A PROJECT REPORT

ON

“STUDY OF HOME LOAN”

FOR

“HDFC BANK LTD”

SUBMITTED TO UNIVERSITY OF PUNE
IN PARTIAL FULFILLMENT OF 2 YEAR FULL TIME COURSE
MASTER IN BUSINESS ADMINISTRATION (MBA)

By

HITESH PARSEWAR
BATCH (2010-2011)

UNDER THE GUIDANCE OF

DEEPALI PUJARI
(MBA)

JSPM’S
JAYAWANTRAO SAWANT
INSTITUTE OF MANAGEMENT & RESEARCH,
INDRAYANI NAGER, HANDEWADI ROAD HADAPSAR.
PUNE-28

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Acknowledgements

If words are considered to be signs of gratitude then let these words Convey the very
same My sincere gratitude to HDFC BANK for providing me with an opportunity to
work with BANK and giving necessary directions on doing this project to the best of
my abilities.
I am highly indebted to Mr. Vishal Patil (Sales Manager) and Mr. Vishnu
Shinde company project guide,(HDFC Home Loan) who has provided me with the
necessary information and also for the support extended out to me in the completion
of this report and his valuable suggestion and comments on bringing out this report in
the best way possible.
I also thank Mr.Kiran Deshmkh and Mr. Sagar Waikar who has
sincerely supported me with the valuable insights into the completion of this project.
I am grateful to all faculty members of Jayawantrao Sawant institute Of
Management and Research, my friends who have helped me in the successful
completion of this project.

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 EXECUTIVE SUMMARY

Home is a dream of a person that shows the quantity of efforts, sacrifices

luxuries and above all gathering funds little by little to afford one’s dream. Home is
one of the things that everyone one wants to own. Home is a shelter to person where
he rests and feels comfortable. Many banks providing home loans whether
commercial banks or financial institutions to the people who want to had a home. The
housing sector plays an important role in the economic development of the country.
My project title is “A STUDY ON HOME LOANS”. I selected this topic
because The Indian housing finance industry has grown by leaps and bound in few
years. Total home loans disbursements by banks have raised which witness’s
phenomenal growth from last 5 years. There is greater number of borrowers of home
loans. So by this study we can find out satisfaction level of customers and problems
faced by them in obtaining home loans.
My objectives of study are-
• To make comparative study of Disbursement of home loans by commercial banks.
• To study the satisfaction level of customers about home loans.
• To study the problems faced by customers in obtaining the home loans.
For this I had taken two commercial Banks in Aurangabad city namely HDFC Bank,
SBH. It includes one public sector banks and one private sector banks. The period of
study is five years commencing from 2006-2009.
In the research methodology had taken both primary data as well as secondary data ,
in the primary data I had make a questionnaire to check the satisfaction level of
customers about home loans . In the secondary data I had studied the annual reports of
commercial banks & broachers of these banks.

And problems face by customers in obtaining home loans are

• The customer does not have proper knowledge about different Home loan
products so they face problem in making a good deal.
• There are procedural delays, which harass the customers lot this will crush the
curtsy of customers to avail the home loan.
• The attitude of bank employees sometimes non cooperative and it creates a
hurdle in building trust and Confidence among customers about banks.
• The banks do not take into account the paying capacity of customers. So some
customers are not able to get amount of Loan needed by them.

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

INTRODUCTION

3
 HDFC Bank
HDFC Bank Ltd.

Type Type
Banking
Industry
Financial services
Founded August 1994
Founder(s) Deepak Parekh
Headquarters Mumbai, India
Jagdish Capoor
(Chairman)
Key people
Aditya Puri
(MD)
Investment Banking
Commercial Banking
Retail Banking
Products Private Banking
Asset Management
Mortgages
Credit Cards[1]
▲ Rs 20,266.99 crore (US$ 4.32
Revenue
billion) (2010)[2]
Operating ▲ Rs. 4,419.01 crore (US$ 941.25
income million) (2010)[2]
▲ Rs. 3,032.92 crore (US$ 646.01
Profit
million) (2010)[2]
Total assets ▲ US$ 39.723 billion (2009)[2]
▼ Rs 21,158.15 crore (US$ 4.51
Total equity
billion) (2010)[2]
Employees 51,888 (2010)[3]
Website HDFCBank.com

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a major Indian financial services
company based in Mumbai, incorporated in August 1994, after the Reserve Bank of
India allowed establishing private sector banks. The Bank was promoted by the
Housing Development Finance Corporation, a premier housing finance company (set

4
up in 1977) of India. HDFC Bank has 1,725 branches and over 4,232 ATMs, in 779
cities in India, and all branches of the bank are linked on an online real-time basis. As
of 30 September 2008 the bank had total assets of INR 1006.82 billion.[4] For the
fiscal year 2008-09, the bank has reported net profit of Rs.2,244.9 crore, up 41% from
the previous fiscal. Total annual earnings of the bank increased by 58% reaching at
Rs.19,622.8 crore in 2008-09.[5]

History

HDFC Bank was incorporated in 1994 by Housing Development Finance

Corporation Limited (HDFC), India's largest housing finance company. It was among
the first companies to receive an 'in principle' approval from the Reserve Bank of
India (RBI) to set up a bank in the private sector. The Bank started operations as a
scheduled commercial bank in January 1995 under the RBI's liberalisation policies.

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

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

Business focus

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

Wholesale banking services

The Bank's target market ranges from large, blue-chip manufacturing companies in
the Indian corp to small & mid-sized corporates and agri-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking
services, including working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for
facilitating superior supply chain management for its corporate customers. HDFC
Bank has made significant inroads into the banking consortia of a number of leading
Indian corporates including multinationals, companies from the domestic business
houses and prime public sector companies. It is recognized as a leading provider of
cash management and transactional banking solutions to corporate customers, mutual
funds, stock exchange members and banks.

5
 Retail banking services

[[The objective of the Retail Bank is to provide its target market customers a full
range of financial products and banking services, giving the customer a one-stop
window for all his/her banking requirements. The products are backed by world-class
service and delivered to customers through the growing branch network, as well as
through alternative delivery channels like ATMs, Phone Banking, NetBanking and
Mobile Banking.]] [[HDFC Bank was the first bank in India to launch an International
Debit Card in association with VISA (VISA Electron) and issues the Mastercard
Maestro debit card as well. The Bank launched its credit card business in late 2001.
By March 2009, the bank had a total card base (debit and credit cards) of over 13
million. The Bank is also one of the leading players in the “merchant acquiring”
business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards
acceptance at merchant establishments.]] The Bank is well positioned as a leader in
various net based B2C opportunities including a wide range of internet banking
services for Fixed Deposits, Loans, Bill Payments, etc.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. These
services are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and market
risk on this investment portfolio.

Distribution network

An HDFC Bank Branch

HDFC Bank is headquartered in Mumbai. The Bank has an network of 1,725

branches spread in 771 cities across India. All branches are linked on an online real-
time basis. Customers in over 500 locations are also serviced through Telephone
Banking. The Bank has a presence in all major industrial and commercial centres
across the country. Being a clearing/settlement bank to various leading stock
exchanges, the Bank has branches in the centres where the NSE/BSE have a strong
and active member base.

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

The responsibility to provide Housing finance largely rested with the

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

6
apex institution marked the beginning of the emergence of housing finance as fund
based financial service in the country. It has growth in the volume and depth with
entry of number of specialized financial Institution / Companies in the public, private
and joint sectors, although it is at an early stage of development.
The Banking Industry has been undergoing some fundamental changes in its
approach to banking. There has been a perceptible shift towards Customer
Relationship Management (CRM) mainly arising out of the element of intensive
competition infused into the industry by the arrival of private players. With the free
economy reforms government permitted private players to inter in banking business
along with existing nationalized Banks.
In 2002 government allowed foreign banks to enter in Indian Market. The
concept of retail banking introduced with the increase in no of banks, private players
introduce especially this concept. The banks are segmenting their portfolio into
different segments like Personal Banking, Retail Banking, Corporate Banking, Agri
Banking and Investment banking. In Retail Banking, banks are concentrating on SME
(Small and Medium Entrepreneur(s) and Individual finance like Vehicle finance,
Housing finance etc. As large no of customer can be tap with diversification of risk as
it evolved lower risk than corporate banking. All banks are increasing their exposure
to this area.
“Credit has done a thousand times more to enrich mankind than all the gold
mines in the world. It has exalted labor, stimulated manufacture, and pushed
commerce over every sea. ”

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

days when commercial banking had not taken the present shape, individuals or
families traditionally involved in money lending as source of finance. Present day’s
economy is vastly different from old economy. Due to industrialization, need for
finance change drastically. With change in population as well as industrialization
demand and supply increased more over the sources of supply no longer confine to
the area where the demand exists with the improvement in transport and
communication system the demand can be easily met by suppliers made from sources

7
located in fair flung areas. Today the total out put of the our industrial sectors is very
large the finance requirements of which cannot be met by the traditional means of
finance hence the role of modern Private bank as credit providers to the economy
begins at this point.

INDUSTRY PROFILE

Early history:
Banking in India originated in the last decades of the 18th century. The first
banks were The General Bank of India, which started in 1786, and the Bank of
Hindustan, both of which are now defunct. The oldest bank in existence in India is the
State Bank of India, which originated in the Bank of Calcutta in June 1806, which

8
almost immediately became the Bank of Bengal. This was one of the three presidency
banks, the other two being the Bank of Bombay and the Bank of Madras, all three of
which were established under charters from the British East India Company. For
many years the Presidency banks acted as quasi-central banks, as did their successors.
The three banks merged in 1925 to form the Imperial Bank of India, which, upon
India's independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed
in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank,
established in 1865 and still functioning today, is the oldest Joint Stock bank in India.
It was not the first though. That honour belongs to the Bank of Upper India, which
was established in 1863, and which survived until 1913, when it failed, with some of
its assets and liabilities being transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire
from the Confederate States, promoters opened banks to finance trading in Indian
cotton. With large exposure to speculative ventures, most of the banks opened in India
during that period failed. The depositors lost money and lost interest in keeping
deposits with banks. Subsequently, banking in India remained the exclusive domain
of Europeans for next several decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The
Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in
Bombay in 1862; branches in Madras and Pondichery, then a French colony,
followed. HSBC established itself in Bengal in 1869. Calcutta was the most active
trading port in India, mainly due to the trade of the British Empire, and so became a
banking centre The Bank of Bengal, which later became the State Bank of India.
The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National
Bank, established in Lahore in 1895, which has survived to the present and is now one
of the largest banks in India. Around the turn of the 20th Century, the Indian economy
was passing through a relative period of stability. Around five decades had elapsed
since the Indian Mutiny, and the social, industrial and other infrastructure had
improved. Indians had established small banks, most of which served particular ethnic
and religious communities.
The presidency banks dominated banking in India but there were also some
exchange banks and a number of Indian joint stock banks. All these banks operated in

9
different segments of the economy. The exchange banks, mostly owned by
Europeans, concentrated on financing foreign trade. Indian joint stock banks were
generally under capitalized and lacked the experience and maturity to compete with
the presidency and exchange banks. This segmentation let Lord Curzon to observe,
"In respect of banking it seems we are behind the times. We are like some old
fashioned sailing ship, divided by solid wooden bulkheads into separate and
cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired
by the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of banks
established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank, Bank of Baroda,
The period between 1906 and 1911, saw the establishment of banks inspired
by the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of banks
established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks
in Dakshina Kannada and Udupi district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four nationalised banks started in this
district and also a leading private sector bank. Hence undivided Dakshina Kannada
district is known as "Cradle of Indian Banking".

Nationalisation
By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has emerged as
a large employer, and a debate has ensued about the possibility to nationalise the
banking industry. Indira Gandhi, the-then Prime Minister of India expressed the
intention of the GOI in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with
positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued
an ordinance and nationalised the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described

10
the step as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received the presidential approval on 9 August, 1969.
A second dose of nationalization of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization, the GOI controlled
around 91% of the banking business of India. Later on, in the year 1993, the
government merged New Bank of India with Punjab National Bank. It was the only
merger between nationalized banks and resulted in the reduction of the number of
nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks
grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
The nationalised banks were credited by some, including Home minister P.
Chidambaram, to have helped the Indian economy withstand the global financial
crisis of 2007-2009. The next stage for the Indian banking has been setup with the
proposed relaxation in the norms for Foreign Direct Investment, where all Foreign
Investors in banks may be given voting rights which could exceed the present cap of
10%, at present it has gone up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till
this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
With the growth in the Indian economy expected to be strong for quite some
time-especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.

Major Players:

1. Housing Development Finance Corporation Limited (HDFC)

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

11
 registered a net profit of Rs. 663.94 crore in the quarter ended
September 30, 2009.

2. State Bank of India Home Finance (SBI)

State Bank of India is another major player in the Indian housing
finance market with almost 16% of the market share. The SBI Housing
Loan schemes are specifically designed to meet the varied
requirements of the customers. It offers home loan for various
purposes including new house/flat, purchase of land,
renovation/alteration/extension of existing house/flat etc. SBI Home
Finance registered a net profit of Rs. 24.63 crore in the year ended
March 31, 2009.

3. Housing Urban Development Corporation (HUDCO)

Through its ‘Niwas’ scheme, HUDCO offers housing loans for the
buying/constructing house/flat. Loans are also offered for
renovation/extension/alteration of existing house/flat. In the last
financial year (ended on March 31, 2009), HUDCO registered a net
profit of Rs. 400.99 crore, comparing to Rs. 373.73 crore of the
previous year.

4. LIC Housing Finance Limited

LIC Housing Finance is another major player in housing finance sector
in India with almost 13% of market share. Promoted by Life Insurance
Corporation of India, LICHFL has an extensive distribution network
with a strong brand presence. Recently, the company has been
awarded “Consumer Superbrand 2009/10 Status” by Superbrands
Council. In the last financial year (ended on March 31, 2009), LICHFL
earned a net profit of Rs. 387.19 crore, comparing to Rs. 279.14 in the
previous FY. It also registered a net profit of Rs. 171.25 crore in the
quarter ended on September 30, 2009.

5. ICICI Home Finance Company Limited

ICICI is a leading housing finance company in India with almost 6%
market share. It offers various types of home loans for its customers
which may have tenure up to 20 years. The home loan interest rate is
connected to the ICICI Bank Floating Reference Rate (FRR/PLR).
Here it can be added here that, the PLR has been reduced to 14.75%
from its previous rate of 15.25% since June 4, 2009. As on January
23, 2009, ICICI HFC has 1416 branches with an asset of Rs. 3,74,410

12
 crore. As on December 31, 2008, the company has a net worth of Rs.
50,035 crore.

6. IDBI Home finance Limited (IHFL)

Founded in January 10, 2000, IDBI Homefinance Limited has become
one of the major players in the Indian housing finance market. It offers
a range of housing financial solutions to its customers including
Individual Home Loans, Home Improvement Loan, Home Extension
Loan, Home Loans for NRIs, Plot Loans, and Loan Against Home etc.
In the financial year 2008-09, IDBI Homefinance Limited registered a
profit of Rs. 3209.93 lakhs, comparing to a net profit of Rs. 2988.62
lakhs in the previous financial year.

7. PNB Housing Finance Limited

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

8. Dewan Housing Finance Corporation Limited (DHFL)

Dewan Housing Finance Corporation Limited is one of the largest
housing finance solution providers in India with an extensive network
of 74 branches, 78 service centers and 35 camps spread across the
nation. The company registered a net profit of Rs. 8,631.83 laks in
2008-09, comparing to a net profit of Rs. 8,257.74 lacks in the previous
financial year. In the quarter ended on September 30, 2009, DHFL
earned a profit (after tax) of Rs. 3,751.09 lacks.

9. GIC Housing Finance Limited

GIC Housing Finance Limited, one of the leading housing finance
companies in India, was initially established as ‘GIC Grih Vitta Limited’
on December 12, 1989. Promoted by General Insurance Corporation
of India, GIC Housing Finance Limited offers extensive range of
housing finance solutions to its customers through its wide network of
24 Business Centers and 3 Collection Centers across the nation. In
the financial year 2008-09, GIC Housing Finance Limited registered a
profit (after tax) of Rs. 5714 lacks. Furthermore, in the last quarter
(ended September 30, 2009), it registered a profit of Rs. 1713 lacks.

13
 10. Can Fin Homes Limited (CFHL)
Can Fin Homes Limited is another big player in the Indian housing
finance market with an extensive network of 40 branches. It is also the
first and one of the biggest bank-sponsored (sponsored by Canara
Bank) housing finance companies in India. In the financial year 2008-
09, Can Fin Homes Limited registered a net profit of Rs. 3,152.9 lakhs.
It also registered a net profit of Rs. 790.9 laks in the quarter ended on
June 30, 2009.

COMPANY PROFILE

The road to success is a tough and a challenging journey in the dark where
only obstacles light the path. Individual aim is how to get success and the
solution for success is customer satisfaction. All we need is the courage to
innovate, the skill to understand your clientele and the desire to give them
your best. Today, nearly three million satisfied customers whose dream we
helped realize, stand testimony to our success. Our objective, from the
beginning, has been to enhance residential housing stock and promote home
ownership. Now, our offerings range from hassle-free home loans and deposit
products, to property related services and a training facility. We also offer

14
specialised financial services to our customer base through partnerships with
some of the best financial institution worldwide.

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

presented attractive housing finance schemes for the customers. With more
than 25 years of experience in Indian finance market, HDFC stands head and
shoulder above its competitors in the housing loan segment. HDFC Housing
Finance has got a strong impact on the customers who are looking for some
housing finance.

HDFC Housing Finance has got 3 types of housing finance for their
customers. HDFC Housing Finance provides Home Loans for the
individuals to purchase fresh or resale house/flat as well as to construct
houses. Home Improvement Loans are for facilitating internal and external
repairs and other structural improvements like painting, waterproofing,
plumbing and electric works, tiling and flooring, grills and aluminum windows.
Home Extension Loan is for the extension of an existing dwelling unit. You
can apply for HDFC Home Finance individually or jointly. Adding up the
income of the co-applicant would enhance your eligibility for the home loan.
However, the co-applicants need not to be a co-owner of the house.

HDFC Housing Finance pays a maximum of 85% of the total project cost. The
maximum loan amount is based on the repayment capacity of the applicant.
You have to repay the loan amount within 20 years, subject to your retirement
age. You can definitely go for some lesser term loan. There is an 'Adjustable
Rate Home Loan' plan available in HDFC Housing Finance.

There are Multiple Repayment Options available in HDFC Housing Finance.

Step Up Repayment Facility, Flexible Loan Installment Plan, and Accelerated
Repayment Scheme are there to give you a wide range of options to choose
your plan from.

When you go for HDFC Housing Finance, you have to pay a fee of 1% of the
loan amount. Service taxes are extra as applicable. There are no charges for

15
prepayment. In order to learn more about housing finance companies in India
browse through the site.

16
 Be aware of frauds

Security Tips
Security measures at HDFC
Bank

Shareholding pattern

History of Share issues

Bonds Issue History

Phishing

Money Mules

Internet Banking

Online Shopping /
Payments

Computer security

Internet Browsing

Email Security

Awards and Achievements - Banking Services

HDFC Bank began operations in 1995 with a simple mission: to be a

"World-class Indian Bank". We realised that only a single-minded focus
on product quality and service excellence would help us get there. Today,
we are proud to say that we are well on our way towards that goal.

It is extremely gratifying that our efforts towards providing customer

convenience have been appreciated both nationally and internationally.

2010

Avaya Global Connect Customer Responsiveness Award -

2010 Banking & Financial Services category
Financial Express - Best New Private Sector Bank
Ernst Young Survey
2009-10
Asian Banker
Excellence Awards  Best Retail Bank in India
2009  Excellence in Automobile Lending
 Bank M&A Integration
 Technology Implementation
The Asset Triple A Best Cash Management Bank in India
Awards
Euromoney Private 1) Best Local Bank in India (second
Banking and Wealth year in a row) 2) Best Private Banking
Management Poll 2010 Services overall (moved up from No. 2
last year)
Financial Insights Innovation in Branch Operations -
Innovation Awards 2010 17
Server Consolidation Project
Global Finance Award Best Trade Finance Provider in India
for 2010
 PRODUCT PROFILE

A Home Loan for every need of yours!

HDFC provide not just the most competitive interest rates & best level of
service, but also products designed to cater to the specific needs of consumer. New
products / new features in existing products are introduced based on customer
feedback. Choose the HDFC that suits your needs.

1. Home loan for ready and under construction property

2. Home Improvement loan
3. Home extension loan
4. Home conversion loan
5. Nri home loan
6. Top up loan

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OBJECTIVES

The credit Manager plays a crucial role in increasing banks profitability as The
major portion of funds are utilized by bank for the purpose of lending of Loans and
Advances to get more return on account of the “Interest ” and reducing risk in
financing.

Objectives of the Study

 To understand the process and key issues in Sanctions

 To understand the process and key issues in Disbursement

 To study the Credit Policy of HDFC

 To study the Restricted Areas of Credit of the Bank.

 To study the Comparative Analysis of the Credit Appraisal System of HDFC with
one of the leading nationalized bank i.e. ICICI Home Finance Co.Ltd.

19
SCOPE

Indian Banking has witnessed tremendous changes in the wake of the new
economic reforms in the year 1992. The reforms have positively impacted on the
banking system, which have become more resilient competitive and efficient, with the
better productivity. It’s a role of primacy in financial intermediation and has not been
challenged by other financial entities. On the contrary, it has become more entrenched
and diversified having mode forays into insurance and investment banking. Some of
the banks have acquired the status of universal banks.
The Credit Manager plays most important role as a part of the Institution. The
Institution should utilized maximum funds for the purpose of lending by considering
both important functions of the Sanction as well as Disbursement. It is necessary that
the Proposal which is sanctioned must be disbursed. The Process of sanctioning has to
go from various crucial stages. this study definitely help to understand what is the
basic criteria for the same and what are the key issues are involved in the processing.
This study is useful for the purpose of How to overcome the issues and the
Queries related to the Credit norms which should be arises while processing and what
are the ideal solutions on the problem according to the Credit Policy of the Bank.
This study clarify that what are basic facts and requirements of the
Disbursement; what are the general causes by which the proposal should be rejected.
The Study deals with the Credit policy of the Bank and shows the importance of the
Credit Appraisal System for securing the Credit or the Loan Given by the bank.
This is useful for knowing the Restricted areas of Credit in which the Credit
policy restrict the Bank to grant the Credit. It is most important fro the Security of the
loan granted. The Comparative study shows what are the major distinguishing facts
between the credit policy of the HDFC bank and the ICICI home finance housing
scheme. It shows the Strengths of both the Institutions..
The study shows that Credit Appraisal System playing very important role.
Recently RBI interrelated the interest rates on Loans and Deposits. Even today all
banks Increase rate on Deposits when they increase the interest rate on loans. There is
perfect correlation between interest’s rates on loans and interest rates on Deposits.

20
THEORETICAL BACKGROUND OF THE STUDY

The Credit Risk is defined as the Risk that the Borrower will fail to satisfy the
terms of the obligation with respect to the timely payment of Interest and Repayment
of the Amount Borrowed. This form of Credit Risk is also called Default Risk.
The Credit manager analyses the Borrowers Financial Information and
Specification of Debt instrument in order to estimate the ability or eligibility of the
Borrower to live up to its future contractual obligation. This activity known as Credit
Appraisal System.
Credit Appraisal System playing significant role in Securing the Credit of the
Financial Institution. The Loan Eligibility appraised on the basis of various credit
norms as per the Credit policy and then final eligibility of Borrower is calculated. If
the Proposal is appraised properly then the risk of Default should be reduced and the
Credit will become secure. At the time of Appraisal various internal and external
factors are taken into consideration which may be affect the Credit Appraisal System.
The Internal factors include Credit Scoring skills of the Manager or Efficiency of the
Manager, Target Completion which means manager has sanction the loan to meet
sanction targets. The external factors play the major role in rising the levels of the Bad
loans; it includes the Economic downturns, Plant Closure., willful default of
Borrower, Government Intervention, and Political Interventionetc.
If these factors taken into consideration while appraising. Then definitely the
Risk of Default should be reduced.
The Credit Appraisal System playing the significant role in securing the Credit
of reducing the Risk of Default.

21
 RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One can also
define research as a scientific and systematic search for pertinent information on a
specific topic. In fact research is an art of scientific investigation. Another meaning of
research as “a careful investigation or inquiry especially through for new facts in any
branch of knowledge.”
Redman and Morry define research as a “systemized effort to gain new
knowledge.” Some people consider as movement a movement from the known to the
unknown it is actually a voyage of discovery.

 Data Sources:
In the Preparation of this project it is necessity to collect the Primary data and
Secondary data

 Primary Data:
The first-hand information bearing on any research which has been collected
by the researcher may be called “primary data”. Collecting information various with
the help of proposals credit policy of the Bank.

 Secondary Data:
The Secondary Data on the other hand, are based on second-hand information.
The data which have been already been collected, compiled & presented easier by any
agency may be used for the purpose of investigated such data may be called
“Secondary Data”. Collecting the in formation with the help of Annual Reports,
Magazines, Internet, and Reference Book. The Secondary data provide by
organization. The needed information is collected from Journals Annual Reports,
Magazines, etc.

22
 DATA ANALYSIS AND INTERPRETATION
SANCTIONING OF LOAN PROPOSAL

 Basic Eligibility Criteria For Resident Indians

Borrowers Resident Indian

Self Employed Self Employed

Salaried
Criteria Professional Non Professional
Classification 1) Worksite 1) CA/ICWA/CS 1) Individuals:
Channel 2) Architects, Propriters,
2) Others : Lawyers Partners &
(Cheque 3) Consultants like Directors of
Salary and MBA Pvt.Ltd Co.
Cash Salary) 4) Chemist with 2) Non
B.Farm Individuals:
5) Doctors / Private Ltd Co.
Pathologists
Minimum Gross 1) Applicant 1) For lawyers Net 1) Retail: Rs.
Income from profit should be Rs.2 60,000 p.a.
DEL/MUM/BL laks p.a 2) Non Retail: Rs.
R: Rs.9000 p.m. 2) For Consultants 100,000 p.a.
2) For other like Engineers,
locations: MBAs etc.Net profit
Rs.7000 p.m. should be Rs.1 Lac
p.a
3) For others Net
Profit should be Rs

23
 60,000
Age Norms 1) Minimum 21 1) Minimum 21 yrs on 1) Minimum 21
yrs on application yrs on application
application 2) Maximum 65 yrs at 2) Maximum 65
2) Maximum 65 maturity yrs at maturity
yrs at maturity
Minimum SSC (X Professional Not Applicable
Qualification standard) Qualification
Required
Minimum No. of 1 Year 1) 3 Years as Minimum 3 Years
Years in Total Practicing
Employment Professional
2) 1 Year as
Practicing
Professional, if
employed previously
for 2 Years
No. of Not to Exceed 4 Not to Exceed 4 Not to Exceed 4
Dependents
No. of Co- Maximum 2 Maximum 2 Maximum 2
Borrowers

24
 Customer- Basic Eligibility Calculation
1) Resident Indian - Salaried

ITEM % CONSIDERATION
REG.ITEMS (PAYSLIP) 100%
HRA 100%
PENSION INCOME 100%
BONUS 100%
ANNUAL BENEFITS 50%
FIXED REIMBURSEMENTS 50%
VARIABLE ITEM 50%

2) How we treat income from other sources?

Source % Eligibility Proof

Agricultural income (As stated 50 % of average of last 2 3 years ITR’s and 7/12
in ITR) years extract or ownership
document copy.
Rental Income 100% of average of last 2 03 ITR
years

Rental Income 100% of current rental Lease Agreement for 3

income as per lease years
Agreement

Rental Income 50 % of current rental income Leave & License

as per leave & License agreement
Agreement copy of current period

LIC /Broker commission i.e. 50 % of new business & Certificate / original

NSC, KVP, IVP postal 100% of renewal business commission slip of
Cos.

25
 Interest / Dividend Income 50 % of average of last 2 03 years ITR’s
years

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

3) FOIR: Fixed Obligation to Income Ratio:

3.1 Resident Indian Salaried:

Income Applicable FOIR

5500 – 8000 40%
8000 – 20000 45%
20000 – 25000 50%
25000 and Above 55%
3.2 INSR: Income to Net Salary Ratio:
MAXIMUM 70%

3.3 Resident Indian – SEP: 55%

For calculation purpose SEPs can be classified as per following pattern –
 Doctors
 Allopathic (MBBS plus)
 Other (BHMS, BAMS, etc)
 Others (CA, CWA, CS, Lawyer, Consultant etc)
Methods Used
 GPR Multiplier Method
 Eligibility based on Net Profit

3.4 Resident Indian – SENP: 55%

Business Income
Av. Net Profit (PAT) for last two years Net Profit
Add: Depreciation* Depreciation
------------------
Business Income
Personal Income (Salary / Remuneration)
(Avg. For last two years) Personal Income
--------------------
Total Appraised Income = BI + PI

26
 *(Depreciation is higher of 2/3rd of Last year’s depreciation or average for last two
years.)
4) Income from other sources

Type Eligibility Proof

Agricultural Income 50%* ITRs
Rental Income 100%* ITRs
Interest/Dividend 50%* ITRs
Income

*Average of the last two years amount

Income from above sources should not exceed
50% of the Total Appraised Income

5) Eligibility calculation

Total Appraised Income xxxxx

Add: Income from other sources xxxxx
--------
Total Income xxxxx
Total Income p.m. (TI / 12) xxxxx
Less: Obligations xxxxx
-------
Maximum Payable EMI (HDFC Bank) xxxxx

DOCUMENTATION CRITERIA
Write all the documents of HDFC
1) Salaried:
 Photograph

27
 6 months Bank statements ( 3 months for work site)
 KYC documentation
 Age Proof
 Latest Salary slip / certificate
 4 salary slips for variable salary
 Form 16 / PF Statement
 Administrative Fee Cheque
 Signature Proof [In case if DD is given)

2) Self Employed Professionals:

 Photograph
 Age Proof
 KYC Documentation
 Income Documents
 Latest three* ITRs , both personal and business along with
computation of income
 Latest three* years P&L accounts and B/S ( with schedules) duly
certified by a CA-both personal & business
 Advance tax challans if available
 6 months Bank Statements
 Proof of Existence*
 Partnership deed copy / MOA / article of association if
applicable
 Office address Proof
 Shop & establishment act certificate
 Processing Fee Cheque
 Signature Proof [In case if DD is given)
 Qualification Certificate

3) Self Employed Non Professionals:

 Photograph

28
  Age Proof
 KYC Documentation
 Income Documents
 Latest three* ITRs , both personal and business along with
computation of income
 Latest three* years P&L accounts and B/S ( with schedules) duly
certified by a CA-both personal & business
 Advance tax challans if available
 6 months Bank Statements
 Proof of Existence*
 Partnership deed copy / MOA / article of association if applicable
 Office address Proof
 Utility bill –telephone bill ,electricity bill
 Shop & establishment act certificate
 Sales tax certificate
 Latest list of Directors & Shareholding Pattern certified by Company
Secretary
 Business Profile on the Letter Head
 Processing Fee Cheque
 Signature Proof [In case if DD is given)

4) Salaried (NRI):
 Photograph
 6 months Bank statements
 KYC documentation
 Age Proof
 Latest Two Months Salary slip / certificate
 6 salary slips for variable salary
 Appointment Letter / Employment Contract Letter / Increment Letter /
CDC (in case of Merchant Navy)
 General POA

29
 Work permit related documents like Labour card, Identity Card or
Work Permit, if applicable
 Form 16 / PF Statement (if there is an Indian income)
 Processing Fee Cheque
 Signature Proof [In case if DD is given)

30
 ANALYSIS OF THE INCOME DOCUMENTS

1) Salary Slip Analysis

 Name of the Applicant – whether matches with the salary slip or not?
 Designation
 Name of the Employer
 Is the latest salary credit as per the salary slip
 Are the salary credits in the bank statements as per the salary slip
 Is the salary fixed or variable
 Any regular deductions reflecting in the salary slip.

2) Understanding Bank Statements

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

 In case of Self Employed check the average balance for liquidity
 Large credit or debit entries
 Recurring debits on account of loan repayment
 Inward Cheque bounces
 Outward Cheque bounces
 Stop Payment / Minimum Balance charges

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

 Name & address of the employer

 Name and designation of the employee
 Details of the salary paid / other income
 Details of the tax deducted
 Information of Housing loan availed
 Information on Mediclaim, pension policy etc
 Information on other savings like PPF, NSC, Mutual funds etc

31
4) Understanding Profit & Loss Account

 Expense heads
 Trend in Profitability & Sales over the years
 Depreciation charged
 Any unusual expenditure

5) Why do we require a Balance Sheet?

To understand the business of the customer in terms of – :

 Owner’s involvement
 Profitability of the business
 Asset base
 His Customer Base & Liquidity
 His Suppliers

6) What to read out of Schedules?

 Understanding the list of his Customers

 Understanding the list of his Suppliers
 Understanding the value of assets as on date
 Understanding various loans availed by the loan applicant

32
 RESTRICTED AREAS OF CREDIT
NEGATIVE PROFILES

 Daily wage laborers / Mathadi Workers

 Drivers and Conductors of SRTC / Taxi drivers / Auto Rickshaw Drivers /
 Commercial Vehicles Drivers

 Anti Social Elements

 Politicians
 Garment Exporters

 Watchmen
 Security Services - Companies and their Employees
 Stock Brokers
 Real estate agents
 Tour Operators
 Cable Operators
 Mine and Quarry workers
 Firms engaged in parcel movement
 Plantation / Time Share companies
 Employees of Chit fund/Stock Broking/Investment companies
 Bar Owner
 Film stars (The negative list includes all persons associated with the Film
Industry i.e. whose income / cash flows are linked with the film industry)
 Class 4 employees
 Employees of Dot-Com companies
 Builders and their relatives

33
GENERAL CAUSES OF REJECTION OF THE PROPOSAL

1) Documentation / Property:

1.1 Credit Documentation not as per Policy.

1.2 Technical Norms not met
1.3 Legal Documentation not as per Policy.
1.4 Fraud Document Submitted

2) Financial Reasons:

2.1 AF Cheque Bounce

2.2 Income Norms not met
2.3 High Outstanding of Debtors
2.4 Too many existing Obligations

3) Geographical Reasons:

3.1 Outside Geo Limits

3.2 Property in Negative Area
3.3 Residence in Negative Area

4) Personal Profile:

4.1 Negative Proff

4.2 Income Ownership norms not met

4.3 Poor Banking /Saving Habits

34
 4.4 Dependents > 4

4.5 Age norms not met

4.6 Customer withdrawing
CASE NO.1

1) Applicant Name : Mr.Dhawane Atul Ramdas

2) Co-Applicant Name : Mrs. Dhawane Pranita Atul
3) Loan Amount Applied : Rs.20,00,000
4) Tenor Requested : 18 Yrs
5) Profile :
Applicant : Salaried
Organization : geo technology
Co-Applicant : housewife

6) Monthly salary:
Applicant : Rs.32,131 p.m.
Co-applicant : nil

7) Strength of the Case:

• Bank Salary
• Qualified Profile
• No Existing obligation
• Super Worksite Company
• Less no. of Dependents

8) Findings:
1) Field Investigation report is Negative due to House found locked at the
time of Visit
2) FOIR is exceeding the limit of 55.00%

35
9) Suggestions:
Field Investigation Report is Negative and FOIR is exceeding hence; Approval
should be taken from higher authority i.e. Regional Business Head (L3Prime), As
per Annexure

CASE NO.2

1) Applicant Name : Mr.Pankaj Khairnar

2) Co-Applicant Name : Mrs.Hemangi Khairnar
3) Loan Amount Applied : Rs.16,00,000
4) Tenor Requested : 20 Yrs
5) Profile :
Applicant : Salaried
Organization : HAL
Co-Applicant : Salaried
Organization : Swami Vivekanand School

6) Monthly salary:
Applicant : Rs.14,200 p.m. & Incentive Rs.14,700 p.m.
Co-applicant : Rs.10,000 p.m.

7) Strength of the Case:

• Bank Salary
• Good Bank Balance
• PF Balance Approx.Rs.1.25 Lack’s
• LIC Policy worth Rs.1.50 Lack’s
• Clubbing of Income case
• Super Worksite Company

8) Findings:
Applicant has borrowed HAL Credit Society Loan and the deduction of which
shows in The Salary Slip

36
9) Suggestions:
As per discussion with Applicant he is not going to nil that loan hence the said
EMI should be considered as obligation in loan eligibility calculation.

CASE NO.3

1) Applicant Name : Mr.Bhavesh Patadia

2) Co-Applicant Name : Mr.Sona Patadia
3) Loan Amount Applied : Rs.1500000
4) Tenor Requested : 15 Yrs
5) Profile:
Applicant : Self Employed Non Professional
Organization : JHP Securities
Co-Applicant : House wife
6) Monthly Income:
Applicant : Rs.74053 p.m.

7) Strength of the Case:

• Good Bank Balance
• Good RTR of Existing Hsg.Loan
• Low LTV

8) Findings:
1) Applicant Bank Statement showing monthly deduction of Rs.8500
as EMI of Hsg. Loan
2) Applicant going to purchase second property

9) Suggestions:
1) As per discussion with Applicant he is not going to nil that
Housing loan hence the Said EMI should be considered as obligation in
loan eligibility calculation.

37
 2) Applicant going to purchase second property hence LTV should be
restricted to Max.75% as per Credit Deviation Sheet in Annexure.

CASE NO.4

1) Applicant Name : Mr.Dilip Nikam

2) Co-Applicant Name : Mr.Anjali Nikam
3) Loan Amount Applied : Rs.1500000
4) Tenor Requested : 20 Yrs
5) Profile :
Applicant : Salaried
Organization : MICO BOSCH Ltd
Co-Applicant : Salaried
Organization : Nirmala Convent high School
6) Monthly Income:
Applicant : Rs.42600 p.m.
Co-applicant : Rs.14700 p.m.

7) Strength of the Case:

• Good Bank Balance
• Good RTR of HDFC Bank Ltd
• Income Clubbed Case

8) Findings:
1) Applicant Bank Statement showing monthly deduction of EMI of HDFC
Bank and the Said was reflected in CIBIL Verification report.
2) Applicant salary slip shows deduction of society loan
3) Applicant going to purchase second property

9) Suggestions:

38
 1) Applicant is not going to nil that Housing loan of HDFC as well as Society
loan; hence The said EMI’s should be considered as obligation in loan
eligibility calculation.
2) Applicant going to purchase second property hence LTV should be restricted
to Max75% as per Credit Deviation Sheet in Annexure.

CASE NO.5

1) Applicant Name : Mr.Sanjay Sagdeo

2) Co-Applicant Name : Mr.Shubha Sagdeo
3) Loan Amount Applied : Rs.8,00,000
4) Tenor Requested : 5 Yrs
5) Profile :
Applicant : Salaried
Organization : MSPG Co.Ltd.
Co-Applicant : House wife
6) Monthly Income:
Applicant : Rs.48,153 p.m.

7) Strength of the Case:

• Bank Salary
• Stable / Govt.Job
• Worksite Company
• No any Obligation
• PF Balance worth Rs.20 Lacks
• Owned House worth Rs.24 Lacks
• Qualified Profile

8) Findings:
Applicant’s Age is 54 years

9) Suggestions:

39
 Loan Amount possible for only 4 years remaining in the service and 1 extended
year hence maximum loan tenor should be restricted to 5 years

DISBURSEMENT OF LOAN PROPOSAL

WRITE ALL THE DOCUMENTATIONS OF HDFC BANK

Legal verification
The borrower has to submit the original property documents as per the
indicative list given by HDFC along with letter acknowledged by the registrar for
pending documents if any and NOC from the landowner as per HDFC standard
format. The copies of the same are forwarded to an empanelled lawyer who has to
peruse the documents, provide a legal opinion and a title clearance certificate to
ensure a clear and marketable legal title. If there are any documents pending as per the
lawyer’s report, the same have to be collected from the borrower.

• Legal report should mention that the title of the borrower is clear and
marketable and acceptable to ICICI as security
• Should be signed by the empanelled lawyer
• Should mention the address of the property as detailed in the sale
agreement / sale deed
• Should list down documents to be collected for security
• Should mention correct property type transaction

40
LEGAL DOCUMENTATION FOR DISBURSEMENT:

1) Direct From Builder Case:

Agreement of Sale
Sub Registrar Receipt
No objection certificate from builder
Own contribution receipt from builder

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

Share Certificate
Allotment Letter
No Objection Certificate from Society
Own contribution receipt from Society
Copy of Society Bye Laws
Society Registration Certificate
Registered Agreement if not Orginal member

3) Own Construction Case:

Original Sale Deed with Registration Receipt.

NA Order Copy
Latest Title Clearance Certificate
Original Architect Estimate
Commencement Certificate

41
4) Resale Case:

Sale Deed/Agmt with Registration Receipt

Previous Customers Sale Deed/Agmt with Registration Receipt
Own Contribution Receipt
NOC from Builder/Society
Title Certificate
Share Certificate & Allotment Letter (if applicable)
7/12 & 6-D Extract (Xerox)
Commencement Certificate & Completion Certificate (Xerox)
Society Registration Certificate & Bye-Laws (Xerox)
Title Certificate (Xerox)
Building Plan (Xerox)
Title Certificate
Society Registration Certificate

42
TECHNICAL APPRAISAL

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

of completion of the property financed and to determine the amount of loan to be
disbursed. In addition, technical appraisal also serves the following purposes:
 It confirms that the property really exists.
 An assessment of available infrastructure is done.
 Check the quality & speed of the progress of construction
 For resale cases, the site engineer has to confirm the external
condition of the building and the internal condition of the flat/property
 For resale cases, the term of the loan should not exceed residual age
of the property as per the site engineer’s report
 All disbursements in self-construction cases are linked to stage of
construction
 Address of the property should be mentioned, should match with the
address on the legal report
 Stage of construction and recommended disbursement should be
mentioned
 Signed by technical officer / empanelled technical agent
 Value of the property is cleared from Technical Report
 Residual age of the property is cleared from Technical
Report

43
 Types of disbursement:

 First and part disbursement

 Full and Final Disbursement

 Balance Transfer
 Top Up Disbursement (Balance Transfer and Top Up)

Accepted Sanction Letter should be collected.

 Accepted by all applicants and co-applicants

 Letter should be in format specified
 Check for post sanction conditions
 Check for rate validity
 Check date of letter for validity

Disbursement Request Form should be collected.

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

request of the customer
 This is a part of the sequence to form a contract

44
  To be filled by the customer
 Details of cost of property as appearing in the agreement for sale/ sale deed.
 Address of the property as appearing in the agreement for sale / sale deed
 Details of cheque favoring and amount and mode of payment.
 Cheque favoring should include Bank and account no. of payee.
 There is an option of changing communication address.

ANALYSIS OF LEGAL DOCUMENTS

 All owners of the property should be applicants

 Check for cost of property and OCRs paid
 Signature of the owners should match with the application form
 Witness should sign the agreement
 Priority and Non Priority documents to be collected as per legal report
 NOC From builder/ society / development authority as the case may be
 Own contribution receipts

1) Agreements
 Current agreement must be registered
 Stamp Duty receipt required
 Registration receipt required
 Stamp duty receipt and registration receipt amount to be added to cost of
property and calculated as OCRs too.

2) NOC
 NOC should be on the letterhead of the Society/ Builder / Development
Authority
 Should have the stamp of the society / Builder / Development Authority
 Address should match as per the agreement, Flat No., Wing No. etc..

45
  Should be as per the procedures and drafts for different transaction types.
 Must be dated

3) Own Contribution Receipts

 Must have a revenue stamp
 Cash payments cannot be more than Rs.20000/-
 Should give details of the property like flat No. etc
 In case of refinance > Rs.1 lack
 Builder case – Receipts from builder & debits in bank account
 Resale – Agreement for sale / Sale deed to be registered before
refinance
Property Norms:

 Property should not be in negative area

 Property should be within geographic limits
 Property should be self contained
 Maximum age of property less than 35 years at loan application
 Loan tenor not to exceed residual age of the property
 Minimum Built up area > 400 sq. ft
 In case of row house of ground floor only
 Minimum Built up area 275 sq.ft with unutilized FSI of first floor

46
 FINDINGS

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

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

3) In case of the borrower lost his job or meets with accident, which results into
permanent disability or the person died, in that situation the loan repayment
responsibility comes on his family. It is major problem

47
 RECOMMENDATIONS

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

various tools of appraising like Deduping, CIBIL Report, Field
Investigation, and RCU Verification.

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

which records every detail regarding the Property.

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

the Borrower and Property should be mandatory.

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

intentionally it shows the carelessness of the customer; and the case
should be done which have technical reason of cheque bounces and
minimum balance charges.

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

p.m.from Rs.5,500p.m. or Fixed Obligation to Income Ratio should
restricted up to 40% from 50% for the income less than

48
 Rs.20000,because the customer can manage easily the residential as well
as other expenses after payment of the housing loan EMI

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

Company Ltd, I recommend that ICICI continue this strategy of
Equitable Mortgage, Guarantor is not mandatory and Door Step Service
to attract more customers and capture the major share in the Market.

CONCLUSION

The Project based on “An Analytical Study of Credit Appraisal System”

Which is a Research project done with special reference to Home Loan. After overall
study I observed that what are the key issues in Sanction as well as Disbursement of
the Loan Proposal, I studied the Credit policy of the Financial Institution, I Observed
that what are the General causes of the Rejection of the Proposal. And also what are
the restricted areas of Credit. And after the Comparative study I understood that what
are the Credit norms of both institution and how it differs from each other. The most
important part that I came to know what is the Importance of the Credit Appraisal
System and how the case is appraised for securing the Credit.
Credit Appraisal System playing most important Role in reducing the Risk of
Default And by adopting the said Recommendations the HDFC Home Finance
Company Ltd should function very smoothly and the Default Risk should be reduced.

49
 BIBLIOGRAPHY

 Credit Policy of HDFC Home Finance Company Ltd

 Websites:

 http://www.hdfcbank.com/pfsuser/aboutus/newsroom/presskit/hdfcho
mefinance.htm
 www.google.co.in

 Books:

 Foundations of Financial Markets And Institutions- Published by

Pearson Education Asia Third Edition by the Author Frank
J.Fabozzi,Frank Modigliani, Frank J.Jones,Michael G.Ferri; Page
numbers: 381 & 382.

 Research Methodology by Shailesh Kasande published by Nirali

Prakashan.

50
 Journal:

 Journal of Management Research, Volume 7, Number 1.Issue April

2007, Article by Mr.Gunjan M.Sanjeev on Bankers’ Perceptions on
Causes of Bad Loans in Bank. Page numbers: 43, 44, 45 & 46

ANNEXURE

 EMI Chart

 Credit Deviation Sheet

51
 RATE OF INTEREST
8.00 8.25 8.50 8.75 9.00 9.25 9.50 9.75 10.00 10.50
10.25%
% % % % % % % % % %
874
1 8699 8711 8722 8734 6 8757 8769 8780 8392 8804 8815
456
2 4523 4535 4546 4558 9 4580 4592 4603 4615 4627 4638
318
3 3134 3146 3157 3169 0 3192 3204 3215 3227 3239 3251
243
4 2442 2454 2466 2477 9 2501 2513 2525 2537 2549 2561
207
5 2028 2040 2052 2064 6 2088 2101 2113 2125 2138 2150
180
6 1754 1766 1778 1791 3 1815 1828 1841 1853 1866 1878
160
7 1559 1572 1584 1597 9 1622 1635 1648 1661 1674 1687
146
NO OF YEARS

8 1444 1497 1440 1453 6 1479 1492 1505 1518 1531 1545
135
9 1302 1315 1328 1342 5 1368 1381 1395 1408 1422 1436
126
10 1214 1227 1240 1254 7 1231 1294 1308 1322 1336 1350
119
11 1142 1156 1169 1183 7 1210 1224 1238 1252 1267 1281
113
12 1083 1097 1111 1124 9 1153 1167 1181 1196 1210 1225
109
13 1034 1048 1062 1076 0 1105 1119 1134 1148 1163 1178
104
14 992 1006 1020 1035 9 1064 1079 1094 1109 1124 1139
101
15 956 971 985 1000 5 1030 1045 1060 1075 1090 1106
16 925 940 955 970 985 1000 1015 1031 1046 1062 1078
17 899 914 929 944 959 975 990 1006 1022 1038 1054
18 875 891 906 921 937 953 968 984 1000 1016 1033
19 855 870 886 902 917 933 949 965 982 998 1015
20 837 853 868 884 900 916 933 949 966 982 999

52