A SUMMER PROJECT REPORT

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A SUMMER PROJECT REPORT

ON Processing of Retail Loan Proposals at Retail Loan Factory of Bank of Baroda, Ahmedabad

by Hiral Panchal (4033)

K.S.School of Business Management Gujarat University A report submitted in partial fulfillment of the requirements of MBA Program

Submitted to Bank of Baroda

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Acknowledgement
The completion of any task depends upon the co-operation, coordination and consolidated efforts of several resources of knowledge, energy, and time and above all the proper guidance of the experienced bankers. Therefore I approached this matter of Acknowledgement through these lines trying my best to give full credit where it deserves.

I wish to express my gratitude to our institute, which has provided me the opportunity to fulfil the most cherished desire to reach my goal. I am thankful to all those who generously helped me to compile this project with their knowledge and expertise. Firstly I owe a great debt to, K.S.SCHOOL OF BUSINESS MANAGEMENT for obliging the project, thus giving me chance to broaden my horizon and providing me all necessary resources in college to assist me in the project. Also I owe a great debt to Mr.A.K.SHAH, Chief Manager of RLF Bank of Baroda who has been nominated as mentor for my project and also thankful to all staffs of RLF as well as Head Office of Bank of Baroda for providing me the necessary guidelines regarding the project, for helping me to track the first hand information and supporting me in the carrying out the project successfully. As well as reposing a belief in me, this was essential for the completion of this project. I express my sincere thanks to Mr.PRIYA KUMAR, Senior Manager (HRM) at Regional Office Bank of Baroda Ahmedabad for giving me the opportunity to choose this topic and the project. I also would like to thank Mr.ANJAY KUMAR Manager at RLF Ahmedabad for the support and providing necessary guidance for completion of this project and allowing me the access to the necessary resources to gather primary information. I would also like to thank all the persons for their contribution for shaping up of this project, who helped me directly or indirectly in completing this project.

2.

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Preface
The project is prepared during the vocational training under taken at RLF on partial fulfillment of the course of master of business administration Hence, this report is designed with the objective to gain practical knowledge. According to old saying there is a huge difference between To say and to do. To take theorical knowledge is important but it becomes more valuable when we apply it in the practice. So, there is a huge difference between theory & practical. For filling this requirement training in the RLF is very practical exposure for me. This training provides golden opportunity for all students, especially when the management does not have perfect knowledge & understanding of working in the organization. Hence, this report is designed with the objective to gain practical knowledge.

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Table of content

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OBJECTIVE AND SCOPE OF THE PROJECT OBJECTIVE:

The main objective of the project is to know the different loan proposals at RLF and how they are being processed. The main objectives of this project are as under : Identify the requested terms of loan, it include loan length, limit of the loan, interest rate, etc. To know the procedure of the loan from sales lead to the disbursement. To know what are the necessary documents for the loan.

Scope:
Retail segment is attracting attention to all banks, financial institution, foreign bank etc. now days there is a boom in retail banking sector. So, there is a wide scope of retail segment. Now days the population is increasing day by day. It causes to increases the number of housing loan. There is a golden opportunity for students in the abroad. The easy & open admission system is attracting many of the students of India. So, the students who want to go there, they can avail the education loan for their bright future & study. With the increasing of globalization &technology, the living standard of people has also improved. So, it will result to increase other loans like housing loan, car loan, traders loan, professional loan.

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Indian banking industry

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Glance on Indian banking industry

Indian bank today is witnessing drastic change. The liberalization of financial sector & business sector reforms have exposed the Indian banks to a new economic environment that is characterized by increased competition & new regulatory requirement. As a result there is a transformation in every sphere of activities of the banks in India. The last decade has seen many positive developments in the Indian banking sector. The Policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. And quickly to build an enabling, rather than a limiting, banking sector in India. Indian banks have compared favorably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks.

OPPORTUNITIES AND CHALLENGES FOR PLAYERS

The bar for what it means to be a successful player in the sector has been raised. Four challenges must be addressed before success can be achieved. First, the market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. Third, with increased interest in India, competition from foreign banks will only intensify. Fourth, given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

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ONE OF THREE SCENARIOS WILL PLAY OUT BY 2010

The interplay between policy and regulatory interventions and management strategies will determine the performance of Indian banking over the next few years. Legislative actions will shape the regulatory stance through six key elements: industry structure and sector consolidation; freedom to deploy capital; regulatory coverage; corporate governance; labour reforms and human capital development; and support for creating industry utilities And service bureaus.

Three scenarios can be defined to characterize these outcomes: A) High performance scenario:
In this scenario, policymakers intervene only to the extent required to ensure system stability and protection of consumer interests, leaving managements free to drive farreaching changes. Changes in regulations and bank capabilities reduce intermediation Costs leading to increased growth, innovation and productivity. Banking becomes an even greater driver of GDP growth and employment and large sections of the population gain access to quality banking products.

b) Evolution:
Policy makers adopt a pro-market stance but are cautious in liberalizing the industry. As a result of this, some constraints still exist. Processes to create highly efficient organizations have been initiated but most banks are still not best-in-class operators. Thus, while the sector emerges as an important driver of the economy and wealth in 2010, it has still not come of age in comparison to developed markets. Significant changes are still required in policy and regulation and incapability-building measures, especially by public sector and old private sector banks. In this scenario, M&A activity is driven primarily by new private banks, which take over some old private banks and also merge among themselves. As a result, growth of these banks increases to 35 percent.

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c) Stagnation:
In this scenario, policy makers intervene to set restrictive conditions and management is unable to execute the changes needed to enhance returns to shareholders and provide quality products and services to customers. As a result, growth and productivity levels are low and the banking sector is unable to support a fast-growing economy. This scenario sees limited consolidation in the sector and most banks remain sub-scale. The extent to which Indian policy makers and bank managements develop and execute such clear and complementary agenda to tackle emerging discontinuities will lay the foundations for a high-performing sector in 2010.

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History of Bank of Baroda

A saga of vision and enterprise

It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hitech Baroda Corporate Centre in Mumbai is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large who in ample measure, have contributed to the making of an institution.

Mission statement
Leveraging technology for augmenting business growth and profitability.

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LOGO
Banks new logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun .Bank call this the Baroda Sun. The sun is an excellent representation of what bank stands for. It is the single most powerful source of light and energy its far reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, bank seeks to be the source that will help all our stakeholders realise their goals. To our customers, we seek to be a one-stop, reliable partner who will help them address different financial needs. To our employees, bank offer rewarding careers and to our investors and business partners, maximum return on their investment on the single-colour, compelling vermillion palette has been carefully chosen, for its distinctiveness as it stands for hope and energy Bank also recognizes that our bank is characterized by diversity. The network of branches spans geographical and cultural boundaries and rural-urban divides. Customers come from a wide spectrum of industries and backgrounds. The Baroda Sun is a fitting face for brand because it is a universal symbol of dynamism and optimism it is meaningful for many audiences and easily decoded by all. Banks new corporate brand identity is much more than a cosmetic change. It is a signal that we recognize and are prepared for new business paradigms in a globalised world. At the same time, bank will always stay in touch with its heritage and enduring relationships on which bank is founded. By adopting a symbol as simple and powerful as the Baroda Sun, bank hope to communicate both.

HERITAGE
It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn. The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development of art, industries and commerce of the State and adjoining territories."

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Journey from 1908 to 2009:

1908-1958

1908: Maharaja Sayajirao Gaekwad III set up Bank of Baroda (BOB). 1910: BOB established its first branch in Ahmadabad. 1953: BOB established a branch in Mombasa and another in Kampala. 1954: BOB opened a branch in Nairobi. 1956: BOB opened a branch in Dar-es-Salaam. 1957: BOB established a branch in London. 1959: BOB acquired Hind Bank.

1960s-1970

1961: BOB merged in New Citizen Bank of India. This merger helped it increase its branch network in Maharashtra. BOB also opened a branch in Fiji

1962: BOB opened a branch in Mauritius. 1963: BOB acquired Surat Banking Corporation in Surat, Gujarat. 1964: BOB acquired two banks, Umbergaon Peoples Bank in southern Gujarat and Tamil Nadu Central Bank in Tamil Nadu state. 1964: BOB lost its branch in Narayanjanj (East Pakistan) due to the IndoPakistan war. It is unclear when BOB had opened the branch. 1965: BOB opened a branch in Guyana. 1967: The Tanzanian government nationalized BOBs three branches there and transferred their operations to the Tanzanian government-owned National Banking Corporation. 1969: The Government of India nationalized 14 top banks, including BOB. BOB incorporated its operations in Uganda as a 51% subsidiary, with the government owning the rest.

2000s

2000: BOB established Bank of Baroda (Botswana). 2002: BOB acquired Benares State Bank in Benares at the Reserve Bank of Indias request.

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2002: Bank of Baroda (Uganda) was listed on the Uganda Securities Exchange (USE). 2003: BOB opened an OBU in Mumbai. 2004: BOB acquired the failed Gujarat Local Area Bank, and returned to Tanzania by establishing a subsidiary in Dar-es-Salaam. BOB also opened a representative office each in Kuala Lumpur, Malaysia, and Guangdong, PRC.

2005: The Reserve Bank of India (RBI), has approved a joint venture between BOB, Bank of Maharashtra (BOM), and Oriental Bank of Commerce (OBC) to set up a bank in Malaysia. The new bank will reside in Kuala Lumpur, which has a large population of Indians. The initial capital required will be US$78 million; BOB will invest 40%, and the other two banks will invest 30% each. The JV is awaiting approval from the Malaysian Central Bank. Bank has built and commissioned its own State-of-the-Art Global Data Centre (DC) in Mumbai for running its centralized banking solution(CBS) and other applications in 1900+ branches across India and 20 other counties where the Bank is operating. BOB also opened a representative office in Thailand.

2006: BOB established an Offshore Banking Unit (OBU) in Singapore. 2007: In its centenary year, BOB's total business crossed 2.09 lakh crores, its branches crossed 1000, and its global customer base 29 million people. 2008: BOB opened a branch in Guangzhou, China (02/08/2008). 2009: Bank of Baroda registered with the Reserve Bank of New Zealand, enabling it to trade as a bank in New Zealand (2009/09/01)

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Introduction of Retail Loan Factory

The Bank of Baroda

has launched its new retail loan delivery model called the urban retail loan factory

The model has been designed under Banks project parivartan, which aims to reposition the bank as a sales & service organization offering a complete range of life cycle & need of each segment of customers, according to a press release. The idea behind the model was to speedup the processing of retail loans in present competition environment. RLF is having twin outfits comprising a sales team & a centralized processing cell (CPC) manned by the bank employees. Here, the sales executive will visit potential clients, and helps the clients to fill up the loan application form, if the file is viable & submit the file to RLF for further procedure while other functionaries work to sanction the loan. The central processing cell shall have simple processes powered by the use of technology to ensure sanction of loan within the set timelines. The retail loan delivery outlet would offer loans within six working days. "We believe in providing credit fast and without hassles," said AK Khandelwal, the then Chairman and Managing Director.

"In this innovative retail loan delivery model, the potential clients are reached by
sales executives. While a team of dedicated employees works to sanction the loan".

SME SECTOR:

Bob has rolled out small & medium enterprise loan factory across three locations in Mumbai. The banks SME segment has been growing at the rate of 25% this year. Currently bank has about 15 SME loan factories.

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Organization structure of Retail loan factory

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Organization profile:
Name
Location

:
:

Urban retail loan factory

1st floor, Above BOB Ambawadi branch Panchwati marg,Ahmedabad-380006 25 59 91-079-26421623 91-079-26421761 rlf.ahmedabad@bankofbaroda.co.in 2006 Monday to Friday 10:00 to 5:00 p.m Saturday: 10:00 to 2:00 p.m

No of employees: No of branches : Contact no Fax no E-mail id Established Office time : : : : :

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Awareness of RLF Branches

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Retail lending products

Bank offers several retail lending products to its customers. However, RLF processes only these products which are secured by mortgage of property. 1) Mortgage loan 2) Other loan Mortgage loan include the security by the means of immovable property and include here that is RLF While other loan includes the security by the means of movable property only

Mortgage loan:
1) Baroda housing loan Baroda home loan(resident Indian) Baroda home loan to NRIs/PIOs Baroda home improvement loan Baroda advance against property Baroda advance against property to NRI

2)Baroda education loan Baroda gyan Baroda vidhya Baroda scholar 2) Baroda Traders loan (Loan/overdraft/fresh sanction/Renewal) 3) Baroda loan to doctors (Fresh sanction/Renewal) 4) Baroda loan to professionals (Fresh sanction/Renewal) 5) Baroda advance against property

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However, RLF is empowered to process any type of retail loan. Like

Other loan:
Baroda personal loan Baroda car loan Baroda two-wheeler loan Baroda loan to defiance pensioners Baroda loan to pensioners Baroda consumer durables Baroda loan for laptops & personal computer Baroda vaibhav lakshmi

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Procedure
Steps to be followed for processing loan
Lead generation/inward of file Follow up by sales executive Collect the details & required papers It include, Type of product Requirement amount Papers Preparation of calculation sheet by sales executive Submission of file to processing department with all formalities Forwarding memo Calculation sheet KYC norms (Know your customers) CIBIL (CONSUMER INFORMATION BUEARU INDIA LIMITED) Checking of CIBIL Scrutiny of file Allotment of report which include, T/C report (title clearance report) V/r report (valuation report) Pre inspection by bank officers Feed the file in the LAPS (lending automation processing system) Collect/ follow up of t/c report, v/r report File ready for the sanction Documentation Separation of papers for record Dispatch to concern branch

After that the next procedure is to be continued by branch. At branch level steps are done viz. Follow the appraisal cum sanction memo Contact to the borrower for execution of and completion of other formalities.

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 Execution of documents (Franking, sign documents of applicants, guarantor, and co-applicant) To issue original pay order To give nomination letter Creation of mortgage as per title report To register the mortgage deed as per state Govt notification.

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1)Lead generation/inward of file

The lead is to be generated by these ways.
I. The lead is to be generated by different branch; means if the inquiry of loan is related to immovable mortgage then branch contact to RLF is called generate lead. Directly party can contact to RLF. Party directly can fill online application through SMS, web site, e-mail. Lead is also generated through references like old customers, relatives of staff, bank employees etc.

II. III. IV.

2) Follow up by sales executive:

After lead generation the next step, sales executive follow up The lead if lead converts to prospective business, then sales executive helps the customer to complete the formalities of pre approved of loan. The help may include,
It include the requirement of loan amount Brief history of loan product Then sales executive prepare or fixed his/her eligibility Prepare a file including with personal papers, business papers and property papers Application form Calculation sheet Form no-135 Form no-16 KYC verification Collecting all the relevant proposed documents Telling the party about the quantum of loan amount

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Preparation of calculation sheet For HSG/OD/EDU LOAN

Income First year Second year Third year applicant co-app co-app _________________ _________________ _________________ _________________ _________________ _________________

Average annual income (for business person) Gross monthly income (for salaried persons) A. Maximum eligibility as per income Rs

a) Up to RS 20000, 36 times of monthly income b) More than RS 20000& up to 100000, 48 times of monthly income. c) More than RS.1lac, 54 times of monthly income Less 40%, 50%, 60% of monthly income (Up to RS.20000 More than RS.20000 & up toRS.50000 Above RS.50000 &up to RS.1 lac Above RS.1 lac Deduction salary ded Insu.prem Loans EMI Available for EMI Rs. _________________ 40% 50% 60% 60%) _________________ _________________ _________________ _________________

Repayment period _________________ MONTH _________________ B. Eligibility as per repaying capacity Rs Stamp duty & registration charges Cost of proposed property Rs Other charges-AUDA etc Rs Year of completion Construction will be completed on _________________ _________________ _________________ _________________ _________________ _________________

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Less-margins Monthly income Up to RS.20000 Purpose Purchase of plot House/flat already constructed from own sources All other cases Above RS.20000 Purchase of lot House/flat already constructed from own sources All other cases Bank loan Rs. C. Eligibility as per cost of property Rs D. Eligibility for loan amount (A/B/C/ whichever is less) Rs. Margin 20% 25% 20% 20% 20% 15%

_________________ _________________ _________________

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3)

CIBIL : {Credit Information Bureau (INDIA) Limited}

The establishment of CIBIL is an effort made by the Government of

India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors portfolio quality.

CIBIL provides a vital service, which allows its Members to make

informed, objective and faster credit decisions, with greater efficiency and grow business profitability.

Rapid industrialization. An expanding economy. Growing aspirations.

Increased incomes. Improved lifestyles. Availability of high quality products and services.

An expanding market these factors have created an atmosphere

conducive to rapid credit off take. While the demand for credit has risen exponentially, there has been a parallel increase in competition.

By the use of CIBIL, which provides details pertaining to credit facilities

already availed of by a borrower as well as his payment track record, has become the need of the hour.

CIBILs aim is to fulfill the need of credit granting

Institutions for

comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members.

Banks, Financial Institutions, Non Banking Financial Companies,

Housing Finance Companies and Credit Card Companies use CIBILs services. Data sharing is based on the Principle of Reciprocity, which means that only Members who have submitted all their credit data, may access Credit Information Reports from CIBIL. The relationship between CIBIL and its Members is that of close interdependence.

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For accessing CIBIl data bank has to enter one of these documents number, which is unique itself viz.

PAN card number Voters id number Passport number Driving license

In addition to above, the name of party, date of birth, address with pin code, amt &purpose of loan are also must.
We can get the all the credit information of the customer whether the customer have availed the loan, whether they have inquired for any loan. So this facility is very useful for the bank to know the credit status of borrower or to help in the decision whether he/she is suitable for the loan or not. If there is an overdue in the CIBIL report which appears to be genuine then bank may take that report positive and may sanctioned the loan. But chronic defaulters are not entertains all. After filling all information, a report with control number of 9 digit gets generated which entails all the credit facilities enjoyed by party or any enquiry made therefore. But banks name or financial institution name do not appear in then. If the report is satisfactory, then loan application is entertained. If there is any write off/defaulters/overdue or any information concealed by party then bank may ask for details thereof. If the submitted information is satisfactory then loan may be sanctioned otherwise bank is at discretion not to consider credit facilities.

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4) SCRUTINY OF THE FILE:

After the checking of CIBIL the next step is to be scrutiny of file. Here carefully all the information/documents are checked by officer. They mainly check these documents, Loan application is duly completed (only for applicant) Proof of identification: id card/passport/driving license/PAN card Proof of residence: id card/passport/electricity bill/telephone bill Proof of business address, in case of non salaried borrowers Statement of bank account for last six months (personal) Investment proofs e.g. copies of NSC, KVP bonds, LIC, RC book, demat a/c, property tax bill Loan account statement

5) Allotment of the report:

1) Title clearance report:

Title clearance report is must checked by banks empanelled advocates. Here advocate verifying the title clearance & searching for last 30 years in the respective courts regard. However if government authority allocates the property then search will be done only for remaining period of 30 year. If the property is allocated by govt authority then search is done only after the allotment. Bank has designed specific format for obtaining legal opinion from banks empanelled advocates. This format describes /covers all the points like,

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Name of account & facility Description & area of property Name of the mortgagor &his status in the account Whether the mortgagor has sufficient title & capacity to contract for creation of mortgage. Nature of mortgagors right or title in the property. Whether mortgagor is in exclusive possession of property proposed to be mortgaged Documents studied Chain of title Whether the title is clear & property is free from any encumbrance Title to property is clear, unambiguous, marketable & property is saleable Whether there is any restriction for creation of equitable mortgage. No objection is required List of the title deeds to be deposited to create mortgage by deposit of title deeds in favour of bank by mortgagor. At the same time court fee receipt is must

Charge: minimum 1500 & for outstation search 500 extra Maximum 2500
2) Valuation report: Valuation report to be obtained from approved valuer of the bank. Valuation report involves the current price of proposed property. It include current market price of property. Charge: 100 for 1lac Max-2500 3) Other charge: It includes processing charges Loan up to RS.20/-lacs:0.35%+service tax Loan above RS.20/-lac:0.40%+service tax

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Maximum RS.15000/Loan above RS.30 lacs-0.75% additional interest But if the borrower is government employee or in preferred list of bank, then 0.25% discount is allowed in rate of interest in the applicable rate of interest.

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5) Inspection by officer:
There are two types of inspection carried out in all types of loans. 1) Pre sanction inspection 2) Post sanction inspection Pre sanction inspection is considered a part of processing. No charge is to be levied therefore

Purpose of presanction inspection:

Most importally, it is treated as vital part of processing. To ensure that information provided by the applicant is correct &satisfactory It includes inspection of residence area, place of employment, place of proposed property It is treated as the basis for construction of any loan Generally some officers are designated for carry out this task On the basis of satisfactory report there from loans are being considered This pre sanction inspection is carried out on expectedly. (without giving information to borrower) Post inspection is done through branch. The purpose behind post inspection is to ensure that the proposed property is owned by party or not.

6) File feeding:
Here, files are sent for entry of information into LAPS (Lending

automation processing system). This software is a boon for Bank for retail
loan products and this is internet-based software, maintained at Mumbai. If there is any change of any type happens, this may be automatically affected in all files.

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The benefit of the software is that it covers all the information relating to applicant, co-applicant & guarantor. Customer profile: it include demographic, income expenses &employments details Whether they have LIC policy then the information of that, financial information of the customer, their liabilities & assets. There are many advantages of LAPS like: Easy accessible (anywhere, anytime) Less time consuming Data storage facility permanently Automatically adjust the interest, amount & also eligible amount after entering of all the regarding data which helps the user to ensure that sanction able loan amount is in line with Banks guidelines.

7) Next Step:
After the file feeding the next step is to send the file in the processing department where all the information are again checked in LAPS and it is ensured that necessary papers are attached in the file. Here files are being processed/sanctioned keeping in mind the Banks guidelines and sent to dispatch department where necessary papers are xeroxed to keep in record and loan documents are taken print out. Generally, appraisal note is made on checking on the following points, Background of the applicant Request of loan amount Cost of property Guarantor information CIBIL DATA Description of the property Recommended by sales executive Net worth & risk rating Title clearance report Valuation report Field Inspection Report

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It is worth mentioning that credit rating is strictly checked to ensure that quality of loan file and if the credit rating is within Banks permissible norms, then loan amount will be sanctioned otherwise on the basis of poor crediting rating loan file may be rejected or returned. Credit rating is done on the CRISIL model. Here in Banking, the credit rating is done for all types of loan but not below the loan amount of Rs 2.00 lac. Basically, crediting rating is decided on the following points: Borrower Age Educational qualification Marital Status Mobility of individual-location Number of depends Number of joint applicants Relationship with bank Employer Type Designation Stability of income Proof of income of borrower Housing loan purpose category Loan to value ratio Net worth to loan ratio Net annual income of the borrower Fixed obligations to income Ratio Guarantors Net worth to loan Ratio

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Baroda Housing Loan

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Retail Lending Products of RLF

BARODA HOUSING LOAN:

Retail continues to be the thrust area for credit growth in banking sector and out of that home loan plays a vital role in retail credit growth. Baroda home loan is a major product under Retail Loan Factory.

It contributes more than 45% of the total retail loans.

1) Purpose:

Construction of new dwelling unit and purchasing of new residential house/flat. Old dwelling unit (not more than 25 years old) Purchase of plot of land, subject to the condition that a house will be constructed thereon within 3 years or up to the period allowed by development authority. Repayment of loan already availed from any other bank/HFC (housing financial corporation), provided documentary evidences are produced For houses/flats constructed/purchased (not prior to 24 months) from own sources. Loan for purchase/construction of second house can be considered. 2) Eligibility: All individuals singly or jointly Principal applicant must be employed minimum for 3 years Minimum age-principle borrower-21 yrs and co-borrower-18 yrs (salaried person-repayment period shouldnt be beyond retirement age and for others65 years Housing loan to HUF of be considered. 3) Limit:

The maximum limit is Rs.100 lacs (branches have to seek approval from authority, if loan exceeds Rs. 50 Lacs). However, the actual quantum of loan should arrive at after considering the income criteria & repaying capacity.

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4) Income criteria: Source Income Up to Rs.20000 Salaried More than Rs.20000 & up to RS.1 Lacs More than Rs.1 Lacs Criteria 36 times of monthly income 48 times of monthly income 54 times of monthly income 5 times of net average (last 3 years) annual income excluding depreciation

Other than salaried persons

Whenever income of the family members is clubbed, they should be made co-borrowers. Income of the agriculturists who are not required to the file the income tax are also considered if the income is supported with relevant papers/documents. 5) Margin: Monthly income Purpose Purchase of plot (incl.registration charges & cost of stamps) House/flat already constructed from own resources. All other cases Purchase of plot (incl.registration charges & cost of stamps) House/flat already constructed from own resources. All other cases Margin 20% 25% 20% 20% 20% 15%

Up to Rs.20000

Above Rs.20000

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6) Repayment:

Maximum 25 years (including moratorium period) Moratorium period: Period in which the applicant is not required to pay principal. However, he may or may not pay interest during this period. Maximum moratorium period is 18 months. After that period, party has to be start pay EMI even if the construction is not completed. Age of the borrower plus repayment period should not exceed: Retirement age in case of salaried 65 years in case of others 7) Insurance:

The insurance of the house mortgaged to the bank is to be done at the banks cost under Baroda loan suraksha bima policy with national insurance company ltd. Bob has tide up with Kotak Mahindra to provide personal death insurance which is optional Free accidental insurance of the borrower at the banks cost (insurance cover shall be available) Borrower can join Baroda jeevan griha suraksha scheme to cover the out standing loan amount with accrued interest against the risk of normal death after paying nominal insurance premium once. 8) Processing charges:

For loan up to Rs.20 lacs-0.35% on loan amount service tax. For loan above Rs.20 lacs-0.40% on loan amount (max Rs.15000+service tax) 9) Other features:

Free credit cards No card-up to Rs.2 Lacs Paras-loan limit of Rs.2 Lacs to 5 Lacs Exclusive-above Rs.5 Lacs & up to Rs.10 Lacs Gold-above Rs. If the loan amount is above 50 Lacs then interest is to be added 0.75% in the normal interest.

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Home Loan to NRIs

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 BARODA HOME LOAN TO NRIs/PIOs:

1) Purpose: a. Purchase of new residential house/flat. b. Construction of new dwelling unit. c. Purchase of old dwelling unit (not more than 15 years old). d. For repair/renovation/extension of existing house. e. Purchase of plot of land, subject to the condition that a house will be constructed thereon within-2 years from the date of purchase of plot. f. Repayment of the loan already availed from any other bank/housing finance company under their scheme to finance NRIs/PIOs for housing. The loan shall be considered for residential properties situated in India 2) Area of operation: The branches may consider housing loan proposals provided it is in the city/town of:

Location of new flat/house to be purchased /constructed or Place of residence of the applicant in India

3) Eligibility: Non-resident Indians (NRIs) holding Indian passport or persons of Indian origin (PIOs) holding foreign passport, singly or jointly.

For this purpose person of Indian origin means a citizen of any country other than Bangladesh/sri lanka /Afganistan/china/iran/nepal &Bhutan ifI. He at any time held Indian passport or II. He or either of his parents was a citizen of India by virtue of the constitution of India of the citizenship Act 1955,or III. The person is a spouse of an Indian citizen or a person referred to in sub clause (a) or (b) above. 1. Principal applicant should having a regular job abroad in a reputed Indian/foreign company, organization or government department holding a valid job contract/work permit for minimum past 2 years. Or 2. Must be employed/self-employed or having a business unit and staying abroad at least for 2 years Must have minimum gross annual income equivalent to Rs.5 Lacs per annum.

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4) Age:

5)

Minimum age must be 21 years; minimum age of co- borrower can be 18 years. Age of the borrower plus repayment period should not be beyond retirement age or 65 years whichever is earlier. Security: Equitable/legal mortgage of property constructed/purchased or property to be Renovated /repaired. Personnel guarantee of spouse/family member residing in India shall be obtained. If spouse is also residing abroad personal guarantee of one/two persons resident in India having adequate worth.

6) Minimum amount:

8)

For purchase of new/old house/flat or construction of house/flat: Rs.5/-lacs For repairs/renovations/extensions: Rs.1/-lac.

7) Maximum amount: For purchase of new/old house/flat or construction of house/flat: Rs.100/-lacs For repairs/renovation/extensions: Rs.25/-lac For purchase of plot of land: Rs.50/-lacs Repayment period: Maximum 15 years including moratorium Payment should be remitted from abroad through normal banking channels or out of NRE/NRO (non residence external account) account of the borrower are to be obtained. Close relatives of the borrower in India may also repay the installments of such loans, interest and other charges, if any, through their bank account directly to the borrowers loan account. Other points: This loan is decided on the papers like employment contract, copy of visa, passport & similar credit in salary account. If the applicant is residing outside India & there is no possibility of coming in India in near future then he/she can avail the housing loan through power of attorney executed in favor of local resident at India.

9)

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 BARODA AAA(ADDITIONAL ASSURED ADVANCE):

1) Purpose: Any purpose excluding speculative or illegal purpose. 2) Eligibility: All existing housing loan customers, whose conduct of account is good and is classified as standard. There is no adverse features/auditors/inspecting officers remarks in exiting housing loan A/Cs. Age of borrower +tenure of AAA loan should not exceed 65 years. Loan can be availed maximum 5 times during the tenure of housing loan provided previous AAA is settled at least one month before. 3) Limit & margin: minimum-Rs.25000 maximum-amount equal to 90% of principal amount repaid Margin-10% of the principal amount repaid. 4) Repayment: By equated monthly installments (EMI).first installment to fall due one month after first disbursement. Repayment period as per borrower capacity to repay however in any case not to exceed remaining period of housing loan. 5) Security: Extension of equitable mortgage of the housing loan. Personal guarantee of third party if the same is mentioned in housing loan.

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 BARODA HOME IMPROVEMENT LOAN:

1) Purpose: For repair/renovation/improvement/extension of existing house. Purchase of furniture/fixture/furnishing/other gadgets. (Only to those borrowers who obtains loans for repairs/renovation under the schemes.) 2) Eligibility: Minimum age-21 years. Maximum age of the borrower +repayment period should not be beyond retirement for salaried person and 65 years in case of others. HUF &staff members are not eligible. 3) Limit: Upper ceiling limit Rs.10.00 lacs with the provision that loan component for furniture/fixture/fitting/other gadgets should not exceed Rs.5.00 lacs, Under this product for salaried 24 times of gross monthly income & for businessman 2 of gross monthly income. 4) Margin: 25% of the project cost 5) Repayment: Maximum 10 years(including moratorium period) Moratorium period maximum 6 months. 6) Interest: 10.50%

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7) Documentation charges: Loan amount Up to Rs.25000/Above Rs.25000/- & up to Rs.2 lacs Above Rs.2 lacs & up to Rs.5 lacs Above Rs.5 lacs &up to Rs.10 lacs Charges(s.t.to.be included) Nil Rs.200 Rs.500 Rs.1000

Property should be in the name of applicant &in the possession of applicant.

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EDUCATION
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 BARODA EDUCATION LOAN:

Bank of Baroda has three types of education loan. a) Baroda vidhya b) Baroda gyan c) Baroda scholar

A) Baroda vidhya:
1) Target group: parents of students perusing school education nursery to standard XII 2) Eligibility: from

Should be an Indian national residing in India. Student should have secured admission to a recognized
school/high school/jr.college for any of the following courses: Stage 1: nursery to V th std. Stage 2:VI th to VIII th std Stage 3: IX th to XII std No minimum qualifying marks Loan to be granted in the name of father/mother of the student 3) Coverage of expenses for: Fee payable to college/school Examination/library/laboratory fee Fee and other charges payable to hostel Purchase of books/equipments/instruments/uniforms Personal computers/laptops wherever required Caution deposit/building fund/refundable deposit supported by institution bills/receipts Cost of external coaching/tuition is not be

considered
4) Quantum of finance: maximum Rs.4 lac 5) Margin: nil 6) Repayment period: Yearly sub limit repayable in 12 equal installments Repayments to start 12 months after first disbursement of each years loan amount

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7) Rate of interest: 1.25% below BPLR 1% concession in the rate of interest to loans sanctioned for the benefit of girl students.

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B) Baroda gyan:
1) Target group: 2) Margin: Up to Rs.4 lacs :NIL Above Rs.4 lacs: 5% Students pursuing graduation, post graduation, professional & other courses in India. 3) Courses eligible: Graduation/post graduation/professional & other courses like ICWA,CA,CFA etc. as well as courses conducted by IIM,IIT,IISC,XLRI,NIFT etc. Evening courses of approved institutes. Other courses leading to diploma/degree etc.conducted by colleges/universities approved by UGC/GOVT etc. 4) Student eligibility: Should be resident Indian. Secured admission to professional/technical courses in India through entrance test/merit based selection process. 5) Quantum of finance: Maximum Rs.10 lacs Scholarship/assistant ship if any received to be included in the margin student pursuing graduation, post graduation, professional & other Courses in India

6) Repayment & moratorium period:

Course period+1 year or 6 months after getting job, whichever is earlier. The loan is repayable in 5-7 years after the above period.

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Baroda scholar

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C) Baroda scholar:
1) Purpose: Bank of Baroda presents financial assistance to students going abroad for Graduation/post graduation/professional/technical courses offered by reputed universities abroad. 2) Loan amount:

Maximum: Rs.20 lacs Minimum: Rs.7.50 lacs (mortgage base)

3) Margin amount: 15% 4) Security: mortgage of property up to loan amount 5) Student eligibility:

Should be an Indian national

Secured admission to professional/technical courses abroad through entrance test/Merit based selection process. 6) Coverage of expenses:

Admission/tuition fees to college/university &hotel/mess charges. Examination/library/laboratory fee/purchase of books/equipments/uniform etc. Purchase of computers if essential for completion of the course. Any other expense required to complete the course e.g. study tour, project work, thesis etc.

7) Repayment & moratorium period:

Course period+1 year or 6 months after getting job, whichever is earlier. 8) Freebies:

Drafts in foreign currencies drawn on our branches/subsidiaries required in favour of college/university/student will be issued free of exchange/commission.

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9) Other benefit:

Concession of 1% in rate of interest if interest is served regularly in moratorium period. Concession of 1% in rate of interest in case of girl student. Loan covers all fees & expenses.

Simple interest is charged at monthly rests during moratorium period. Low processing charges of 1% will be charged if applicant has not availed the disbursement of loan. If the interest amount of the loan, party is paying before moratorium period then 1% discount. 10) Rate of Interest: 12%

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Baroda Traders Loan

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 BARODA TRADERS LOAN:

1) Purpose: Working capital requirement Development of shop (e.g. purchase of equipment, furniture etc. and not for purchase of shop) Need based requirement of funds for development of shop by way of loan up to a maximum of 25% of the limit sanctioned for the working capital Non fund based facilities (i.e. bank guarantee and letter of credit)

2)

Eligibility: All persons engaged in trade of any commodity/goods not prohibited by law or opposed to public interest. Individual, proprietorship, partnership concerns, firms, private ltd and regd.co-op societies engaged in trade of any commodity/goods required by the community and trading in them is not prohibited by law or proposed to public interest. The business units should have been established in the line of business for a minimum period of 2 years. Trading unit established by our existing customer with satisfactory dealings of their close relatives, even if these are established for less than 2 years. Trading units of non-customers having less than 2 years establishment, with the prior approval of regional authority.

3) Limit &margin:
Minimum:Rs 25000 & maximum : Rs.200 lacs Advance value of collateral security with margin: 10% on FDR 15% on surrender value of LIC policies, NSC and Govt.bonds 50% on approved shares/bonds 40% on latest valuation of immovable property OR 20% of projected sales( whichever is less)

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4) Processing & service charges

Fund based: min-@ 0.35% i.e. Rs.1000/ Max.Rs.300000/- +service tax Non fund based- as per extant guidelines.

5) Repayment:
Overdraft: 12 months subject to annual review Demand loan: maximum 60 EMI(depending on repayment capacity)

6) Security:
Tangible collateral securities in the form of mortgage of land (not agricultural land) and building. Property to be mortgaged may be only in the name of borrower, proprietor, partner, director or their close relatives (viz. spouse, parent, brother, sister, son. daughter) who should stand as a guarantor. NSCs, LIC policies KVPs, bonds, FDRs, standing in the name of borrower/proprietor/partner/director only. Age of property: In case of loan: Age of property should not be more than 25 years old. However for properties which are older than 20 years but not more than 25 years, branch is to ascertain structural soundness of the property by obtaining an approved engineers certificate, certifying that structural soundness as well as residual life of the building should be at least 5 years more than repayment period of the loan. For dwelling units, which are older than 25 years, regional head may authorize such cases on selective basis, subject to ascertaining structural soundness of the building by obtaining an approved engineers certificate, certifying that structural soundness as well as residual life of the building should be at least 5 years more than the repayment period of the loan. In case of overdraft: Building less than 25 years old guidelines applicable to general advance to be followed Older than 25 years- the branch will be required to carry out inspection of the property every year at the time of review of facility and obtain report from architect every 3rd year along with valuation of property.

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7) Documentation:
d.p.note letter of continuing security hypothecation of goods(where ever applicable) draft undertaking cum declarations undertaking to deal exclusively with us equitable mortgage of property Mortgage should be registered with sub registrar of assurance. The under taking from the borrower declaring that he does not owe any overdue statutory dues like sale tax, income tax/and have obtained/renewal license from concerned authorities required for trading in the merchandise goods every year Property to be mortgaged must be in the name of either: Borrower Proprietor, partner, director Close relative of borrower who should stand as guarantor Third party property provided credit facility is for Rs.1 lac and above 8) Other point: If yearly sales of customer are above 40 lac then return should be audited compulsorily. Registration certificate is must if VAT is to be charged and also required challan. Last 2 years of income tax return or audited report If the account of customer is not in the BOB then credit report of present bankers is must If company then constitution is required, 1) Memorandum 2) Article of association Interest rate is to be depends on current rate of BPLR

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BARODA MORTGAGE LOAN

Baroda mortgage loan is divided in to two sub products. i.e. 1) ODAP (overdraft against the property) 2) Loan against property

The mainly difference between these loan is, In ODAP the interest will be served on monthly basis on the amount withdrawn and . In Mortgage loan, the EMI will start from the next month from the loan disbursement, there is provision for 3 months moratorium period

1) Purpose:
For all legitimate purpose except for speculations.

2) Type of facility:
Overdraft/term loan

3) Eligibility:
Salaried employees/professionals, self employed & others, who are income tax assessed for last 3 years. Age:minimum-21 years Maximum-60 years (The customers age +overdraft/loan tenure should not exceed 65 years) Minimum gross annual income: Rs.60000/-

4) Limit:
A) Minimum-Rs.1 lac b) Maximum: for rural branches: Rs.5 lac All other branches : Rs.100.00 lacs. (Subject to income criteria, repayment capacity and advance value of the property offered as security)

5) Income criteria:

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Salaried class: 36 times of net monthly income. Other individuals: 3.5 times of net average (last three years) annual income. Income of all the joint owners of the property who are coborrowers can be clubbed. ii. Co-borrower: The facility can be considered to an earning member/members of a family against the property standing in the name of any member/members of the family. Members of the family comprises of spouse, father, mother, son/s, brother/s & brothers wives and daughter/s (subject to the condition that they are living in the family jointly, this is to be ascertained through interview of applicant) i. Net monthly income: Gross salary less professional tax, income tax and P.F Net annual income: Income net of professional tax and depreciation, if any.

6) Repayment capacity:
Total deductions should not exceed 60% of the gross income(including installment/repayments towards proposed facility)

7) Rate of interest:
1.50% above BPLR (presently BPLR is 12%.so 13.50%

8) Penal interest:
2%p.a.on overdue amount

9) Margin:
40% of the market value of the property to be mortgaged

10) Security:
Equitable mortgage of: 1. Residential or commercial property 2. Plot of land allotted/purchased from any development authority. The allotment/sale of plot/land by such development authorities should not contain any clause stipulating fixed time limit for construction of house/commercial building. Loan/overdraft against tenanted property should not be considered except in case where the property is given on lease to PSU, govt/ semi govt. enterprises, large corporate, banks, financial institutions & insurance companies.

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11) Personal guarantee:

Up to Rs.10 lacs: guarantee may not be insisted upon. Over Rs.10 lacs: third party guarantee of an individual having adequate worth must be obtained.

12) Repayment period:

Loan: Maximum 84 months in equal monthly installments (EMIs) Maximum moratorium period-3 months Overdraft i. The facility may be continued without any condition of reduction till the maximum age specified ,if desired by the borrower, subject to: Annual review & satisfactory conduct of the amount Minimum annual turnover in the account is at least 25% of the limit.

ii.

Wherever it is observed at the time of review that stipulation of annual turnover is not complied with, the limit should be reduced annually as under: Maximum period of overdraft: 10 years. Reduction in operative limit proportionately by the end of each year, synchronizing with review of the account. Alternatively branch may explore the possibility of converting the overdraft facility in to term loan and fix EMI for recovery of the balance amount.

13) Period of facility: 12 months subject to review 14) Valuation of property:

Valuation of property should be got done by our banks/ Govt approved valuer as per extant guidelines at the time of considering the facility. However, if the property has been acquired within last 5 years, amount of registered sale deed may be taken as value of the property (in such cases fresh valuation may be dispensed with and loan amount is considered on that value.

15) Other points:

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 The bank shall have right to progressively reduce the limit of overdraft sanctioned hereby every year/month from time to time during the avalment of the OD limit. However, it is agreed and understood that such commitment for progressive reduction in the overdraft limit is and will be without prejudice to the rights of the bank to call for accelerate and demand repayment of entire outstanding amount in overdraft limit at any time and from time to time. Interest to be recovered as & when applied in the account

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PREVENTIVE VIGILANCE GUIDELINES:

Bank issues preventive vigilance guidelines in retail loans segment from time to time so that frauds & forgery do not happen. Here some incidences wherein the borrowers have fraudulently tried to avail loans from the bank by producing false information, fake and forged documents . Fake/forged/Xerox copy of the title deeds. KYC norms not strictly compiled with and borrowers were not residing at the places as informed to the bank. False copies of IT returns were submitted. Upon verifying copies of income tax returns for last three years from original it was revealed that all the returns were filed on one date whereas different dates appearing on zerox copies submitted to bank were of respective years. Applicant for availing home loan submitted in fake construction agreement. There was no builder in existence. Fabricated statement of account was submitted in few cases, which was revealed after cross checking with other banks branches. In many cases CIBIL data interface gave the information about other bank borrowings in respect of applicants who intentionally did not disclose the information at the time of applying for loan from our bank. Pre sanction inspection revealed that a person who has applied for home loan does not have any business but has managed to fix signboard at the shop, which belongs to someone else. Income of spouse was considered based on false documents though she was not engaged in gainful employment. In some cases properties were overvalued substantially for getting maximum loan. Construction was not as per approved plan and of poor quality & low value.

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A fraud is one area of concern where there is total loss in most of the cases. Here some guidelines so, that frauds can be averted. KYC norms to be strictly compiled with and identity of the borrowers/guarantors to be verified by making a visit to their residences and/or work places. The borrowers are required to visit the branch personally to execute all loan documents. Authenticity of salary certificates and income tax returns submitted by the borrowers to be independently verified from the employers and income tax authorities through charted accountants/agencies empanelled by our bank for the purpose. Income assessment is very important tool to decide the loan amount, as well as permissible EMI.several frauds have occurred due to inflated income assessed by including various other sources of income which are not of stable nature like interest income, rental income, and agricultural income etc.due care has to be taken to verify the genuineness of the source & kept on record. Strict watch to be kept on repayment of installments and follow up is done promptly. Branches should be more cautions in case of higher number of cases are coming through one particular builder. Equitable mortgage can also be registered with sub registrar office on payment of required fee. Facilities must be released only after compliance of all the terms of sanction and vetting of documents. Pre-sanction inspection including visit to the place of residence and work as well as property to be purchased, must be carried out independently, preferably without giving prior information to the applicant. In case of applicants other than salaried persons, the original taxpayers copy of challans of tax deposited is verified to ascertain genuineness of income tax returns and also the assessment orders for earlier years. Housing proposals of the persons, who have filed their income tax returns of last three years in one lot, should not be entertained. No middlemen should be entertained for any retail credit proposals.

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 Whether applicants are not maintaining their saving account with bank, the branch should obtain statement of principal account of the applicant, wherein salary is being credited. Credit rating in prescribed module relevant to the retail loan proposal should be carried out in case before taking credit decision. Valuation report submitted by govt/ approved valuer in respect of immovable property, the processing officer or asset inspecting officer or sanctioning authority should assess the value of the property independently on the basis of prevailing market rates and record the same in the file. Each disbursement, whether need to be made in stages, should be backed by site/spot inspection and relative report should be kept on record. Post-sanction inspection after final disbursement should be carried out to ensure that borrower has taken possession of the house/flat besides verification of end use of funds.

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SWOT ANALYSIS
STRENGTH: Financially strong bank Very old bank Aggressive marketing Good repo Technological advanced

WEAKNESS: Guidelines are not flexible Power is not decentralized OPPORTUNITIES: New area is developing. So, there is vast chance for housing loan. Guidelines to be designed in such a way that needs of the all type of prospective borrowers should be fulfilled. THREATS: This is the nationalized bank so, competition may be with private banks Aggressive marketing strategies by private banks Entry of foreign banks in near future.

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LEARNINGS
The most important part is that they make me feel employee of the organization rather than a trainee and allow me to flourish in each and every department. They were so generous to me that at any mistake, rather scolding they taught me how to correct it & allow me to learn from that mistake. Learning include, 1. Overview of the banking industry & their operation 2. Deep knowledge of loan &procedure 3. Proposals that the bank has approved for the disbursement of loan 4. How to come out from the different problem regarding loan & how to interact with customer. 5. Working on CRISIL and learning some of its function 6. The most important learning of CIBIL& how to learn this CIBIL 7. Knowledge & functioning of LAPS software 8. Awareness of FINACLE software.

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Experience at RLF
I would like to conclude my project with a feeling of having gained enormous knowledge in the field of advances. My project has taught me a lot and has helped me sharpen my management skills for application aspect. I had wonderful experience for which I am greatly thankful to the entire staff of RLF who have continuously taught me by guiding in each and every step. It was a memorable experience of working in such a lively & dedicated atmosphere. Not to forget to mention that my two months training has removed my misconceptions regarding the working of public sector bank. Lastly, I would conclude it was such a memorable experience for me to be a part of BOB RLF. Thanks a lot to all staff members of BOB for such a good co-operation.

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BIBILIOGRAPHY & WEBOGRAPHY

www.bankofbaroda.com www.google.com www.apnaloan.com www.cibil.com www.crisil.com www.loanbazar.com

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