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COMPARATIVE STUDY OF HOME LOANS OF PNB AND SBI BANK.

INTRODUCTION TO LOAN:Home loans work like any other debt. That is, loans are simply specific money that we borrow from a bank, a private lender, or some other type of lender. Afterwards, we must repay our debts with interest. However, unlike other types of loans, home loans are different in several respects. Owning a piece of land or property is a lifetime dream for every individual. There are many home loans provider in the market. There are different type of home loan i.e. Home Purchase Loans Home Improvement Loans Home Construction Loans Home Extension Loans Home Equity Loans Land Purchase Loans Bridge Loans

Home Purchase Loans


These are the basic forms of home loans used for purchasing of a new home. With about a million home lenders and mortgage brokers it's becoming a tough challenge as the days are progressing. But at the same time, when the sites are coming up with all the latest tools and relevant information for us, and with all such conveniences, obtaining a home purchase loan or mortgage has become really pretty simple. However, at the same time though, we may be flummoxed to look so many attractive rates and offers in the market, not to forget the hidden costs associated with each of them.

Home Improvement Loans


Home improvement loans are used to finance improvements and add on to the existing set of credentials of beauty on your owned house, recently purchased property or rented accommodation. Home improvement loans are used to maintain or enhance the value of your house. In general it includes: repairs, remodeling, energy-related items (permanent in nature), repairs, a new kitchen, a new bathroom, terrace, an extension or general property improvements. Luxury items and fireplaces are generally not eligible, though. Many improvements in landscape and even swimming pools are nowadays considered to be a part of home improvement.

Home Construction Loans

Home construction loans are used to finance for the construction of our newly acquired home or if we are planning to build a home.

The factors include in calculations for house building costs? Design of the house Construction cost Financing Cost Buildable site All the above mentioned costs will help us to determine the amount we may need to borrow. For example, besides calculating the construction costs, we may also be required to consider the total expenditures to develop the site in order to build. Each site is unique requiring different expenditures so this specific rupee amount will vary from site location to site location. Payment: Before the house starts getting build, we will be required to pay a deposit to your builder as well as paying a deposit for the land if we are buying land. As work progresses you will need to make payments to the builder. Certain loans can be structured for progress payments to be made during construction.

Home extinction loan


Home extension loans are used by customers to get loans from the banks to extend their houses, by adding more rooms, kitchens, wash rooms, terraces, or any other rooms for your growing family. It may also be used to enclose open balcony/terrace space, or constructing a Puja ghar. Maximum Amount of Home Extension Loans: Banks generally offers about 70-85% of the total amount of home extension as loan. The amount of loan sanctioned also depends on a number of factors such as the age of the applicant at the time of loan, tenure of the loan, repayment capacity of the borrower; his/her credit history etc.

Home equity loan:


Home equity loans helps customer to en cash the market value of the commodity by taking a loan by mortgaging the property. So, Home equity loans are availed by customers, who wish to mortgage his/her property to the bank for taking some loan for some other purpose. Then, it's up to the bank's discretion to consider the market value of the property and accordingly decide

how much to pay to the customer. Both the residential as well as non residential property can be considered for the approval of the loan, provided the mortgager is a licensed title holder and the land is free form any kind of dispute. Home equity loans don't restrict one to use the loan money in specific investments. It might also be used in marriage, higher education, medical expenses, etc. However it should not be used in any illegal or speculation purposes.

land purchase loan:


Land Purchase loans are used by customers who wish to purchase a plot of land for commercial or residential purpose. Everyone has his/her dream perfectly sketched in his souls and so is his ambition to get his house erected on the exact location he dreamt that to be. If you have found and short listed the piece of land, and have arrived here for finance, you have come to the best place you could have arrived in the web. Now, that you have decided to purchase a land as an investment or for your own dream home, you will realize that a land purchase loan is one you will cherish. Loans that are strictly for land purchase can be as scarce as good residential plots. While many lending firms around the nation compete to provide mortgages for the purchase of a house on a lot, only local institutions typically will be interested in lending for an empty lot.

Bridge loan:
Bridge loans are designed for people who wish to sell the existing home and purchase another one. The bridge loans help finance the new home, until a buyer is found for the home. Bridge loans are used by customers as an effective vehicle to capitalize on a purchase opportunity. It can be considered as a short term financing scheme which is generally expected to be paid back, within the range of 6-36 months, till the time the borrower gets more permanent and lower cost financing. So, bridge loans, (or swing loans as they are otherwise said) is a short term loan provided by various banks like Bank of India, Citibank, ICICI etc. often used for commercial real estate purchases, retrieve real estate from foreclosure. Bridge loans in corporate finance are called gap financing, and are used to cover the time between redemption of issuance of one bond and its replacement by a new issue. They can also be

operating loans for periods between LOI and acquisition, or quiet period and IPO. Bridge loan may contain a decent proportion of prepaid interest, sometimes as much as six months. If the home gets sold before that time, you may receive interest payments back, but if it hasn't sold, you may be required to continue payments.

OBJECTIVES
To study the cost of home loans provided by the bank. To know that which bank provide batter loan schemes. To analyze the home loan scheme by PNB and SBI banks. To know the consumer perception about the home loan of PNB and SBI.

SCOPE OF THE STUDY:


This study is analysis and comparison of home loans provided by the SBI and PNB banks. It is helpful in analysing the home loan service provided to the customer and their comparison.

INTRODUCTION TO COMPANY: PUNJAB NATIONAL BANK :


PNB has over 4500 branches and offices bringing the Punjab National Bank to your doorstep. Around 2400 offices come under the network of Centralized Banking Solution or CBS. A need for centralized banking system prompted PNB to go computerized and what followed was the establishment of CBS in Punjab National Bank branches in all the leading cities like Delhi, Pune, Chennai, Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar, Kolkata, Ludhiana, Nodal and Bangalore. Internet Banking Services are provided to all customers in the CBS branches. A branch and ATM locator is also available on the official website of Punjab National Bank. For an overview of the annual report or the bank profile, the site can be resourceful. The website also provides info on the careers and recruitments at PNB and the exam results.

The careers at nationalized banks like PNB are the most sought after one and candidates are selected on the basis of their exam result. PNB topped the Best Paying Commercial Bank category with an overall rating of 87.45% as evaluated by the SSS Retirement, Death & Funeral Benefits Program.

STATE BANK OF INDIA: State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic network of over 9000 branches (approximately 14% of all bank branches) and commands one-fifth of deposits and loans of all scheduled commercial banks in India. The State Bank Group includes a network of eight banking subsidiaries and several nonbanking subsidiaries offering merchant banking services, fund management, factoring services, primary dealership in government securities, credit cards and insurance. The eight banking subsidiaries are: State Bank of Bikaner and Jaipur (SBBJ),State Bank of Hyderabad (SBH).State Bank of India (SBI),State Bank of Indore (SBIR),State Bank of Mysore (SBM),State Bank of Patiala (SBP),State Bank of Saurashtra (SBS) and State Bank of Travancore (SBT). Today, State Bank of India (SBI) has spread its arms around the world and has a network of branches spanning all time zones. SBI's International Banking Group delivers the full range of cross-border finance solutions through its four wings - the Domestic division, the Foreign Offices division, the Foreign Department and the International Services division. OVERVIEW OF THE INDUSTRY:
HISTORY: Banking in India has a long and elaborate history of more than 200 years. The beginning of this industry can be traced back to 1786, when the countrys first bank, Bank of Bengal, was established. But the industry changed rapidly and drastically, after the nationalization of banks in 1969. As a result, the public sector banks began experiencing numerous positive changes and enormous growth. Then came the much-talked-about liberalization and economic

reforms that allowed banks to explore new business opportunities and not just remain constrained to generating revenues from mere borrowing and lending. This provided the Indian banking scenario a remarkable facelift that only continues to get better with time. However, even today, despite the foray of foreign banks in the country, nationalized banks continue to be biggest lenders in the country. This is primarily due to the size of the banks and the penetration of the networks. The Indian banking system can be classified into nationalized banks, private banks and specialized banking institutions. The industry is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. The Reserve Bank of India is the foremost monitoring body in the Indian Financial sector. It is a centralized body that monitors discrepancies and shortcomings in the system. Industry estimates indicate that out of 274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in the private sector. These private sector banks include 24 foreign banks that have begub their operations here. The specialized banking institutions that include cooperatives, rural banks, etc. form a part of the nationalized banks category.

Opportunities:The Banking sector is considered the most lucrative option in todays job market. In the industry, a position in Treasury or Forex is considered right on top and this is followed by careers in Private Banking, Investment Banking and Retail Banking. One could work in a variety of areas in banking industry including Recurring Deposit account, banking officer, probationary officer, loan officer, assessor, personal loan officer, home loan officer, home loan agent, loan manager, mortgage loan underwriter, loan processing officer, accountant, product marketing and sales executive, and customer service executive among others. In the Financial Services, some of the important jobs include that of a stockbroker who is essentially a person who buys and sells securities on behalf of individuals and institutions for some commission. While some brokers like to practice with individual clients others work for institutions. Brokers who work for institutional investors are often called securities traders. Many prefer to work as dealers, advisors and securities analysts. Security analysts are those who advise companies on floatations of shares as they are expected to have sound knowledge of capital markets. Investment analysts are the backbone of

the financial services sector. They study the financial reports of companies, assess various statistical information, profitability projections, compare financial results, survey the industry as a whole and on the basis of the available information, and finally conclude to a decision. Equity Analysts do jobs similar to investment analysts and research the equity markets and make predictions.

Growth:
The limit for foreign direct investment in private banks has been increased from 49% to 74%. In addition, the limit for foreign institutional investment in private banks is 49%. Liberalization and globalization have created a more challenging environment in the banking sector as well as in the other segments of the financial sector such as mutual funds, Non Banking Finance Companies, post offices, capital markets, venture capitalists, etc. Research and Markets has announced the addition of 'Indian Retail Banking, 2006' to their offering. Indian Retail Banking continues to redefine the credit growth in the country. It grew by a whopping 44.4% in 2005-06 to touch Rs 3,538 billion. This leap was despite the increase in risk weight by RBI for housing and real estate loans during August, 2005. Housing, which constitutes more than 52% of all retail loans, grew at a robust rate of 44.35% during 2005-06. In order to help banks in India to understand the market and competition and plan future strategies, we have just come out with an Industry Insight on Indian Retail banking - 2006 edition. This report analyses the retail banking market and its segments in India and presents the key trends, along with issues and challenges. The report also paints a future outlook for the market. Besides it profiles 21 major players in the retail banking space and their strategies. Finally, it seems Reserve Bank of India's (RBI) flurry of measures to restrain the home finance market is paying off. With tightening of interest rates by the RBI and a simultaneous increase in real estate prices in a few markets, the banking sector is witnessing a decline in the growth of its home loan portfolio The home loan industry is experiencing a growth of 25% this year, as against 30% growth in home loans earlier. Rajiv Sabharwal, senior general manager, ICICI Bank which has recorded the highest incremental growth in home finance segment in recent past, said, The real estate prices have become very high in few markets, which has resulted in the fall in growth rates for home loans for the banking industry.

Home loan growth has reduced to 25% from its earlier growth rate at 30% and since we are an integral part of the industry, there will be some impact on us too. He added that the bigger impact had come from real estate prices, but obviously interest rates hikes will also have an impact. He, however, declined to disclose the banks current home loan growth rate. Echoing a similar view, a senior official of State Bank of India (SBI) said the home loan market is showing some signs of slowing down. However, another major player, Housing Development Finance Corporation (HDFC) said the housing finance market for the middle class segment was growing at a healthy pace. PNB Bank is a leading home loan lender of the country with about 30% market share. Retail lending comprises 70% of the total loan portfolio of the bank, of which the home loan lending is about 50%. In the first half of fiscal 2007, the bank experienced total home loan disbursements of Rs 13,400 crore.

PROFILE OF THE ORGANISATION:


PROFILE OF PNB: The profile of the PNB shows superior banking services in corporate, personal and international banking, industrial and agricultural finance and finance of trade. Punjab National Bank boasts of a varied clientele consisting of small and medium industrial units, exporters, multi-national companies, Indian conglomerates and NRI. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. The objectives of the Company are in line with objectives laid down by RBI for the Primary Dealers: Strengthen the infrastructure in the government securities market in order to make it vibrant, liquid and broad based. Ensure the development of underwriting and market making capabilities for Government Securities Improve secondary market trading system, which would contribute to price discovery, enhance liquidity and turnover and encourage voluntary holding of Government securities amongst a wider investor base Become an effective conduit for conducting open market operations.

PROFILE OF SBI:
The SBIs powerful corporate banking formation deploys multiple channels to deliver integrated solutions for all financial challenges faced by the corporate universe. The Corporate Banking Group and the National Banking Group are the primary delivery channels for corporate banking products. The Corporate Banking Group consists of dedicated Strategic Business Units that cater exclusively to specific client groups or specialize in particular product clusters. Foremost among these a specialized group is the Corporate Accounts Group (CAG), focusing on the prime corporate and institutional clients of the countrys biggest business centers. The others are the Project Finance unit and the Leasing unit. The National Banking Group also delivers the entire spectrum of corporate banking products to other corporate clients, on a nationwide platform. The bank is also looking at opportunities to grow in size in India as well as Internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings. Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme termed Parivartan the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and inclusiveness. The workshops fired the imagination of the employees with some other banks in India as well as other Public Sector Organizations seeking to emulate the programme.

PRODUCT RANGE OF COMPANY/INDUSTRY


The products and services provided by the SBI and PNB are in various fields, such as: Banking services NRI services International banking Corporate banking Agricultural banking

International banking .

RESEARCH METHODOLOGY
Design of Research: The research will be exploratory in nature. A population of peoples who take home loan from these banks will be considered for this study. I will try to explore about the home loans which would make a difference in the behavior of the consumer. Effort will be made to throw light on most of the factors which have either indirect or direct effect on the behavior of the consumer. I will also explore the impact of home loans on the market share of the banks.

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