installment Ratio)

This ratio signifies the % of the income that can be set aside for repayment of the loan under the assumption that 50-60% of the income is required by the person for his own sustenance.

In Principal Approval
A written agreement from the lender to offer a specified interest rate if the mortgage goes to closing within a set of time (usually 3 months) subject to the legal and technical clearance and the creation of a valid and equitable mortgage over the property.

Interest
The amount of money expressed as a % of the principal charged for the use of the money borrowed.

Loan Against Property

It is when you want to borrow money against your existing property in these case to the property is mortgaged with the lender. The rate of interest foot

48

loan against property is generally higher than the interest rate on home loan as the end use of the fund cannot be monitored.

LTV (Loan to Value ratio)

This ratio denotes the percentage of value of property that is financed by the company this ratio ranges between 80 to 85 % often Property

Market Value
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be scolds for a given time.

Maturity
The date on which the principal balance of a loan is due and payable

Mortgage
A legal contract that is registered against the title to a property in order to guarantee that loan will be repaid it is the first charge on the property that the HFC funds. This funding could be either for construction, purchase, and renovation. If the borrower defaults in paying the installments on the home loan and he has filed for bankruptcy, the HFCs claim will lie on precedence to other creditor charges.

Power of Attorney
A legal document authorizing one person to act on behalf of another

Tenure
The period on which the loan has to be repaid

Securitization

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Securitization of financial assets involves the conversion of outstanding debt usually at a discount in to tradable debt or equity instruments. In other word it is process of pooling and repacking of homogeneous liquid loans in to marketable securities.

Benchmark Prime Lending Rate

A rate used as a yardstick for measuring or setting other interest rates. For e.g. a bank prime-lending rate, which it uses to price, loans or the commonwealth bond rate, which is widely used as a base from which other securities such as corporate debentures are priced. It is the rate being offered to the prime borrower by the HFC cannot lend at rate lower than this rate.

50

Interest Rate Comparison with Other Banks:

Bank Category Age Tenure Interest rate Fixed HDFC BANK Self Employed BANK OF BARODA Self Employed UTI BANK Salaried Self Employed CITI BANK Salaried Self Employed Salaried Salaried 23-58 years 23-65 years 21-55 years 22-55 years 24-58 years 24-65 years 25-58 years 25-58 years 5-15 years 5-15 years 5-17 years 5-17 years 1-20 years 1-20 years 1-20 years 1-15 years 8.75% 8.50% 9.00% 8.25% 0.50% 9.75% 7.50% 9.75% 7.50% 1% 9.50% 8.50% 9.50% 8.50% 1% 10.75% 8.50% Floating Processing fees 0.50-1%

10.50% 8.75%

The interest rates differ from bank to bank depending on schemes offered by bank the above rates are based on past and current information.

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Graph No.1 Salaried persons

Graph No. 2 Self-employed

Interpretation:

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From the above data it is clear that Bank of Baroda has lower fixed and floating interest rates as compare to HDFC Bank and UTI Bank, but CITI Bank has lower fixed & floating interest rates.

3.4

CALCULATION

OF

EMI,

PRE-EMI,

LOAN

AMOUNT AND INTEREST RATES.

Computation of EMI
1 EMI = 12 Where, L= loan amount r = rate of interest in decimals. n=period of loans in years. X [(1+r) A (n-1)] [L. r (1+r) A n]

Computation of PEMI
Formula = PEMI = Amount Dispersed * Rate of Interest/365 Days* No. Of Days Due. PEMI Is

The Methods of Calculating the Loan Amount

1) Calculate the Net adjusted Salary. 2) Compute applicable IIR of the NAS. This is the repayment capacity of the borrower 3) Refer the EMI table where the installment for a loan of Rs.100000 is given for the applicable tenure. 4) The maximum period for the loan should be stated so that computation would be for maximum possible amount. If however then he should be
53

convinced to avail the loan for the minimum possible period so that the money is realized faster. Care should be taken to see that borrower is not unduly troubled due to payment of very high EMI.

If You Take Loan for Rs.100000 for Monthly Quarterly and Annually Installments
Fixed rate Amt. 100000 Period 15days 1 months 3 months 6 months 9 months 12 months Rates 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% EMI 173913.86 87155.31 29317.26 14859.25 10041.12 7632.96

Floating rates Amt. 100000 Period 15days 1 months 3 months 6 months 9 months 12 months Rates 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% EMI 166915.40 83635.16 28115.83 14237.25 9612.07 7299.39

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An illustration
Let us take two cases a) A fixed rate home loan. b) A floating rate home loan. The loans of Rs.1000000 for tenure 15 years Loan Fixed Floating Amount 1000000 1000000 Interest (%) 9.50 8.50 15 15 Years EMI (Rs) 9921.49 8954.96 Total (Rs.) 1785868.20 1611892.86 payment

Explanation
Let Us Assume A Scenario When Home Loan Rate Is Lowered By 1% Scheme Loan outstanding (Rs) Interest (%) Years EMI (Rs) Total payment (Rs) Fixed 693869.86 9.50% 15 9921.49 1785960 Floating 614240.25 7.50% 15 8331.26 1499580 Difference 79629.61 2.00% 0 1591.23 286380

Interpretation
When the rate is cut by 1%, the floating rate home loan work out cheaper by Rs.286380 in other words the fixed rate home loan seeker will pay that much more on his loan.

Explanation

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Now Let Us See What Happen When Loan Rate Is Raised By 1% Scheme Loan outstanding (Rs) Interest (%) Years EMI (Rs) Total payment (Rs) Fixed 693869.86 9.50% 15 9921.49 1785960 Floating 614240.25 9.50% 15 10552.60 1899468 Difference 79629.61 0.00% 0 -930.38 -113508

Interpretation
In case of rise in the home loan rate, the fixed rate home loan is the preferable option here the loan seeker will pay Rs.113508 less over the tenure compared to the one who has availed of the floating rate option.

Conclusion
From the above two interpretations it is clear that if you have an appetite risk and you want to save your money over the term of the loan and are expecting a falling rate interest scenario option for floating rate scheme, but if you wish to avoid uncertainty and risk the fixed rate option would be better.

Graph 3. Disribution Of Loans For Various Sectors.

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Perticulars Agriculture Home Education Two & four Wheelers Business Industry

Size (50) 18 14 8 4 5 1

3.5 DOCUMENTS OF SECURITY FOR TYPES OF LOANS

What Is Documentation ?

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Documentation means obtaining relavant document (relavant means relavant to the the advance to the terms and condition of the advance to the security and to the legal status of borrower) property executed by the constituent to whom credit facilities have been sanctioned by the bank and / or by whom the said facilities are guaranteed while nature of document obtained varies with the nature of advance terms and conditions of the advance nature of security and nature of legal status of the borrower mode of execution there of varies with the legal status of executant alone.

Significance Of Documentation
Appropriate document properly executed signify and incorporate the following. 1)The contractual relationship between the bank and the constituents such as creditors-debtors , agents-principles etc. 2)The nature and description of security if any offered for the advance . 3)The terms and condition of the advance.

Importance Of Documentation
Documents obtained by bank from the basis upoun which a suit as and when found necessary may be filled by the bank in a competant court of law against the defaulting borrower although it may be argued that the bank may be able to proceed legally against the defaulting borrower on the basis of debit entries themeselves appearing in its books the difficulties that confront the bank in proving each such debit entry to the courts satisfaction are so enormous that no bank generally relies totally upoun them in other words the burden of proofs get shifted to the defaulting borrower when proper document can be produced to the court by the bank in the absense of such property executed document the onerous burden of proof is on the banker.

Defective Documentation It`S Consequences

1) Inappropriate document i.e. document not relavent to the advance.
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2) 3)

Incomplete set of documents. Document not filled in / partialy filled in / incorrect filled in/Document with

unauthenticated overwriting / cancellation / correction insertion. 4) 5) Unstamped inadiquetely stamped or inproperly stamped document . Document not properly / not executed by all the persons who are required to execute such documents. 6) Document executed by persons / incompetant to contract i.e. by person who have no legal capacity to contract and hence to borrow. 7) Document executed by persons not authorised to so execute e.g. agents who do not have necessary power to borrow and execute the document. Loan Documentation Standerd Application form Loan document Home loan application form duly fill up and signed by the applicant. And eligible co applications along with recent photocopies. Offer acceptance note Loan offer letter duly accepted and signed by the applicants ,co-applicants to the loan. Loan agreement Home loan agreement executed between the borrowers & the bank duly stamped as per the respective state act regarding stamping. Stading instructions Standing instructions to be duly signed by all the account holders.

For All Types of Loans

Various document required to be submitted to the bank while submitting a loan application as per size and type of the borrower.

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1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

Passport size photograph. Residence address proof/ election card/ ration card/ electricity bill. Salary slips of last 3 months. Balance sheet and profit & loss account for last 3 years duly certified by a C.A. Last 3 years income tax returns with computation of income tax and its challans. Degree certificate of professionals. Shop act license. BST, CST registration. Stock list List of debtors & Creditors. Income certificates. 10 cheques Registered Govt. Contracted letter. SSI registration. Lasted 7/12 extract Undertaking from of employers for deductions of loans, installment from salary of borrowers. Undertaking of the company of the Govt. Institutions for payments in favour of Bank of Baroda A/c of Agreement with company / appointment letter for distributors, stockiest etc. Purchase order/ sales order. Quotation for machinery/ vehicle. Development agreement / GPA. Valuation Report. Concern Letter. For partnership firm: - Registered partnership deeds.
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For Pvt. Ltd. & Public Ltd.: - Memorandum of association, Article of 3 Association, resolution.

For Trust: - Trust deed resolutions, Permission for Charity Commissioner. For Co. Operative Societies: - Registration Certificate, Resolution permission form DDR Office.

Home Loan Credit Documentation

For Salaried Individual

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For Self Employed Professionals Or Businessmen Salaried individuals Age proof (any School leaving certificate or passport or driving license or setion card one) Address (any one) Identity proof or birth certificate. passport or telephone bill or electricity bill or title deed of property or rental agreement or driving license or election ID card or photo credit card with latest bill or or employer letter or ration card. Photograph of Applicant and any one of the following Passport, PAN card,Driving license , Photo credit card (signed) with statement , Employer ID card , Election card. Minimum in employment Signature verification (any one) Income Banking statement If the income papers collected does not evidence this then the letter or Employer certificste to confirm this. Bankers signature verification Processing fees cheques clearence (in case of thumb impression Affidative for thumb impression duly Notarized). Where co applicants are taken and not other documents like age address proof Pay slip / pay certificate for last 2 months . Bank statement of the salary account for the last 6 months to be collected bank A/c status which include the following. number of years applicant need to submit erlier periods Form 16 or appointment documents

Self

employed &

documents

professinals

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businessmen. Age proof (any School leaving certificate or passport or driving license or setion card one) Address (any one) or birth certificate. proof passport or telephone bill or electricity bill or title deed of property or rental agreement or driving license or election ID card or photo credit card with latest bill or or employer letter or ration cardor Identity office address proof to be obtained in addition to residence. Photograph of Applicant and any one of the following Passport, PAN card,Driving license , Photo credit card (signed) with Business profile statement , Employer ID card , Election card. Brief giving the details of the nature of the business list of outlets , qualification , industry segment list of major clients, existing credit facilities and futurs plans if any to be obtained from the customer Minimum no. of yr. in buss. Signature one) Income Banking statement ownership or equity in case of promoter director. Income tax return or any other proof. Bankers signature verification Processing fees cheques clearence (in Notarized). Where co applicants are taken and not other documents like age address proof Income tax return for last 2 or 3 years,supported by P & L A/c ,balance sheet with all schedules.In case of businessmen last 3 years ITR supported P&L A/c and balance sheet with all schedules. Bank statement of last 6 months(both SB &CA) that includes the following. Last 6 months transaction entry, stop payment orders, loan obligations, avg. Balance maintained & minimum balance charges, professionals reciepts.

verification (any case of thumb impression Affidative for thumb impression duly

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CHAPTER NO.4 FINDINGS & RECOMMENDATION

4.1
4.2

FINDINGS

RECCOMENDATIONS CONCLUSION QUESTIONNAIRE BIB LIOGRAPHY

4.3 4.4 4.5

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4.1

FINDINGS
1) Those borrowers have taken loan under special home loan package in

between 16/12/2009 to 1/07/2010; will get the benefit of less interest of 8.5% for 5 Lacs for 5 years i.e. upto year 2014. And those who have taken loan after this period will pay the interest 1% extra i.e. 9.5% on same amount for the same period. 2) According to the priority sectors credit the fixed interest rate facility for all the sectors will remain same, but the floating interest rate facility for the sectors will change according to the actual loan taken & it decreases with the loan slab rates by 0.25%
3) By studying the comparative differentiation in housing loan interest with

other banks, I find that, the interest rate of HDFC & UTI bank is slightly higher than the interest rates of Bank of Baroda, but interest rate of CITI bank is lower than Bank of Baroda. 4) When floating rate of interest is cut by 1% home loan works out cheaper and the fixed rate home loan seeker will pay more and When floating rate of interest is raise by 1% home loan work out costly, then fixed rate option is good for the loan seeker that will save the money of the borrower. By calculating EMI with fixed rate of interest, it is beneficial to borrowers while EMI with floating rate of interest, it is beneficial to bank.

4.2

RECOMMENDATIONS
65

1. Bank sector as a whole should have to publish one common book under which the various types of loans and their interest rates with necessary documents must be specifying from time to time. 2. To increase bank profitability they have to minimize their interest rates while giving loans to more customers so customers and bank both will satisfy. 3. Governments have to take major steps to reduce interest rates while taking loan or for fluctuating in interest rates. 4. Banks have first check the previous records relating to the loan taken by the customer and should he make repayment within stipulated time or not.

SIX IMPORTANT POINTS TO SELECT RIGHT LOAN FOR BORROWERS 1) Risk involvement
The key element when borrowers choosing the bank / financial institute for loan always select the government or nationalized banks because in that the risk factor is less as compare to the private banks and these will give tax benefits to them.

2) Find minimum interest rate

Collect information from more than one source so you can easily compare with other banks interest rate, which helps you to save money.

3) Compare processing fees

Work out processing fees, administrative and other charges that involve while taking loan collect the written statement of all fees from banks and finance companies which help in comparing the fees to ensure further surprises use the lowest processing fees.

66

4) Collect Pre- Approval letter

This gives you average leverages as the seller of the property sees you as a serious borrower. And having the letter in your hand will set a limit to the amount of money you can commit to a property.
5)

Bargain for lower rate of interest

If you are taking loan from housing finance companies they will

reduce their rack rate for customers with a good credit records a bargain deal will easily fetch a home loan at significantly lower rate (you can get discount of as 0.75%) for that get a confirmation letter of the rate.
6)

Find easy and complete procedure

All the customers expect easy process for taking loan with installments

for repay and details of interest rates.

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4.3

CONCLUSION

The data analysis and findings done helps us to know various aspects relating to security and loans. The floating rate of interest option is good for the banks for the recovery of the loans, but for the borrower the fixed interest option is good because of least involvement of the risk. Customer takes loan from Pvt. Banks for cash credits but for agriculture, housing, education they prefer nationalized banks for security and tax benefits. By studying of various interest rates of Bank of Baroda with comparison of other banks it is observe that it is in the midway of the other financial company but as compare to private banks the interest rates are lower.

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4.4

QUESTIONNAIRES

1.

Personnel information? a) Name. c) Gender. b) Occupation. d)Age.

2.

What is your annual income? a)Less than 1lacs. c)1.25-1.50 Lacs. b)1-1.25 Lacs. d)1.50-more than 1.50 Lacs.

3.

Have you taken loan before this? a)Yes. b)No.

4.

If yes, from which bank? a)Government. b)Private.

5.

How much loan taken? a)Less than 50000. c)100000-200000. b)50000-100000. d)200000 & above..

6.

What are interest rates? a)9% c)10% b)9.5% d)If else.

7.

Types of security? a)Home. c)Gold. b)Land. d)Else.

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8.

Purpose of loan? a)Education. c)Agriculture. b)Home. d)Business.

9.

Do you know the changes made in interest rates? a)Yes. b)No.

10.

Which option do you prefer while taking loan? a)Interest rates. c)Security. b)Easy process. d)Mode of repay.

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4.5

BIBLIOGRAPHY

a) Circulars of bank of Baroda Andarsul branch. b) Annual report of bank of Baroda and Andarsul urban co-operative bank ltd. Andarsul c) Websites: i. ii. Www.bankofbaroda.com www.wikipedia.com d) Magazines: i. ii. iii. The Indian bankers. Bobmaitri. Smart investor.

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