A

PROJECT REPORT
ON
RETAIL BANKING

TABLE OF
CONTENTS
Sr no.
1.1
1.2
1.3

Contents
Chapter- 1 Introduction
General Introduction
History
Profile Of The Organization

2.1
2.2

Chapter- 2 Objectives
Objectives Of The Study
Data Collection

8
9

3.1

Chapter- 3 Contents
Analysis And Interpretation

10-37

4.1
4.2
4.3

Chapter- 4 Findings And Conclusion

Findings
Suggestion
Conclusion

38
39
40

Chapter- 5 Annexure
Bibliography

41

5.1

Page no.
5
6
7

INTRODUCTION OF BANKING SECTOR:

Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;
both are now defunct. The oldest bank in existence in India is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of
Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay
and the Bank of Madras, all three of which were established under charters from the British East
India Company. For many years the Presidency banks acted as quasi-central banks, as did their
successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon
India's independence, became the State Bank of India in 1955.

The Indian economy is emerging as one of the strongest economy of the world with the GDP
growth of more than 8% every year. This has given a great support for the development of
banking industry in the country. Due to globalization, competition among the banks has
drastically been increased. As India has a substantial upper and middle class income hence the
banks have immense opportunities to increase their market shares. The consumer being on the
receiving end is in the comfortable position but the banks trying to increase their market share
have to continuously add value for consumers in order to increase market share and sustain
their growth.

The banking sector is the most dominant sector of the financial system in India. Significant
progress has been made with respect to the banking sector in the post liberalization period. The
financial health of the commercial banks has improved manifolds with respect to capital
adequacy, profitability, and asset quality and risk management. Further, deregulation has
opened new opportunities for banks to increase revenue by diversifying into investment
banking, insurance, credit cards, depository services, mortgage, securitization, etc.
Liberalization has created a more competitive environment in the banking sector

AN OVERVIEW OF BANKING:

A bank is a government licensed financial institution whose primary activity is to act as a

payment agent for customer and to borrow and lend money at differing maturities. It is an
institution for receiving, keeping, and lending money at interest. In order to make profits, modern
banks generally borrow short and lend long (i.e. take money from depositors and lend that
money for longer term projects).
Many other financial activities were added over time. For example banks are important players
in financial markets and offer financial services such as investment funds. In some countries
such as Germany, banks are the primary owners of industrial corporations. In Japan, banks are
usually the nexus of a cross- share holding entity known as the Zaibatsu. In France,
bancassurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.

TRADITIONAL ACTIVITIES OF A BANK

Banks act as payment agents by conducting checking or current accounts for customers, paying
cheque drawn by customers on the bank, and collecting cheques deposited to customers
current accounts. Banks also enable customer payments via other payment methods such as
telegraphic transfer, and ATM. Banks borrow money by accepting funds deposited on current
accounts, by accepting term deposits, and by issuing debt securities such as banknotes and
bonds. Banks lend money by making advances to customers on current accounts, by making
installment loans, and by investing in marketable debt securities and other forms of money
lending. Bank provides almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments.

BANKING STRUCTURE OF INDIA

Banking in India originated in the last decades of the 18th century. The oldest bank in existence
in India is the State Bank of India, a government-owned bank that traces its origins back to June
1806 and that is the largest commercial bank in the country. Central banking is the responsibility
of Reserve Bank of India, which in 1935 formally took over these responsibilities from the then
Imperial Bank of India, relegating it to commercial banking functions. After Indias independence
in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government
nationalized the 14 largest commercial banks; the government nationalized the six next largest
in 1980. Currently, India has 88 scheduled commercial banks (SCBs)- 27 public sector banks
(that is with the government of India holding a stake), 31 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign
banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to
a report by ICRA limited =, a rating agency, the public sector banks hold over 75 percent of total
assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5%
respectively.

OBJECTIVE OF THE STUDY

My study project is based on following objectives.

1. To study the Loan Assessment System in Bank.

2. To study the Loan Assessment System between PSU and Private Sector Bank.
3. To study Retail Banking.

Data Collection: My project is a study project, it is totally based on proposal which bank
provides. Data collection is mainly based on secondary sources. The secondary sources of data
collection are given below:
Secondary Sources: It includes bank records, past data records, internet sources and books.

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Data Analysis
The data will be analyzed by reading the various proposal of accepting the proposal or providing
loan facilities to the customer. I shall use different analytical tool to accomplish the job. Each
bank use different policy for sanction of loan proposal. By reading proposal which bank provide
for study I came to know the criteria which Bank of India used for accepting loan proposal of
individual or small and medium size enterprises.

Reserve Bank of India

The Reserve Bank of India (RBI) is India's central banking institution, which controls the
monetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj in
accordance with the provisions of the Reserve Bank of India Act, 1934. The share capital was
divided into shares of 100 each fully paid which was entirely owned by private shareholders in
the beginning.[2] Following India's independence in 1947, the RBI was nationalized in the year
1949.
The RBI plays an important part in the development strategy of the Government of India. It is a
member bank of the Asian Clearing Union. The general superintendence and direction of the
RBI is entrusted with the 20-member-strong Central Board of Directorsthe Governor (currently
Duvvuri Subbarao), four Deputy Governors, one Finance Ministry representative, ten
Government-nominated Directors to represent important elements from India's economy, and
four Directors to represent Local Boards headquartered at Mumbai, Kolkata, Chennai and New
Delhi. Each of these Local Boards consist of five members who represent regional interests, as
well as the interests of co-operative and indigenous banks.
Central Board of Directors
The Central Board of Directors is the main committee of the central bank. The Government of
India appoints the directors for a four-year term. The Board consists of a governor, four deputy
governors, fifteen directors to represent the regional boards, one from the Ministry of Finance
and ten other directors from various fields.
Governors
The current Governor of RBI is Duvvuri Subbarao. The RBI extended the period of the present
governor up to 2013. There are four deputy governors, currently K. C. Chakrabarty, Subir
Gokarn, Anand Sinha and Harun Rashid Khan.Deputy Governor K C Chakrabarty's term has
been exteded further by 2 years.

Functions of Reserve Bank of India

Bankers Bank and Lender of the Last Resort

6

The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible
securities or get financial accommodation in times of need or stringency by rediscounting bills of
exchange. Commercial banks can always expect the Reserve Bank of India to come to their
help in times of banking crisis. Hence they have been termed as the lender of last resort. The
Reserve Bank stipulates that the commercial banks maintain the reserves in the form of SLR
and CRR for the same purpose.

Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume
of credit created by banks in India. It can do so through changing the Bank Rate or through
open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of
India can ask any particular bank or the whole banking system not to lend to particular groups or
persons on the basis of certain types of securities. Since 1956, selective controls of credit are
increasingly being used by the Reserve Bank.
Every bank has to get a license from the Reserve Bank of India to do banking business within
India. The Reserve Bank has also the power to inspect the accounts of any commercial bank.
As supreme banking authority in the country, the Reserve Bank of India, has the following
powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative controls.
(c) It controls the banking system through the system of licensing, inspection and calling for
information.
(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled
banks.

Custodian of Foreign Reserves

As the Central Bank is the custodian of the countrys foreign exchange reserves it is vested with
the responsibility of managing the investments and utilization of the reserves in foreign
exchange. It acts as the custodian of Indias reserve of international currencies. The Reserve
Bank of India has the responsibility to maintain the official rate of exchange. It manages the
investment of reserves in gold accounts abroad and the shares securities issued by foreign
governments and international banks or financial institutions.

Supervisory Functions
In addition to its traditional central banking functions, the Reserve Bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in
India. The Reserve Bank Act, 1934 and the Banking Regulation Act, 1949 have given the RBI
7

wide powers of supervision and control over commercial and co-operative banks, relating to
licensing and establishments, branch expansion, liquidity of their assets, management and
methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorized to
carry out periodical inspections of the banks and to call for returns and necessary information
from them. The nationalization of 14 major Indian scheduled banks in July 1969 has imposed
new responsibilities on the RBI for directing the growth of banking and credit policies towards
more rapid development of the economy and realization of certain desired social objectives.

RETAIL BANKING

INTRODUCTION

Retail Banking is a banking service that is geared primarily toward individual consumers. Retail
banking is usually made available by commercial banks, as well as smaller community banks.
Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking
entities provide a wide range of personal banking services, including offering savings and
checking accounts, bill paying services, as well as debit and credit cards. Through retail
banking, consumers may also obtain mortgages and personal loans. Although retail banking is,
for the most part , mass-market driven, many retail banking is streamlined electronically via
Automated Teller Machines (ATMs), or through virtual retail banking known as online banking.
Retail Banking deals with lending money to consumers. This includes a wide variety of loans,
including credit cards, mortgage loans and auto loans, and can also be used to refer to loans
taken out at either the prime rate or subprime rate.
Retail Banking refers to banking in which banking institution execute transactions directly with
consumers, rather than corporations or other entities.
Banking services offered to individual customers such as savings accounts, personal loans,
remittance services .Pure retail banking is generally conceived to be the provision of mass
market banking services to private individuals. It has been expanded over the years to include in
many cases services provided to small-and medium sized business. Some banks may also
include their private banking business (i.e. services to high net worth individuals) in their
definition of retail banking.

CHRACTERISTICS OF RETAIL BANKING

1.
2.
3.
4.

Banking facilities targeted at individual customers.

Focused towards mass market segment covering a large population of individuals.
Offer different liability, asset and service products to the individual customers.
The delivery model of retail banking is both physical and virtual i.e. services are
extended through branches and also through technology driven electronic off site
delivery channels like ATMs, internet banking and mobile banking.
5. Extended to small and medium size business.

ADVANTAGES OF RETAIL BANKING

1. Client base will be large and therefore risk is spread across the customer base.
2. Customer Loyalty will be strong and customers tend not to change from one bank to
another very often.
3. Attractive interest spreads since spreads are wide, since customers are too fragmented
to bargain effective; credit risk tends to be well diversified, as loan amounts are relatively
small.
4. There is less volatility in demand and credit cycle than from large corporate.
5. Large numbers of clients can facilitate marketing, mass selling and the ability to
categories
/ select clients using scoring system/ data mining.

CONSTRAINTS OF RETAIL BANKING

Though retail banking as a segment has a number of embedded advantages, the segment
suffers from constraints also. A few of the constraints are listed below:

1. Problems in managing large numbers of clients, especially if IT systems are not

sufficiently robust.
2. Rapid evolution of products can lead to IT complications.
3. The cost of maintaining branch networks and handling large numbers of low-value
transactions tend to be relatively high. (For this reason banks are encouraging clients to
use cheaper distribution channels, such as ATMs, the telephone or internet for these
transactions and reserve the branches for higher added value transactions).
4. Higher delinquencies especially in unsecured retail loans and credit card receivables.

PRODUCTS IN RETAIL BANKING

* Indian retail credit

* Housing finance
* Auto finance
* Consumer durable loan
* Educational loan
* Other personal loans
* Credit cards
* Insurance

DEFINING RETAIL BANKING ACTIVITY

Retail banking activity is commonly understood to comprise:

banking services for consumers (individuals/private households) and
banking services for small- and medium-sized enterprises (SMEs).
The delineation of each of these two segments, however, is not standardized by, for instance a
nomenclature for central banks statistics or other official databases. The inclusion or exclusion
of customer categories from these segments depends, to a large extent, on cultural habits,
market developments or the individual business strategies of banks. In some countries or
specialized banks,
For example, services for wealthy individuals and households fall under the so-called segment
of private banking. Moreover, whether a certain size category of SMEs belongs to the segment
of retail banking or the segment of corporate banking varies from bank to bank. In order to
reduce this complexity, the Authority has used the following definitions for the purposes of the
sector inquiry:
Personal banking, i.e. banking products and services for consumers including current
accounts (and related services such as ATM, direct debit and credit transfers), sight deposits
and other savings accounts, credit lines/overdrafts (no limits on individual asset size) and
consumer loans;
Business banking, i.e. banking services for enterprises up to a maximum turnover of EUR 10
million annually and including services such as current accounts, term loans and credit lines.
This report, following industry and literary usage, will also use the term SME banking or SME
customers for this sub-segment. In carrying out the inquiry and, for instance, addressing
comprehensive questionnaires to banks in the EFTA States, the Authority has not applied a rigid
definition within these general parameters. This approach has allowed for individually flexible
definitions, for example by accepting the banks own definition of SME business even where
they may be narrower in scope.

10

RETAIL BANKING PRODUCT AND SERVICES:

Within the two segments mentioned above, the Authority has focused on the following main
products:
Within the segment of banking services for consumers, three sets of retail banking products
form the core of the sector inquiry:
i)

Current accounts the bank account which individuals use for most of their
household transactions such as receiving wages or paying bills.

ii)

Deposit accounts an account which individuals use for saving. The accounts
provide instant (sight deposits) or time-limited (time deposits) access to funds.

iii)

Consumer term loans a loan account operating for a specified time period, which
is used to fund personal or household consumption.

In addition to these three sets of products, the sector inquiry has also taken some account of
other retail banking products for individuals such as payment cards, mortgages and investment
funds.
The analysis of banking services for small enterprises (SMEs) focuses on:
i)

Current accounts the bank account which SMEs use for the bulk of the payments
they make and receive.

ii)

Term loans - a loan account operating for a specified time period, which an SME
uses to finance its business expenditure.

iii)

Credit lines an open-ended facility which incorporates the credit element of a loan
enabling SMEs to draw down finance and the flexibility of a current account for
making and receiving payments.

In addition to these three sets of products, the sector inquiry has also taken some account of
other products for SMEs such as leasing (which involves a banks paying for part or all of the
cost of a capital asset for an SME and the bank then leases this asset to the SME). Together
with the retail banking products specified above, the sector inquiry also analyses payments
systems, since they form the core of money transmission services in personal and SME
banking, and are significant structures within the retail banking sector as a whole.

11

DRIVERS OF RETAIL GROWTH:

CHANGING CONSUMER DEMOGRAPHICS

Growing disposable incomes

Youngest population in the world
Increasing literacy levels
Higher adaptability to technology
Growing consumerism
Fiscal incentives for home loans
Changing mindsets-willingness to borrow/lend
Desire to improve lifestyles
Banks vying for higher market share

FUTURE OF RETAIL BANKING:

The accelerated retail growth has been on a historically low base

Penetration continues to be significantly low compared to global bench marks.
Share of retail credit expected to grow from 22% to 36%.
Retail credit expected to grow to Rs.575000 cr. by 2010 at an annual growth rate of
25%.
Dramatic changes expected in the credit portfolio of Banks in the next 5 years.
Housing will continue to be the biggest growth segment, followed by Auto loans.
Banks need to expand and diversify by focusing on non urban segment as well as varied
income and demographic groups.
Rural areas offer tremendous potential too which needs to be exploited.

CHALLENGES:

Sustaining Customer loyalty

NPA reduction & Fraud prevention
Avoiding Debt Trap for customers
Bringing Rural masses into mainstream banking

12

INTRODUCTION OF BANK OF INDIA:

Bank of India was founded on September 7, 1906 by a group of eminent businessmen from
Mumbai. In July 1969 Bank of India was nationalized along with 13 other banks.
Beginning with a paid-up capital of Rs.50 lakhs and 50 employees, the Bank has made a rapid
growth over the years. It has evolved into a mighty institution with a strong national presence
and sizable international operations. In business volume, Bank of India occupies a premier
position among the nationalized banks.
Presently, Bank of India has 2609 branches in India spread over all states/ union territories
including 93 specialized branches. These branches are controlled through 48 Zonal Offices.
Bank of India has several firsts to its credit. The Bank has been the first among the nationalized
banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at
Mumbai way back in 1989. It pioneered the introduction of the Health Code System in 1982, for
evaluating/ rating its credit portfolio. Bank of India was the first Indian Bank to open a branch
outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in
1974. The Bank has sizable presence abroad, with a network of 23 branches (including three
representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo,
Hong-Kong, and Singapore.
13

DIFFERENT TYPES OF LOAN FACILITIES PROVIDED BY BANK OF INDIA:

Star Mitra Personal Loan: It is special loan scheme for physically challenged people to
purchase durable and sophisticated appliances that promote their social and physical
rehabilitation.

Star Pensioner Loan Scheme:

1.
2.
3.
4.
5.

It is a loan scheme to meet marriage expenses/ medical expenses/ education of

self/ spouse/ children/ near relatives.
Repairs/ renovation/ extension of existing house/ flat.
Any other personal expenses of bonafidenture.
Repayment of existing housing loan from other banks.
Purchase of consumer durables/ computers/ professional equipments.

Star Home Loan: It provide loans to purchase a plot for construction of a house, to
purchase/ construct house/ flat, as well as for renovation/ repair/ alteration/ addition to
house/ flat, furnishing of house.

Star Personal Loan: Star personal loan scheme provides loan to meet various personal
requirements of customers and their family.

Star Educational Loan: Star Education Loan Scheme provides financial support from
the bank to deserving students for pursuing higher education in India and Abroad.

Star Mahila Gold Loan Scheme: Star Mahila Gold Loan Scheme for purchase of gold
ornaments, preferably hallmarked, from reputed jwellers and/ or Gold coins of Bank of
India.

Star Auto fin: Star Auto fin Loan facilitates purchase of two/ four wheeler vehicles, also
for purchase of used/ second hand two and four wheeler. (Age of vehicle should not
exceed 3 years.)

DIFFERENT TYPES OF LOANS & RATE OF INTEREST

LOANS
STAR HOME LOAN
PERSONAL LOAN
STAR EDUCATION LOAN
STAR VEHICLE LOAN
STAR MAHILA GOLD LOAN

RATE OF INTEREST
10.50%
15.50%
13.50%
12.25%
13.50%
14

CRITERIA FOR ACCEPTING LOAN PROPOSAL IN BANK OF INDIA:

1. EDUCATION LOAN:

OBJECTIVE & PURPOSE:

The Star Educational Loan Scheme aims at providing financial support from the bank to
deserving/ meritorious students for pursuing higher education in India and abroad. The
main emphasis is that every meritorious student is provided with an opportunity to
pursue education with the financial support on affordable terms and conditions.

ELIGIBILITY CRITERIA:

a) STUDENT'S ELIGIBILITY:

Should be an Indian National;

Secured admission to professional/technical courses in India or Abroad through

Entrance Test/Merit based selection process.

Good academic career.

The student should not have outstanding education loan from any other Institution.

Father/Mother should be co-borrower.

Branch nearest to the permanent residence of student will consider the loan.

b) ELIGIBLE COURSE:
(i) Studies in India :

Graduation/ Post Graduation courses

Professional courses: Engineering, Medical, Agriculture, Law, Dental, Management,

Computer, etc.
15

Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other Institutes set up by
Central/State Govt.

Other courses leading to diploma/degree, etc. conducted by colleges/universities

approved by UGC/Govt./AICTE/AIBMS/ ICMR, etc.

(ii) Studies abroad:

Graduation: For job oriented professional/technical courses offered by reputed

universities.

Post Graduation: MCA, MBA, MS, etc.

Courses conducted by CIMA - London, CPA in USA, etc.

EXPENSES CONSIDERED FOR LOAN :

Fee payable to college/school/hostel

Examination/Library/Laboratory fee.

Purchase of books/equipments/instruments/uniforms.

Caution deposit/building fund/refundable deposit supported by Institution bills/receipts.

Travel expenses/passage money for studies abroad.

Purchase of computers - essential for completion of the course.

Insurance cover for the student.

Any other expense required to complete the course - like study tours, project work, thesis, etc.

QUANTUM OF FINANCE :
Need based finance subject to repaying capacity of the parents/students with margin and the
following ceilings :

Studies in India - Maximum Rs.10.00 lakh

16

Studies Abroad - Maximum Rs.20.00 lakh.

MARGIN :
Up to Rs.4 lakh
Above Rs.4 lakh ( Studies in India)
Studies Abroad

: NIL
: 5%
: 15% Scholarship could be included in margin.

Margin to be brought in on year to year basis as and when disbursements are made.

SECURITY:

Up to Rs. 4 lakh

: No security

Above Rs.4 lakh &up to Rs.7.5 lakh

: Collateral security in the form of a suitable third

Party guarantee.

Above Rs.7.5 lakh

: Co-obligation of Parents together with tangible

Collateral security of suitable value along with the
Assignment of future income of student for
Payment of installments.

The security can be in the form of land / building / Govt. Securities / Public Sector Bonds / NSC/
KVP / LIP / Banks Term Deposit etc. in the name of Student / Parent / Guardian / Guarantor with
suitable margin.

RATE OF INTEREST:

Up to Rs.7.50 lacs

Above Rs.7.50 lacs

13.5%
13%

17

a. Int. Concession of 0.50%p.a. for woman beneficiaries for limits up to Rs.50,000/- and 1%
for limits over Rs.50,000/b. For Professional courses (like Engg./Medical/ Management, etc.) int. concession : 0.50%
p.a.

INSURANCE:
All the student borrowers are offered a specially designed OPTIONAL Term Insurance cover
and the premium can be included as an item of finance.
REPAYMENT:

Repayment holiday/Moratorium Course period + 1 year or 6 months after getting job,

whichever is earlier.

After commencement of repayment

Loan amount up to Rs.7.50 lacs

: 7 years.

Loan amount over Rs.7.50 lacs

: 10 years.

BANK CHARGES:

For Studies in India- NIL.

Processing/upfront charges

For Studies Abroad Rs.1000 for issuance of

sanction letter for obtention of VISA. Amount
refundable on availing loan.

Document /Stamp Charges

At Actual

Change of Institution

Studies in India Rs.250/Studies Abroad- Rs.500/-

18

One time charges for any deviations from the scheme norms including approval of courses
outside the scheme applicable @ Rs.500 for loan upto Rs. 4 lacs, Rs.1000 for loan up to
Rs.7.50 Lacs and Rs.2000 for Loan over Rs.7.50 Lacs. In respect of loans availed by borrowers
from rural areas from the Rural Branches Charges NIL.

OTHER CONDITION:

i) Loan to be disbursed in stages as per requirement / demand, directly to the Institution/

Vendors of books/equipments/instruments to the extent possible;

ii) Student to produce mark list of previous term/semester before availing next installment ;
iii) Student / Parent to provide latest mailing address, in case of any change;
iv) Student /Parent to inform Branch immediately on change of course /completion of
studies/termination of studies/ any refund of fees by college /institution /successful placement
/obtention of job/change of job etc.,

So after reading so many proposal for education loans I came to know Bank of India accept the
proposal only if it fulfills the above conditions.

2. STAR HOME LOAN:

1.

Provides loans to purchase a Plot for construction of a House, to purchase/construct

house/flat, as well as for renovation/ repair/alteration/addition to house/flat, furnishing of
house.

2. Maximum loan amount is Rs.500 lacs and repayment ranges up to 20 years, with
reasonable margin and nominal processing charges. No commitment /administrative
charges.
3.

The loan is available at very competitive rates of interest, currently available in the
industry.

19

4. Option for different EMI amounts for different periods during tenure of loan to suit
customers repayment capacity.
5. Prepayment of Loan permitted.
6.

Interest is calculated on daily balance basis which is of great advantage to customer as

it results in lower interest amount.

7.

Loan to NRIs as well as Persons of Indian Origin.

8.

Simplified application form/procedures for convenience of customers, and speedy

approvals.

9.

Free Personal Accident Insurance cover.

10. Life Insurance Cover to borrowers for Loan Protection (optional).

OBJECTIVE & PURPOSE

To purchase / construct house / flat

To renovate / extend / repair existing house / flat.

To purchase a plot of land for construction of house.

To acquire household articles along with the house / flat-for furnishing the house / flat.

ELIGIBILITY
Salaried employees, Professionals, Self-employed persons. Requests are also considered from
NRIs, HUF, Prop. Firm, Partnership firms and corporate are eligible for STAR HOME LOAN plan
of BANK OF INDIA.

QUANTUM OF LOAN
20

For construction/purchase of a house/flat-Rs.300 lacs (Rs.500 lacs in major metros viz.

Mumbai, Kolkata, New Delhi and Chennai)

Repairs/renovation/extension to house/flat Rs.50 lacs

Purchase of a plot - Rs.100 lacs

Purchase/acquire household articles for furnishing the house/flat - Rs.5.00 lacs. (15% of
Home Loan amount)

Minimum Home Loan: - For Metro/Urban Centers:-Rs. 1 Lac

PROCESSING CHARGES & OTHER EXPENSES

For Individuals

Loan Limit

Charges- One Time (inclusive of ST)

Up to Rs.25 Lacs

@0.50% of loan amount ( Min.Rs.4,000 and

Max. Rs.10,000)

>Rs.25 to Rs.75 Lacs

Flat Rs.20,000

>Rs.75 to 300 Lacs

Flat Rs.25,000

>Rs.300 Lacs

Flat Rs.50,000

For Partnership firms & Corporate Borrowers Processing charges will be double that of
individuals.
For Rural areas Processing charges will be 75% that of applicable to individuals in respect of
loans availed by borrowers from rural areas from the Rural Branches.
Legal Expenses/Valuation Charges/Stamp Paper Charges etc., At actuals

MARGIN (for 1st house):

For Loan up to Rs.20 Lacs

20%

Over Rs.20 to Rs.50 Lacs

25%

Over Rs.50 Lacs

30%

21

It is summarized from the above table for loan up to Rs. 20 lacs borrower has to pay 20% of 20
lacs i.e. 20% of the loan amount. In case of loan of Rs.20 lacs to 50 lacs borrower has to pay
25% of 50 lacs and remaining 75% given by the bank as a loan. In case of loan over Rs. 50 lacs
borrower has to pay 30% of the loan amount and remaining 70% given by the bank as a loan.
Margin is subject to RBI stipulated Loan to Value of Max. 90% for loans up to Rs.20.00 lacs and
Loan To Value of Max.80% for loans above Rs.20.00 lacs on pure cost of the house / flat, i.e.
excluding stamp duty ,registration, stamp duty, etc.

REPAYMENT:
Maximum 20 yrs. including moratorium period of 18 months (max.) in monthly installments.
Extended repayment up to 25 years permitted in Banks approved projects. Loan to be normally
repaid before date of retirement in case of salaried persons and before attaining 65 years of age
in case of others.

ELIGIBLE QUANTUM OF LOAN / EMI:

Calculation of quantum of loan is related to Income/repayment capacity of

proponent/borrower.

Salaried Employees :

72 times of gross monthly salary or 6 times of

gross annual income based on I-T Returns.

Self-employed/
Professionals etc.

6 times of Gross annual income based on I-T

Returns

HUF/Proprietorship /Partnership Firm/

Company

6 times of cash accruals (PAT+Depreciation)

as per Balance Sheet/P&L Account

Firm/ Company
In case of Individuals:
Net take home pay/income (net of all deductions including EMI of Proposed loan) should
not be less than 40% of the gross monthly salary/income of applicant(s)
In case of HUF/Proprietorship/ Partnership firm/Company :
DSCR (Debt Service Coverage Ratio) should be minimum 1.5.
22

RATE OF INTEREST:

Limits
Up to Rs. 30 lacs
Over 30 lacs & below 75 lacs
Rs. 75 lacs & above

Up to 5
yrs.
10.5
10.75
11.25

>5-10
yrs.
10.5
10.75
11.25

>10-15 yrs.
10.5
10.75
11.25

>15-20 yrs.
10.5
10.75
11.25

So from above table we can say that:

Loan upto Rs. 30 lacs the interest rate is 10.5% for 5- 20 yrs.
Loan above Rs. 30 lacs & below Rs.75 lacs the interest rate is 10.75% for 5-20 yrs.
Loan of Rs. 75 lacs & above the rate of interest is 11.25% for 5-20 yrs.

SECURITY:
Mortgage / Equitable Mortgage (1st charge) on land/flat/house.
Third Party guarantee (if mortgage could not be created at the time of disbursement).
So we can say that for applying home loan proposal individual need to fulfill the above
procedure. After verifying all the documents which are require for accepting loan proposal Bank
of India provide Home Loan facility to the customer as per their needs and wants.

SPECIAL FEATURES:
1. Free Personal Accident Insurance cover for the borrower (covering accidental death as well
as permanent total disablement) as per terms of insurance policy covering loan outstanding as
on the date of accident(Renewal at the discretion of the Bank).
2. Life Insurance cover to housing loan borrowers , at affordable premium against risk of death
during tenure of loan under Group Insurance Scheme in tie up with Star Union Dai-Ichi
Insurance Co. Ltd. at borrowers own expenses & option.
3. Loan furnishing the house/flat at a rate of interest as applicable to housing loan under the
scheme.

OTHER ATTRACTIVE FEATURES:

23

Interest on daily Reducing Balance Basis.

No pre-payment charges on Floating Rate Loans.
Repayment allowed up to 70 years in select cases.
Facility for set-up/ set-down EMIs.
Inclusion of national rental income in case of 2nd house and also Employees staying in
staff Quarters.
Inclusion of Income of close relatives for enhanced loan.
Tax Benefit on interest and installments rapid in Home Loan.
Facility for 100% loan irrespective of stage of construction OR Bridge Loan subject to
conditions.
Interest subvention from Government of India in the 1st year subject to condition.

EMI CALCULATOR FOR HOME LOAN:

Equated Monthly Installment, i.e., EMI in short is the amount payable every month to the bank
or any other financial institution until the loan amount is fully paid off. It consists of the interest
on loan as well as part of the principal amount to be repaid. The sum of principal amount and
interest is divided by the tenure, i.e., number of months, in which the loan has to be repaid. This
amount has to be repaid monthly. The interest component of the EMI would be larger in the
initial months and gradually reduce when compared to the principal amount. The exact
percentage allocated towards payment of the principal depends on the interest rate. Though
total monthly principal and interest payment wont change, the proportion will change with
time. With each successive payment, an applicant will pay more toward the principal and less in
interest.

Eg.

Principal Loan Amount

Interest Rate
Loan Term
Monthly Payment EMI
Total Interest Payable
Total Payment

= 10,00,000
= 10.5% p.a.
= 20 years.
= 9,984
= 13,96,112
= 23,96,112 (principal+ interest)

So from the above table we can say that out of Total Payment an applicant has to pay major
portion in terms of interest i.e. 58% of total. It is a part of bank income.

Formula For Calculation of EMI

24

E = P r (1 + r)n/ (1 + r)n - 1)
Where,
E is EMI
P is Principal Loan Amount
r is rate of interest calculated on monthly basis.
n is loan term / tenure / duration in number of months

25

Break-up of Total Payment

principal Loan Amount

Interest

26

EMI PAYMENT SCHEDULE

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

Principal
15,540
17,252
19,153
21,264
23,607
26,209
29,097
32,304
35,864
39,816
44,204
49,075
54,484
60,488
67,154
74,554
82,770
91,892
1,02,019
1,13,261

Interest
1,04,266
1,02,554
1,00,653
98,542
96,166
93,597
90,709
87,502
83,942
79,990
75,602
70,731
65,322
59,318
52,652
45,252
37,036
27,914
17,787
6,545

Principal+
Interest
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806
1,19,806

Balance
9,84,461
9,67,209
9,48,056
9,26,792
9,03,185
8,76,977
8,47,880
8,15,576
7,79,713
7,39,897
6,95,693
6,46,618
5,92,135
5,31,648
4,64,495
3,89,941
3,07,171
2,15,279
1,13,261
0

From the above chart we can say that in 1 year out of Rs. 1,19,806 only Rs. 15540 deducted
from the total amount as a principal and remaining Rs. 1,04,266 an applicant has to pay as a
Interest. From the above table we can observe that start 13 years installment major part
deducted as a Interest which is loss for the customer but at the same time it is income for the
bank. But from 14th year the amount which is deducted as an Interest is less than the principal
and it is continue till last installment.
So from the above table we can summarize that an applicant always try to repay the loan before
13 years which is beneficial for him because till 13th year interest is more than the principal, but
in case if he is not in a position to repay the loan then an applicant should continue till last
installment because there is no benefit for him to repay the loan after 13th year as the principal is
more than the interest. So it is always advisable for an applicant to repay the loan as early as
possible otherwise, continue till last installment.

27

INTRODUCTION OF ICICI BANK

ICICI Bank Limited is an Indian diversified financial services company headquartered in

Mumbai, Maharashtra. It is the second largest bank in India by assets and third largest by
market capitalization. It offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its specialized
subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and
asset management. The Bank has a network of 2,630 branches and 8,003 ATM's in India, and
has a presence in 19 countries, including India.
The bank has subsidiaries in the United Kingdom, Russia, and Canada; branches in United
States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre; and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. The company's UK subsidiary has established branches in
Belgium and Germany.
ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab National
Bank and Bank of Baroda.

DIFFERENT TYPES OF LOAN FACILITIES PROVIDED BY ICICI BANK

Home Loans
Personal Loans
Loans against Securities
Car Loans
Two Wheeler Loans
Commercial Vehicle Loans
28

Loan against Gold Ornaments

Loan For Construction Equipment

CRITERIA FOR ACCEPTING LOAN PROPOSAL IN ICICI BANK

1.

EDUCATION LOAN:

ELIGIBLE STUDENT:

The Student Should be an Indian National.

Student should secured admission to professional/ technical courses in India or Abroad

through Entrance Test / Merit Based Selection process after completion of HSC(10 plus
2 or equivalent).

COURSES ELIGIBLE:
Studies in India
Approved courses leading to graduate / post graduate degree and P G diplomas conducted by
recognized colleges / universities recognized by UGC / Govt. / AICTE/ AIBMS/ ICMR etc.
Courses like ICWA, CA, CFA etc. Courses conducted by IIMs, IITs, IISc, XLRI, NIFT, NID etc.
Regular degree/diploma courses like aeronautical, pilot training, shipping etc., approved by
Director General of Civil Aviation /Shipping, if the course is pursued in India. Approved courses
offered in India by reputed foreign universities. Teacher Training /Nursing /B.Ed. courses will be
eligible for education loan provided the training institutions are approved either by the Central
Government or by State Government and such courses should lead to degree or diploma
course and not to certification course.

Studies Abroad
Graduation: For job oriented professional/ technical courses offered by reputed universities.
Post graduation: MCA, MBA, MS, etc Courses conducted by CIMA- London, CPA in USA etc.
Degree/diploma courses like aeronautical, pilot training, shipping etc. provided these are
recognized by competent regulatory bodies in India/abroad for the purpose of employment in
India/abroad.

Expenses Consider For Loan

29

Fee payable to college/ school/ hostel.

Examination/ Library/ Laboratory fee.

Travel expenses/ passage money for studies abroad.

Insurance premium for student borrower, if applicable.

Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts.

Purchase of books/ equipments/ instruments/ uniforms.

Purchase of computers - essential for completion of the course.

Any other expense required to complete the course - like study tours, project work,
thesis, etc.

Quantum of Finance

Need based finance subject to repaying capacity of the parents/ students with margin
and the following ceilings.

Studies in India - Maximum Rs.10.00 lacs.

Studies abroad - Maximum Rs.20.00 lacs.

Margin

Up to Rs 4 lacs : Nil

Above Rs 4 lacs

Studies in India: 5%

Studies Abroad: 15%

Security

Loans Upto Rs 4 lacs - Co obligation of parents.

30

If parents are not there banks could consider grandparent as co obligator to the loans
taking into account their net worth.

Above Rs 4 lacs and upto Rs. 7.5 lacs.

Co obligation of parents along with Collateral in the form of a suitable third party
guarantee for 100% of the loan amount to be taken.

For cases above Rs 7.5 lacs.

Co obligation of parents along with Collateral security of 100% value of loan.
Assignment of future income of the student for payment of the loan installments for all
loans.

Rate of Interest

4 Lakhs -

14% p.a

4 lakhs to 7.5 lakhs -

18% p.a

Above 7.5 lakh up to 20 lakhs -

18% p.a

So we can say that for loan amounted to Rs.4 lakhs the rate of int. which bank charges to the
customer is 14%. Loan of Rs. 4 lakhs to 7.5 lakhs the rate of interest is 18% and from 7.5 lakhs
to 20 lakhs the rate of interest is same i.e. 18%.

Terms and Conditions for Loan

For more than 4 lakhs and up to 7.5 lakhs of Education loan, student have to give third party
guarantee to re payment of Education loan along with parents(Third party) Salary documents,
Bank balance sheet and other Property proofs.
For more than 7.5 lakhs and up to 10 lakhs, ICICI Bank executives will check all necessary
documents, according to ICICI Bank Education loan terms and conditions to provide loan as per
parents future Income and type of course selected by student.
Up to 20 lakhs education loan (only for foreign studies), students have to submit all documents
with proof of admission in college, according to ICICI Bank terms and conditions

31

Documents required while applying for ICICI Bank Education loan to study in India and
abroad:
Students have to submit the following documents to get ICICI Bank Education loan. Candidates
have to fill the ICICI Bank Education loan application form and must include relevant necessary
documents of latest last 2 months salary slip of parent and income tax assessment sheet.
Student has to attach one set of Education qualification certificates of his/her last studies like
10th class and Intermediate etc. Student can have the complete details on ICICI Bank
Education loan documents need to submit to approve/get loan.
Income Proof-Any either salary slip/other
Residency proof
Education Certificates of SSC, Intermediate and other necessary, if required.
Income tax assessment of last 2 years
Last 6 months of Bank account balance sheet
Latest 2 passport Photo graphs
Admissions proof in college
Passport/Visa

Repayment

The repayment holiday shall be a year more than the period of the course or 6 months
after the borrower gets a job, whichever is earlier.

The loan shall be repaid in 5 - 7 years after commencement of repayment

Prepayment permitted without any charges.

Processing Charges: Nil

2. HOME LOAN
32

Objective & purpose

To purchase or construct house/ flat.

To renovate or repair of existing flat/ house.
To purchase a plot of land for construction of house.

HOME Loan Amount

The home loan amount depends on repayment capability and is restricted to a
maximum
of 80% of the cost of the property or the cost of construction as applicable.
Tenor
Maximum tenure of home loan can be 20 years. However, in case of salaried customers
it is capped at retirement age.

Eligibility Criteria

ICICI Bank offers Home Loans to Resident as well as Non Resident Indians.
Criteria based on which Bank sanction the loan to the applicant:

An Applicant must be at least 21 years of age on sanction of loan.

An Applicant must be salaried or self employed with a regular source of income.
The loan must terminate before or 65 years of age of retirement, whichever is earlier.
Minimum age of Co- Applicant should be 18 years.
If the spouse of an Applicant is an earning member, then an Applicant can make him/her
the Co-Applicant. Their income will be considered to enhance the eligibility.
In case of Co- Owner they must be necessarily be Co- Applicant.

Documents Required For the Sanctioning Home Loan

In case of Salaried Customer:

33

Application form with photograph duly signed by all applicants.

Identity, residence and age proof.
Last 3 months salary-slips.
Form 16/ Income Tax Returns.
Last 6 months bank statements.
Processing fee cheque.

In case of Self Employed Professional:

Application form with photograph duly signed by all applicants.

Identity, residence and age proof.
Education qualification certificate and proof of business existence.
Last 3 years Income Tax Return with Computation of Income.
Last 3 years CA Certified / Audited Balance Sheet & Profit and Loss Account.
Last 6 months bank statements.
Processing fee cheque.

In case of Self Employed Non-Professional:

Application form with photograph duly signed by all applicants.

Identity, residence and age proof.
Proof of business existence.
Business profile.
Last 3 years Income Tax Return with Computation of Income.
Last 3 years CA Certified / Audited Balance Sheet & Profit and Loss Account.
Last 6 months bank statements (self and business).
Processing fee cheque.

Rate of Interest:

Loan Amount

Rate of Interest

Loan up to Rs. 30 lakhs

10.50%

Rs.30 lakhs to 75 lakhs

11.00%
34

Rs. 75 lakhs & more

11.50%

All ICICI Bank floating rate home loan is benchmarked to I-Base. Effective April 23, 2012 I-Base
will be 9.75% Administrative fee is 0.5% of the loan amount and applicable service tax will be
levied.

Repayment:

Repayment Tenure is the tenure for the number of year for which the loan gets
sanctioned. ICICI Bank offers a wide range of option for the tenure of the loan. An
Applicant can take a Home Loan for up to 20 years provided an Applicant do not reach
the age of 65 years or retire within that period.

All loan repayments are done via Equated Monthly Installments.

An EMI refers to an Equated Monthly Installments. It is a fixed amount which an

Applicant pays every month towards his/her loan. It comprises of both, principal
repayment & interest payment.

EMI payments start from the month following the month in which the full disbursement
has been made.

The EMI is to be paid every month through (PDCs) or Electronic Clearing System.

In case of part disbursement of the loan, monthly interest is payable only on the
disbursed amount. This interest is called pre-EMI interest (PEMI) and is payable monthly
till the final disbursement is made, after which the EMIs would commence.

FINDINGS :
Based on information which I have collected for study some findings for my project are

Bank of India provides the cheapest rate of interest for housing loan i.e. 10.5% for 20
years, whereas the rate of interest for home loan in ICICI Bank is 10.5% for 1st year and
then it increases to 11% and so on.

35

Procedures for sanction of loan for other banks are quite lengthy and people avoid
lengthy procedure and documentation, therefore people try to get loan from public banks
rather than private banks.

Bank of India provides free insurance to an applicant who applies for home loan as well
as education loan.

Bank of India provides some Interest Concession for Women Beneficiaries.

SUGGESTIONS:
Following are some suggestion which I want to give Bank of India:

Bank has to create awareness among people about the loan facility which bank provides
its customer in Ghansoli Branch through posters, because in Ghansoli Branch there was
no poster regarding loan facility like other bank.

Staff members should provide proper guidance regarding loan queries and they should
provide information accordingly.

36

CONCLUSION:
Based on above findings conclusion for my projects areIt is beneficial for people to apply for loan in Bank of India to enjoy following facilities:

Low Interest Rate

Free Insurance Coverage
Interest Concession for Women
Low Risk
Easy processing and Documentation

37

REFERENCE:
Newspapers- The Economic Times
Proposals provided by Bank

INTERNET SOURCES
www.investopedia.com
www.rbi.gov.in
www.bankofindia.com
www.icicibank.com

38

39