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CHAPTER-I

1.1 INTRODUCTION TO THE COMPANY

Established in 1911, Central Bank of India was the first Indian commercial bank which was

wholly owned and managed by Indians. Central Bank of India a government-owned bank, is

one of the oldest and largest commercial banks in India. It is based in Mumbai. The bank has

3,563 branches and 270 extension counters across 27 Indian states and three Union

Territories. Central bank of India is one of 18 Public Sector banks in India to get

recapitalisation finance from the government over the next 24 months. The establishment of

the Bank was the ultimate realisation of the dream of Sir Sorabji Pochkhanawala, founder of

the Bank. Sir Pherozesha Mehta was the first Chairman of a truly 'Swadeshi Bank'. In fact,

such was the extent of pride felt by Sir Sorabji Pochkhanawala that he proclaimed Central

Bank of India as the 'property of the nation and the country's asset'. He also added that

'Central Bank of India lives on people's faith and regards itself as the people's own bank'.

 During the past 99 years of history the Bank has weathered many storms and faced many

challenges. The Bank could successfully transform every threat into business opportunity and

excelled over its peers in the Banking industry. Central Bank of India has approached the

Reserve Bank of India (RBI) for permission to open representative offices in five locations -

Singapore, Dubai, Doha, London and Hong Kong. This is the first time the bank is venturing

an independent overseas foray after the Sethia scam in the 1970s forced the bank to close

down its London office. RBI had then asked the other two banks, who had operations in

London, to close down.

As on 31 March 2011, the bank's reserves and surplus stood at 6,868.85 crore. Its total

business at the end of the last fiscal amounted to 2,09,757.33 crore.The bank had a staff

strength of 37,241 as on Nov 2006.

A number of innovative and unique banking activities have been launched by Central Bank of

India and a brief mention of some of its pioneering services are as under:

1921Introduction to the Home Savings Safe Deposit Schemeto build saving/thrift habits in

all sections of the society.

1924 An Exclusive Ladies Department to cater to the Bank's women clientele.

1926 Safe Deposit Locker facility and Rupee Travellers' Cheques.

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1929 Setting up of the Executor and Trustee Department.

1932 Deposit Insurance Benefit Scheme.

1962 Recurring Deposit Scheme.

Subsequently, even after the nationalisation of the Bank in the year 1969, Central Bank

continued to introduce a number of innovative banking services as under:

1976 The Merchant Banking Cell was established.

1980 Centralcard, the credit card of the Bank was introduced.

1986 'Platinum Jubilee Money Back Deposit Scheme' was launched.

1989The housing subsidiary Cent Bank Home Finance Ltd. was started with its

headquarters at Bhopal in Madhya Pradesh.

1994Quick Cheque Collection Service (QCC) & Express Service was set up to enable

speedy collection of outstation cheques.

Further in line with the guidelines from Reserve Bank of India as also the Government of

India, Central Bank has been playing an increasingly active role in promoting the key thrust

areas of agriculture, small scale industries as also medium and large industries. The Bank also

introduced a number of Self Employment Schemes to promote employment among the

educated youth.

 Among the Public Sector Banks, Central Bank of India can be truly described as an All India

Bank, due to distribution of its large network in 27 out of 29 States as also in 3 out of 7 Union

Territories in India. Central Bank of India holds a very prominent place among the Public

Sector Banks on account of its network of 3967 branches and 27 extension counters at

various centres throughout the length and breadth of the country.

 Customers' confidence in Central Bank of India's wide ranging services can very well be

judged from the list of major corporate clients such as ICICI, IDBI, UTI, LIC, HDFC as also

almost all major corporate houses in the country.

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1.1.1 Directors

 Directors of Central Bank of India & their address:

Shri. M.V.Tanksale

Chairman & Managing Director

Smt Vijayalakshmi R. Iyer

Executive Director

Shri Rajiv Kishore Dubey

Executive Director

Shri Alok Tandon

Director

Shri  Salim  Gangadharan

Regional Director

Shri  Brijlal Kshatriya

Director

Shri Romesh Sabharwal

Director

Major (Retd.) Ved Prakash

Director

Shri B S Rambabu

Director

1.1.2 Branches

These are the branches of Central Bank of India:

ANDAMAN & NICOBAR

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ANDHRA PRADESH

ARUNACHAL PRADESH

ASSAM

BANKA

BIHAR

CHANDIGARH

CHHATTISGARH

DADRA&NAGAR HAVELI

DAMAN & DIU

DELHI

GOA

GREATER BOMBAY

GUJARAT

HANUMANGARH

HARYANA

HIMACHAL PRADESH

JAMMU & KASHMIR

JHARKHAND

KARNATAKA

KERALA

MADHYA PRADESH

MAHARASHTRA

MANIPUR

MEGHALAYA

MIZORAM

MP

NAGALAND

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NALANDA

ORISSA

PONDICHERRY

PUNJAB

RAJASTHAN

SIKKIM

TAMIL NADU

TRIPURA

UTTAR PRADESH

UTTARAKHAND

UTTARANCHAL

WEST BENGAL

1.1.3 Present Plans

Restoring the premium position of Central Bank of India amongst PSU banks is top on the

agenda of its new Chairman and Managing Director, Mr M.V. Tanksale. Following are the

plans of Central Bank of India:

Branch expansion, extensive hiring to infuse young blood into its manpower,

leveraging on technology and expanding its global footprint

Above all, they will be focussing more on relationship banking than mere transaction

banking. They will also be increasing their productivity levels in terms of business per

branch by leveraging new technology.

One of the ills affecting the bank has been its ageing manpower. To reverse this, it

plans to go on extensive hiring. This fiscal, they will be taking on board 5,000

personnel, including 2,000 officers. And next fiscal, the hiring will be more.

Central Bank plans to introduce new products that will be tailor made for its retail

customers. Only a few days ago they decided to launch a new product, Cent Double,

which will ensure doubling of a certain amount of deposit within a stipulated time.

They are yet to work out the rate (of interest) and the time frame.

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The bank will simultaneously expand its global footprint. At

present, it has presence in Zambia. This fiscal it plans to open a representative office

in Nairobi and will subsequently enter Mozambique. Later, they will expand into

West Asia through Dubai and Hong Kong.

1.2 INTRODUCTION TO THE STUDY

Housing being one of the three basic needs of life always remains in the top priorities of any

person, society and economy. As a human being, an individual needs his own space and

privacy, which can be provided by the ownership of house. The home is the basic unit of the

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society. Home provides a platform to the family and the family is the most important social

institution, which leaves its imprint on an individual for whole life. Thus housing deserves

significant attention in the context of developing policies and strategies for human

development. But still the majority of human populace lives in slums, shanties and temporary

shabby shelters in rural areas. This shortage of housing is a big impediment in the healthy

development of an individual and consequently the society, and the nation.

The problem of space, privacy, security and sanitation leads to social, economic and

environmental degeneration. The perpetual strife for space and house-ownership leads to

personal and social disorganization, which is detrimental for society and the economy.

A developing nation like India has to focus more on housing sector to cater to the housing

needs of burgeoning population and to accelerate the economic growth. The housing sector

has been globally used as an engine to propel the economic growth as it is generates

employment and demand in the market. Last one decade has seen the authorities according

significant focus on the housing sector in India. The government of India has been trying to

nurture and strengthen the housing sector in recent times through various fiscal and

legislative measures.

The total housing shortage in the country in 1997 was estimated to be 13.66 million units, of

which 7.57 million units were in urban areas. More than 90 per cent of this shortage was for

the poor and low income category. Against this background, the National Housing and

Habitat Policy (NHHP) was formulated in 1998 and stressed on:

Removing legal, financial and administrative barriers for facilitating access to loans,

finance and technology;

Ensuring that housing, along with supporting services, was treated as a priority and at

par with the infrastructure sector;

The creation of surpluses in housing stock; and

providing quality and cost-effective shelters especially to the vulnerable groups and

the poor.

The draft National Urban Housing and Habitat Policy 2007, while focussing on urban

shelters, emphasised on the promotion of larger flow of funds to meet the revenue

requirements of urban housing and infrastructure using innovative tools. It recognized that

based on historical growth patterns, the urban population of India was likely to grow to 360

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million in the year 2010 and to 533 million by the year 2025. The document noted the

Planning Commission’s projection of total requirement of urban housing during the 10th Plan

period (2002-2007) of 22.44 million dwelling units including the backlog of 8.89 million

units at the beginning of this Plan. With rising incomes, favorable demographic profiles,

swelling middle class and rapid urbanisation, the demand is projected to rise to 73.96 million

units for rural and urban areas during the 11th Plan period (2007-2012).

1.2.1 Present Scenario of Housing Loans

In India, housing finance is the fastest growing sector in the current times. Banks are cashing

on this phenomenon by offering easy home loans at attractive rates. Home loans products is

offered by almost all banks; right from loans for purchasing real estate to buying a flat, from

home improvement to home extension loans. The EMI and rate of interest is arrived at,

keeping a number of factors like, the loan amount, market value of the land or building,

tenure of loans etc.

Types of Home Loans Available:

Home Purchase Loans

Home Extension Loans

Home Equity Loans

Home Improvement Loans

Land Purchase Loans for construction of flat/home

1.2.2 HOME PURCHASE LOANS

Owning a home is perhaps the biggest and most important dream of an average family

therefore ownership of a home goes beyond pure financial considerations. Home loans

purchase has witnessed an increase owing to competition between a number of public and

private players. The cut in the loan interest rate has also fuelled the demand for this product.

1.2.3 Kind of Home Purchase Loans Interest Rates:

Fluctuating Home Purchase Loans Interest rates: Keep changing with change in the

prevailing market rate or the prime lending rate.

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Fixed Loans Interest Rate: As the name suggests, do not change during the entire loan

period, irrespective of the prevailing market rate. generally fixed loan interest rates

are higher than the fluctuating loan rate.

The current scenario in India is that of declining interest rate, so a fluctuating interest rate

makes more sense. The loan is repayable in the form of equated monthly installments (EMI).

The EMI should not exceed 50 per cent of your monthly household income.

1.2.4 Interest Rate on Home Purchase Loans:

Home Purchase Loans interest rates depend on a number of factors :

The tenure for which the loan is taken

Loan amount

Type of housing loans taken

Type of customer and his repayment capacity

Loan policy of different companies. Interest rates will be different for private sector

and public sector players. Companies lower the interest rates during festive seasons.

1.2.5 Maximum Home Purchase Loans Given Depends On:

Individual loan policy of different companies. The maximum amount of loans given is

however 85% of the value of the property (inclusive of cost of land)

Repayment capacity of the customer

Maximum term of home purchase loans

The term of home purchase loans offered is maximum 25 years. This again depends

on the repayment capacity of the individual

1.2.6 Number of Loans Applicants:

A loan can be taken either on an individual or joint basis. Some companies necessitate that

proposed owners be co-applicants, however, co-applicants need not be co-owners.

1.2.7 Other Home Purchase Loans Costs:

Besides the interest rate, customers also have to bear the processing and administrative

charges which increase with the cost of the loan. If two housing finance corporations give

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you the same amount of loan but at different interest rates, calculate what works out better for

you.

1.2.8 Home Purchase Loans Application Process:

An individual/company/professional can apply for home purchase loans in different home

loans corporations by filling the application form. These days companies provide online

forms for customer convenience. There is certain information that one must furnish in order

to qualify to approval of home loans.

1.2.9 HOME EXTENSION LOANS

Banks provide customers with home extension loans to extend their houses, add more rooms

etc. Such loans fall under the category of home loans.

1.2.10 Maximum Amount of Home Extension Loans:

Banks normally offer 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 etc.

1.2.11 Interest Charged by Bank for Home Extension Loans:

Rates of interest charged will be as per Bank's policy on the date of disbursement of loan.

Interest rates can be either on fixed or floating basis.

1.2.12Process of Home Extension Loans Application:

Customers can fill online application forms or personally visit the bank for approval of loan.

A nominal fee of 1-2% is charged as processing by the banks.

1.2.13 HOME EQUITY LOANS

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Home equity loans helps the customer to mortgage his existing property to the bank for

taking loan for some other purpose. Banks assess the current market value of the property to

give loans to customers. Customers can use the money so acquired for marriage, education,

medical purpose. Residential/Non-residential properties are considered for approval of loan.

They are only given to legal title holders, also the land should be free from any kind of

dispute.

1.2.14 Maximum Amount of Home Equity Loans:

Banks offer around 60-65% of the actual value of the property as loan. The Loan amount can

go up to 10-15 lakhs for commercial and residential properties. Repayment is done through

Equated Monthly Installments or EMI. The repayment period can range from 10-15 years

depending on the bank's policies.

1.2.15 Interest Charged by Banks for Home Equity Loans:

Rate of interest can both be fixed as well as fluctuating, according to the requirement of the

customer. Rate of interest charged is also fixed according to the prevailing market conditions.

1.2.16Home Equity Loans Application Process:

An individual/company/professional can apply for home equity loan in different home loan

corporations/ banks by filling the application form. These days companies provide online

forms for customer convenience. There is certain information that one must furnish in order

to qualify to approval of home loan.

1.2.17 HOME IMPROVEMENT LOANS

Maintaining homes is a costly affair. Banks are coming out with new products to suit the

needs of the customers. Home improvement loans have been introduced by quite a few banks.

1.2.18 Purpose of Home Improvement Loans Include:

Internal and external repairing

Waterproofing and roofing

Complete interior renovation

1.2.19 Interest on Home Improvement Loans:

Home improvement loans interest rates depend on a number of factors :

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The tenure for which the loan is taken

Loan amount

Type of housing improvement loans taken

Type of customer and his repayment capacity

Loan policy of different companies. Interest rates will be different for private sector

and public sector players. Companies lower the interest rates during festive seasons.

Rates of interest charged will be as per Bank's policy on the date of disbursement of loan.

1.2.20 Maximum Amount of Home Improvement Loans:

An old customer is sometimes given 100% cost of improvement. Generally all the new

customers are sanctioned 85% of the cost of improvement. The maximum loan amount can

vary from bank to bank, it also depends on the amount of loan taken and the repayment

capacity of the customer.

The amount of loan is however subject to the market value of property. The maximum term

of home improvement loan varies from bank to bank, depending on the age of the applicant at

the time of loan application. The loan payment is made by equated monthly installments

(EMI).

1.2.21 Number Of Loans Applicants:

A loan can be taken either on an individual or joint basis. Some companies necessitate that

proposed owners be co-applicants, however, co-applicants need not be co-owners. Minimum

age of a person applying for loan should not be less than 21.

1.2.22 Home Improvement Loans Application Process:

An individual/company/professional can apply for home improvement loans in different

home loans corporations/ banks by filling the application form. These days companies

provide online forms for customer convenience. There is certain information that one must

furnish in order to qualify to approval of home loans.

1.2.23LAND PURCHASE LOANS

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In India, various private and public sector banks are coming out with attractive loan plans for

its customers for purchase of land for construction of house/flat. The loan can be taken for

both land purchase as well as construction on the land.

1.2.24 Eligibility for Land Purchase Loans:

Any individual aged 21 years or above having regular income is generally eligible to apply

for land Purchase loan.

1.2.25 Maximum Amount of Loans:

The quantum of loan sanctioned, depends on a number of factors like the cost of house/flat,

person's age while applying for loan, income, repayment capacity etc. Loans of higher

amount may be considered on the basis of merit of the case. The loan can then be repaid

through Equated Monthly Installments or EMI. The loan is payable maximum in years.

1.2.26 Margin for purchase or construction of new house/flat:

Minimum 15% of the project cost for individual

Minimum 10% of the project cost in case wife joins as co-borrower

1.2.27 Margin for purchase of old house/flat/land:

Minimum 30% of Purchasing value. This value may vary from bank to bank.

1.2.28 Interest on Land Purchase Loans:

Interest on both fixed as well fluctuating rates are available. The actual interest rate is

governed by prevailing market conditions at the time of taking loan. Special reductions in

interest rates may sometimes be allowed for women and in other special conditions. A

nominal processing fee of 1% of amount of loan taken is generally charged by banks.

1.2.29 Documentation :

Businessman/ Self employed professional:

Application form with photograph

Educational qualification

Identity and residence proof

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Proof of business existence with business profile and last three years income tax

return

Last 3 years income statement and balance sheet.

Last 3 month's personal and business bank statements.

1.2.30 Salaried customers:

Application form with photograph

Identity and Residence proof

Latest salary slip

Form16

Last 6 months bank's statement

1.2.31 Reasons For Which People Get Their House Financed

1. The fear of Income Tax authorities :- In a country like India where there is a lot of flow

of black money, spending lakhs of rupees together catches the attention of income tax

authorities. Also for this reason people get their house financed.

2. Easy payment in Installments :- It is a human psychology that when one asked to pay Rs.

1000 altogether, it pinches more than paying Rs. 100 every month for ten months. So the

lum sum payment looks too much and hard to pay.

3. Necessity :-Housing loan becomes necessity for those people who have no funds for

Renovation/ Construction/ Extension/ Purchase or Improvement for own and buy a new

house.

4. Dead investment :- Generally people consider investing on houses a dead investment ,

which locks to capital and gives no return, so they prefer paying slowly through

installments.

5.Maintain the Liquidity :- Investing lakhs of rupees altogether, disturbs the liquidity

position of the firm. As its very important to maintain the liquidity of a concern, getting

the houses financed is the only way out to possess a house without disturbing the

liquidity position.

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6. Better Investment facilities :- Funds are always limited. Thus it is very important to

invest them in the most beneficial way. As said earlier that investment in houses is

considered as a dead investment, which doesn't give any return, thus by getting their

houses financed an individual or a firm try to keep the money with them to invest in

better alternatives.

1.2.32 Computing Eligibility for The Home Loan

A number of factors are taken into account when assessing customer repayment capacity.

Customer income, age, number of dependants, qualifications, assets and liabilities, stability/

continuity of your employment/ business are some of them. Besides the proposed owners in

respect of which he is seeking financial assistance will have to be co-applicants. However, all

co-applicants need not be co-owners. Income of the spouse can also be clubbed if he/she has

been made the co-applicant.

However, there are ways by which a customer can enhance their eligibility.

For instance, if customer spouse is earning, put him/her as a co-applicant. The additional

income shall be included to enhance his/her loan amount. Incidentally, if there are any co-

owners they must necessarily be co-applicants.

Customer fiancée's income can also be considered for sanctioning the loan on his/her

combined income? The disbursement of the loan, however, will be done only after customer

submit proof of your marriage.

The housing finance company can consider all the income accruing to the applicant on a

monthly basis, i.e. all the recurrent credits (basic salary, HRA, other allowances but not the

LTA and medical), any rental income that he is getting and the savings in rent payment

which might accrue to him an account of his moving from a rented dwelling to self-occupied

property. In short, the calculation will be as per the applicants net cash inflows, less expenses

and commission for the salaried class, and as per his profit-and-loss account for the self-

employed or a private company ( net profit + 2/3rd depreciation + directors' remuneration).

Providing additional security like bonds, fixed deposits and LIC policies may also help to

enhance eligibility.

1.2.33 When to apply

The movement customer decides to buy a home, borrower can put in their application,

borrower can apply for a loan even before they have selected the property. Yes, customer can

apply for a loan even before he/she have selected the property. The property need not even be

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in the same city where customers are residing. Should there be a change in customer’s

financial status or plans, he/she can withdraw their sanction within 6 months of approval.

However, Housing Finance Company's are always ready to assist their customers in the event

of legitimate problems. And, Housing Finance Company's might reconsider this if they find

that there are satisfactory reasons for the delay.

If it is refinancing customer are interested in, it is possible within 6 months from the date of

purchase of property.

1.2.34Sanctioning

On the basis of certain documents submitted by borrower , Housing Finance company's will

determine borrower eligibility. How ever, there are ways by which borrower can enhance

their eligibility.

For instance, if customer spouse is earning, put him/her as a co-applicant. The additional

income shall be included to enhance his/her loan amount. Incidentally, if there are any co-

owners they must necessarily be co-applicants.

The disbursement of the loan, however, will be done only after customer submit proof of

their marriage. Providing additional security like bonds, fixed deposits and LIC policies may

also help to enhance eligibility.

While there is no need for a guarantor, it could be that having one might enhance customer

credibility with Housing Finance Company's. If so, their loan officer would provide you with

the necessary details.

Below is a list of documents required from you for sanctioning. You may be asked to submit

further legal documents if required by Housing Finance Company's or its approved lawyers.

Do retain photocopies of all documents being submitted by customer .

1.2.35List of documents for sanctioning

1. Passport size photograph

2. Age verification: PAN card, Voters ID, Passport, License

3. Bank statement for the last six months.

4. Income Documents e.g. Latest Form 16, Certified IT returns for latest 3 years

5. Processing Fee cheque & Loan Enclosure letter.

In case of further queries , additional documents may be required.

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1.2.36 Loan Disbursement

For outright purchase of house/flat, the loan amount will be paid in lump sum to the vendor at

the time of registration after satisfying that the borrower has paid/provided for the balance

amount. For houses/flats under construction, the loan amount will be disbursed in stages

based on the progress of construction. Disbursement will be made after the property has been

technically appraised and all legal documentation has been completed. The borrower has to

invest his proportionate share of the cost, prior to disbursement of loan. Home loan will be

disbursed after customer identify and select the property or home that he/she are purchasing

and on his/her submission of the requisite legal documents.

While borrower may be under the impression that the list of documents asked for is rather

extensive, please note that it is for his/her own good. Each and every single document asked

for will be verified and checked to ensure his/her safety. This may take some time but HFC’s

want to ensure a clear title and will complete all the legal and technical verifications to ensure

that customer have full rights to his/her home.

1.2.37 List of documents for disbursement

a) Standard documents required :

Loan Agreements, Disbursement Requests, Post-dated cheques

Personal guarantor’s documents, as the case may be

b) Some documents, which are specific to each state are required during disbursements. For

further information, please contact the nearest office.

1.2.38What is an EMI

An EMI refers to an equated monthly installment, it is a fixed amount which borrower pay

every month to words their loan. It comprises of both, principal repayment and interest

payment.

This is one acronym that is now synonymous with the loan business. "What is EMI?" and

"How is it calculated?" are two of the most common questions put forth by loan applicants.

The EMI is an abbreviated form of the equated monthly installment and is simply referred to

as monthly installment in common parlance. And, being a self-explanatory term, that is

exactly what it is. The amount borrower will have to pay his/her financier every month when

repaying their loan.

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Being a monthly payment, at the end of the year, borrower would have paid 12 EMIs. This is

sometimes referred to as the equated annual installment (EAI) - the amount borrower would

pay every year.

However, it is important to note that though the EMI is a constant amount throughout the

repayment tenure, in actuality it is an unequal combination of principal repayment and

interest payment.

This unequal distribution is due to the EMI tilting heavily towards interest payments in the

initial years of repayment. While principal repayments take predominance as the end of the

repayment tenure nears.

For instance, in the above example, the EMI will stay constant for all the 60 months at Rs

2,226. However, in the first year of repayment, only Rs 16,218 of the principal is repaid and

in the final (fifth) year, Rs 24,179 of the same.

Finally, if borrower are dependent on income from this home (such as rental payments) to

help service his/her loan, then borrower would be in a better position to pay the pre-EMI rate

of interest and start paying his/her EMI only when their home is ready for occupation.

1.2.39Getting the papers in order

Buying a home entails a tremendous amount of paperwork. And, hence, there is a lot to

consider where documentation is concerned.

Is the Title clear? Are the non-encumbrances certificates in place? Are the permissions under

Urban Land Ceiling and Regulation Act, 1976 for developing of land/plot verified? If being

purchased in a resale, the Title and Letter attesting to the ownership of property is very

important.

Generally, if the project under construction has been approved by a leading housing finance

company (HFC), it would have examined the legal and technical documents. So the next time

you fret about how long your HFC is taking to disburse the loan, remember that all this

verification is for your ultimate benefit.

While it is comforting to know that the verification is being done, it does not shift your

responsibility and risk to the financial institution. You had better do your own verification.

In practicality, you may not understand the legal jargon used in such documents. Hence, it

would be wise to get a lawyer to take a look at it. This may set you back by around Rs 1,500

but it is money well spent.

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Then comes the registration. Registration refers to the recording of the contents of a

document with a Registering Officer appointed by the state government. Do ensure that you

are aware of what you have to pay and by when.

Stamp duty is a tax levied by state governments on certain instruments. Being levied by the

state government, this one will obviously vary between states and will depend on the

purchase price shown in the Agreement of Sale. Stamp duty is paid at the time of registration.

The payment of proper stamp duty on instruments bestows legality on them. That means, they

can be admitted as evidence in the court of law. An instrument not properly stamped doesn't

have this privilege.

1.2.40 Stamp Duty & Registration

Stamp duty is basically a tax levied by state governments on certain instruments (not on

transactions). And, the term "instrument" encompasses agreements, exchange deeds, gift

deeds, power of attorneys, indemnity bonds and conveyances.

How does it differ from registration ?

While stamp duty is payable at the time of registration, the two are quite different. Stamp

duty is revenue earned by the government on execution of instruments but registration

charges are collected for keeping the records of the documents. All documents creating rights

in immovable property require compulsory registration. Registration refers to the recording of

the contents of a document with a Registering Officer appointed by the state government. He

preserves copies of the original document. The sole purpose being to conserve evidence and

assurance of title and prevent fraud. Hence, it safeguards your interest as a buyer. Also, the

Stamp Act varies between states but the contents of the Indian Registration Act, 1908 are

common across the country. Though, registration fees may differ across states.

How much does it amount to ?

Stamp duty is always a percentage of the market value of the property. Moreover, this

percentage varies between states. For instance, in Bangalore it varies as per the slab of

property value while it is 10% in Rajasthan and 5% in Calcutta. In Maharashtra, the rates

depend on the slab of property value. Take the case of residential flats purchased in a co-

operative housing society or an apartment owners association.

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If the cost of the transaction is between Rs 1 - 2.5 lakh, the stamp duty is 0.5% of the

sale value

If the cost of the transaction is between Rs 2.51 - 5 lakh, the stamp duty is Rs 1,250 +

3% (above Rs 2.5 lakh)

If the cost of the transaction is between Rs 5.01 - 10 lakh, the stamp duty is Rs 8,750

+ 6% (above Rs 5 lakh) &

If the cost of the transaction is above Rs 10 lakh, the stamp duty is Rs 38,750 + 8%

(above Rs 10 lakh)

1.2.41Supporting Documents to be attached:

a) Common for all applicants:

1. Allotment letter of the co-operative society / association of apartment owners.

2. Copy of approved drawings of proposed construction / purchase.

3. Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the

property to be purchased / constructed.

4. If you have been in your present employment / business or profession for less than a year,

mention details of occupation for previous 5 years, giving position held, reasons for

change and period of the same.

5. Applicable Processing Fees.

b) Additionally,

If You Are Employed:

1. Latest salary slip/salary certificate showing all deductions.

2. If your job is transferable, permanent address where correspondence relating to the

application can be mailed.

3. A letter from your employer agreeing to deduct the monthly installments towards

repayment of the loan from your salary. This will expedite the processing of your loan

application.

If You Are Self-Employed:

1. Balance Sheets and Profit & Loss Accounts of the business/profession along with copies

of Individual Income Tax Returns for the last three years certified by a Chartered

Accountant.

21

2. A note giving information on the nature of your business/profession, form of organization,

clients, suppliers, etc.

1.2.42 MAJOR PLAYERS IN HOUSING FINANCE

In Public Sector

- HUDCO (Housing and Urban Development Corporation)

- L.I.C Housing Finance Ltd.

- G.I.C Housing Finance Ltd.

Nationalized Banks

There are 14 nationalized banks in India, but some major are:

- State Bank of India

- Central Bank of India

- Vijaya Bank

- P.N.B

- Dena bank

- Union Bank of India

- Allahabad Bank

- P & S Bank

Co-operative Banks

Private Ltd. Banks

- HDFC Bank

- ICICI Bank

22

23

CHAPTER-II

REVIEW OF LITERATURE

Thomas O. Stanley, John K. Ford (1986) reviewed with an objective method of pricing,

where the cost of each component of a product is determined separately, is relevant to the

pricing of loans in banking. Relevant factors in this case are a “real rate” of interest, an

inflation premium, administrative expenses, a maturity factor and an allowance for credit

risk. All these can be accounted for in the pricing of retail loans. This systematic approach

enhances the loan pricing procedure and offers an objective way for an institution to establish

and monitor the risk level of its portfolio of earning assets. From data it is clear that banking

has priced its retail loans well and this brings the evolution of new pricing techniques into

question.

Rodney Shakespeare (2005) reviewed the present options for an economy all have serious

weaknesses and, in any case, the way forward for Islam must be completely distinctive.

Fortunately, Islamic opposition to riba enables a distinctive new way which addresses the real

economy, furthers justice and ends foreign financial colonialism. The new way uses Islamic

endogenous loans. These are state-issued, repayable, interest-free loans which are generally

administered by the banking system on market and private property principles. The loans are

counter-inflationary and are always directed at productive capacity.

Taisier A. Zoubi, Osamah Al-Khazali (2007) examined the factors which affect loss

provision for loans and investment in Murabaha, Musharka, and Mudarabah for banks in the

Gulf Cooperation Council (GCC) region. The effect of prior period earnings, legal and

statutory reserves, size of the bank, level of debt, and loan and investment to deposit ratio on

the loss provisions of banks are examined for the period 2000-2003.

Design/methodology/approach – To test the factors that explain the loan loss provision and to

test the income smoothing hypothesis, debt to equity hypothesis, and reserve hypothesis, a

single stage regression model was developed and tested. Findings – The results indicate that

when return on assets (ROA) before tax and loss provisions for the current year is higher than

the prior year ROA and the actual capital reserve is below the legal required reserve, then

management is expected to increase loss provisions for the current year. This result is robust

for all the years of this study. Originality/value – While prior research has examined the

issue of the loan loss provision in USA, Japan, and Europe, no research has examined the

issue of the loss provisions in the GCC region. This study demonstrates that the income

smoothing hypothesis is relevant across different regulatory requirements, economic

24

conditions, and different accounting standards. Managers of banks in the GCC region use the

loss provision, among other things, to smooth earnings to achieve certain objectives.

Sheena Thakur (2008) analyzed that Finance Minister has acted Santa Clause and

announced debt waiver and relief for small and marginal farmers. The move will cost the

government a total of Rs 60,000 crore – the waiver costing Rs 50,000 cr and a 25 per cent

discount on the one time waiver to cost Rs 10,000 crore. Agricultural loans given by

scheduled commericial banks, regional rural banks and cooperative credit institutions up to

March 31, 2007 and over-due as of December 31 that year will be covered under the waiver

scheme to address the problem of indebtedness of farmers. Agriculture loans restructured and

rescheduled by banks from 2004-06 and other loans normally rescheduled under RBI

guidelines will also be eligible under the waiver scheme. The loan waiver scheme will benefit

three crore small and medium farmers and cover loans worth Rs 50,000 crore in total – that is

4 per cent of the total loans of commercial banks. One crore other farmers will benefit to the

tune of Rs 10,000 crore in the waiver. According to industry sources, the banks have reasons

to be happy as there was an implicit hint that they would get reimbursed accordingly. In that

scenario, the move will help the banks to get rid of bad debt. The farmers can also take fresh

loans post the settlement of the older ones which will give a fillip to agri credit space that has

already touched Rs 2,40,000 cr in 07-08.

Vaibhav Aggarwal (2008) reviewed that in a remarkable move benefiting the co-operative

banks, the RBI said that it will soon allow co-operative banks to raise capital through

innovative instruments. This was suggested by the RBI deputy governor Usha Thorat, who

said that the guidelines would issue soon. This new development came when she was

speaking on the sidelines of a MoU-signing function between the Indian Institute of Banking

& Finance (IIBF) and National Co-operative Union of India/National Council for Co-

operative Training on 29th of May, 2008.

Presently, only commercial banks can come up with a premium issue that helps boost

capital, however, co-operative banks cannot. Therefore, there is a need for innovative

instruments. In the present scenario, the co-operatives improve their capital through the issue

of shares to customers and by ploughing back their earnings. Clarifying on the farm debt-

waiver scheme, stated that no benefit under the debt-waiver scheme will be allowed for farm

loans that have fallen overdue after December 2007. “Loans overdue after December 2007

will not be covered by the scheme and it is very clearly spelt out in the scheme. Those, who

25

have their payment overdues for up to February 29, 2008, will have to meet their payments

obligation. Stated otherwise, those, who have already repaid their dues by the date, stand to

lose

Zubair Hasan (2008) discussed the issue of credit creation and control in the area of Islamic

banking. Design/methodology/approach – In view of a rapid expansion of Islamic banking in

recent decades, the answer to questions whether Islamic banks can create credit like

mainstream banks and, if yes, what methods central banks could use to control it in their case

is of paramount importance. An overview of the literature on the subject is provided and

credit creation process is explained as background material for the discussion. Findings – The

literature on the subject is scanty, controversial and inconclusive. One reason seems to be the

mismatch between structural design of Islamic banks and the objectives they are supposed to

meet. It is concluded that Islamic banks can create credit in the usual manner but central

banks will have to design new tools for credit control applicable to Islamic banks. Research

limitations/implications – It is not a rigorous analytical exercise as the main purpose of the

paper is to reopen an important issue for discussion. It is an opinioned work and presents

rather tentative answers to the questions raised. Practical implications – The findings of the

paper may have serious implications for the current structure of Islamic banks and the legal

framework for regulating their credit creation activities. Originality/value – The paper draws

attention to a rather neglected issue in Islamic banking and offers guidelines to resolve it.

26

27

CHAPTER-III

3.1 NEED OF THE STUDY

The review of literature revealed the fact that majority of researchers have conducted a full

fledge study on the types of Home Loan in the organization. Few studies have been

conducted on the effect of Home Loan on the customers of the organization and satisfaction

level. This study is being conducted in order to throw more light on the types of Home Loan

product.

3.2 SCOPE OF THE STUDY

This study has covered the 100 respondents of Amritsar City.

3.3 OBJECTIVES OF THE STUDY

To know the factors which influence a customer to select a particular institution for

home loan.

To know the satisfaction level of customer regarding home loan policy of bank.

To know the problems faced by respondents while getting housing finance.

28

29

CHAPTER-IV

4.1 Research Methodology

Research Methodology is a way to systematically solve the research problem. The Research

Methodology includes the various methods and techniques for conducting a Research.

“Marketing Research is the systematic design, collection, analysis and reporting of data and

finding relevant solution to a specific marketing situation or problem.

The purpose of Research is to discover answers to the Questions through the application of

scientific procedures. My project has a specified framework for collecting data in an effective

manner. Such framework is called “Research Design”.

4.2 Research Design

4.2.1 Sampling Plan – Sampling can be defined as the section of some part of an aggregate

or totality on the basis of which judgment or an inference about aggregate or totality is made.

The sampling plan helps in decision making in the following areas: -

4.2.2 Sample size – Sample size refers to the total numbers of items about which the

information is desired. The sample size of the study is 100.

4.3 Data Collection And Analysis

4.3.1 Data Collection - Research work is exploratory in nature. Convenient sampling has

been used. Information has been collected from both Primary and Secondary Data.

Primary sources – Primary data are those, which are collected are fresh and for the

first time, and thus happen to be original in character. Primary Data has been

collected by conducting surveys through Questionnaire, which include both open

ended and close-ended Questions.

Secondary sources – Secondary Data are those which have already been collected by

someone else and which already had been passed through the statistical process.

Secondary data has been collected through Magazines, Web sites, Newspaper and

Journals.

4.3.2 Tools Of Presentation And Analysis

Analysis of Data: After collecting the data has been analyzed through various statistical

tools and techniques. The analysis of data requires a number of closely related operations

such as establishment of categories, the application of these categories to raw data through

30

coding, tabulation and then drawing statistical inferences. The unwieldy data should

necessarily be condensed into few manageable groups and tables for further analysis. Thus it

helps to classify the raw data into some purposeful and usable categories.

4.4 Limitations Of The Study

Following are the limitations of this study:

1. This study has been restricted to Amritsar City only.

2. The information provided by the respondents may be biased and incorrect.

3. The sample may not represent the whole population.

4. Paucity of time and resources could lead to the inability of conducting a large survey.

5. Approaching customers who had taken loan from sample institutions may not easy.

31

32

CHAPTER-V

DATA ANAYSIS AND INTERPRETATION

1.Do you have a home loan?

Table No. 5.1 Response regarding home loan facility

Response %Age

Yes 100

No 0

Figure No. 5.1 Response regarding home loan facility

100%

0%

Yes No

Interpretation: The study is limited to those 100 respondents who have availed home loan

facility from Central Bank of India.

33

2. What is your purpose for the home loan?

Table No.5.2 Purpose for the home loan

Reason %Age

Construction 38

Purchase 52

Extension 8

Renovation 2

Figure no.5.2 Purpose for the home loan

38%

52%

8% 2%

Construction Purchase Extension Renovation

Interpretation: The above figure depicts that out of the total sample of 100 respondents, it is

found that most of the applicants applied for the purpose of purchase that is 52% as against

the other purposes of home loans i.e. construction, extension and renovation which amounted

to 38%, 8%, and 2% respectively.

34

3. Why did you select that particular institution?

Table No. 5.3 Particular institution by the respondents

Reason %Age

Easy Accessibility 39

Prompt Services 14

Existing Customers 19

Others 28

Figure No5.3 Particular institution by the respondents

39%

14%19%

28%

Easy Accessibility Prompt ServicesExisting Customers Others

Interpretation: The above figure depicts that out of the total sample of 100 respondents, it is

found that 39% of the respondents come to a particular institution due to easy accessibility

while 28% of the respondents are recommended by some one to avail loan from a particular

institution, and only 14% respondents opt because of prompt services while 19% are the

existing customers.

35

4.What problems did you face while getting the home loans?

Table No. 5.4 Problems Faced while getting the home loans

Response %Age

Lengthy Procedure 20

Terms & Conditions 21

Attitude of the staff 04

Timely Credit 24

Others 31

Figure No. 5.4 Face while getting the home loans

20%

21%

4%24%

31%

Lengthy Procedure Terms & ConditionsAttitude of the staff Timely CreditOthers

Interpretation: The above figure depicts that out of the total sample of 100 respondents,

it is found that 31% of the respondents faced the problem of more documentation

formalities while availing the home loans. 24% of the respondents faced the problem of

time involved in the disbursement process followed by other problems like terms &

conditions, lengthy procedure and attitude of the staff.

36

5.Are you satisfied with the services provided by Central Bank of India?

Table No.5.5 Satisfaction With the services

Response %age

Yes 80

No 20

Figure No.5.5 Satisfaction With the services

80%

20%

Yes No

Interpretation: The above figure depicts that majority of the customers are satisfied with the

services provided by central bank and only 20% of the customers that are not satisfied with

those services.

6.If no what do you think could be the solution to improve the shortcomings?

37

Table No. 5.6 Improvement for the shortcomings

Response %age

Better service quality 30%

Cordial staff behaviour 30%

Reduction in complexity in processes 40%

Others 0%

Figure NO. 5.6 Improvement For the Shortcomings

30%

30%

40%

0%

Better service qualityCordial staff behaviourReduction in complexity in processesOthers

Interpretation: The above figure depicts that 40% of the customers are saying that there

should be reduction in complexity in processes while 30% of the customers saying that

cordial staff behaviour should be there and there should be better service quality.

7 How do you rate Central Bank of India regarding home loan a whole ?

38

Table no. 5.7 Rating of central bank

Response %Age

Excellent 16

Very Good 47

Average 32

Poor 5

Figure no.5.7 Rating of central bank

16%

47%

32%

5%

Excellent Very Good Average Poor

Interpretation :

From the above graph it is clear that out of 100 respondents, 16% respondents have rated the

home loan facility of Central Bank of India as Excellent followed by 47% rated it as Very

Good, 32% rated it as Average and rest of them rated it as “Poor”.

39

Findings of the Study

40

CHAPTER-VI

1. The study is limited to those 100 respondents who have availed home loan facility from

Central Bank of India.

2. The applicants applied for the purpose of purchase that is 52% as against the other

purposes of home loans i.e. construction, extension and renovation which amounted to 38%,

8%, and 2% respectively.

3. 39% of the respondents come to a particular institution due to easy accessibility while 28%

of the respondents are recommended by some one to avail loan from a particular institution,

and only 14% respondents opt because of prompt services while 19% are the existing

customers.

4. 31% of the respondents faced the problem of more documentation formalities while

availing the home loans. 24% of the respondents faced the problem of time involved in the

disbursement process followed by other problems like terms & conditions, lengthy procedure

and attitude of the staff.

5. It is also found that majority of the customers are satisfied with the services provided by

central bank and only 20% of the customers that are not satisfied with those services.

6. 40% of the customers are saying that there should be reduction in complexity in processes

while 30% of the customers saying that cordial staff behaviour should be there and there

should be better service quality.

7 16% respondents have rated the home loan facility of Central Bank of India as Excellent

followed by 47% rated it as Very Good, 32% rated it as Average and rest of them rated it as

“Poor”.

41

CHAPTER-VII

7.1 CONCLUSION

42

At last, after the five decades of independence, the vital housing finance industry is coming

into its own. On the one side, the govt. has recognized the role that housing can play in the

revival of the national economy and has accordingly, started taking steps to give a boost to

housing finance sector, and, on the other, the industry, dominated-nay virtually monopolized

by one company all these years, is now attracting new players from private bank, insurance

and finance sector. More over the prolonged depression in the real estate market during the

last three years or so, has brought down property prices from unthinkable heights to

somewhat reasonable levels prompting millions of middle class people to go for their own

houses, giving a boost to housing finance sector in the process.

Future prospects of housing finance institutions are very much bright in the Indian market.

The housing finance market – with a turnover of more than Rs. 50,000 crore a year is

expanding and has tremendous future prospects Because of the following reasons: -

Growth in demand is driven by improved offer debility

- Falling property prices

- Lowest interest rates since inception

- Rising income level increasing

- Fiscal incentives on both interest & principal repayments

- Increasing urbanization

It is a very good opportunity for genuine house seekers to go for a housing loan and give a

secure feeling to their families. Housing is one toll that can ease the unemployment problem

in the country. It employs both skilled and unskilled labour and catalyses activity in at least

200 related sectors. As a result it and is trying to make housing affordable to common man by

giving all kinds of incentives and sops. Tax relief is a part of this.

Notwithstanding the various constraints the future outlook for the housing finance sector is

highly promising.

7.2 RECOMMENDATIONS

43

1. Most of the customers said that the formalities involved in getting the loan sanctioned

made the procedure lengthy and cumbersome and they face difficulty in getting timely credit.

So there is a need to cut short the lengthy and cumbersome procedure into simplified

procedure with minimum formalities. They further suggest that the authority to sanction the

loan must be given to the local branch mangers in order to minimize the levels through which

the loan application is required to be passed.

2. Another suggestion from the customers is that as the customer enters into the bank to take

a housing loan he should be guided properly as to how to apply for the loan. What are terms

and conditions required to be fulfilled so that his loan application and they can get credit on

time.

3. Specialized staff should be recruited to guide the customer as the customers are not fully

aware of the housing loan schemes available with the banks. When he wishes to take a

housing loan, he should be properly guided as to what schemes are available, what are the

terms and conditions of each schemes, which schemes would match the requirements of the

customer.

4. Some customers suggested that eligibility criteria should be widened so that more and

more customers can avail of the facility of housing finance and fulfill their dream of having a

house of their own.

5. More marketing efforts should be undertaken to make the housing schemes popular among

the people. Stress on advertising should be made to reach the masses. Moreover institution

staff should go to the different rural areas and provide information to rural people through

seminars on housing loan facility provided by them.

6. Awareness level should be increased through Exhibitions, Newspaper, Hoarding’s.

7. There should be some relaxation in the matter of guarantee.

8. Customer waiting time can be minimized.

9. Door step service can be provided to the customer.

10. Disbursements and applications processing time should be minimized.

44

REFERENCES

REFERENCES

45

Vaibhav Aggarwal (2008), “Co-operative Banks to benefit: RBI” published Rupee

Times Online Edition.

Sheena Thakur (2008), “Debt waiver, relief schemes for marginal farmers” published

by The Economic Times.

Taisier A. Zoubi, Osamah Al-Khazali (2007), “Empirical testing of the loss provisions

of banks in the GCC region”, Journal: Managerial Finance, Volume: 33, Issue: 7, Pg:

500 – 511, published by Barmarick Publications

Rodney Shakespeare (2005), “Islamic Endogenous Loans”, Journal: Humanomics,

Volume: 21, Issue: 3, published by Emerald Group Publishing Limited

Thomas O. Stanley, John K. Ford (1986), “The Role of Risk in Pricing Retail Loans”,

International Journal of Bank Marketing, Volume: 4, Issue: 5, Page: 58 – 65 published

by MCB UP Ltd

Zubair Hasan (2008), “Credit creation and control: an unresolved issue in banking”,

International Journal of Islamic and Middle Eastern Finance and Management,

Volume: 1, Issue: 1, Page: 69 – 81, Emerald Group Publishing Limited

46

47

ANNEXURE

QUESTIONNAIRE

SECTION A : PERSONAL PROFILE

Name: ________________________________________________ Age: _____________

Occupation:

(a) Govt. Employee (b) Private Sector Employee

(c) Self Employee/Professional

Monthly Income:

(a) Below Rs.10000 (b) Rs.10001-Rs.15000

(c) Rs.15001-Rs.20000 (d) Rs.20001-Rs.25000

(e) Rs.25001-Rs.30000 (f) Above Rs.30000

Gender:

(a) Male (b) Female

SECTION B

1. Do you have a home loan ?

(a) Yes

(b) No

2. What is your purpose for the home loan?

(a) Construction (b) Purchase

(c) Extension (d) Renovation

48

3. Why did you select that particular institution?

(a) Easy Accessibility

(b) Prompt Services

(c) Existing Customer

(d) Others

4. What problems did you face while getting the housing finance?

(a) Lengthy procedure

(b) Terms & Conditions

(c) Attitude of the staff

(d) Timely credit

(e) Others

5. Have you compared the rate of interest Central Bank of India with others ?

(a) Yes

(b) No

6. Are you satisfied with the services provided by CBI?

(a) Yes

(b) No

7.If no what do you think could be the solution to improve the shortcomings?

(a) Better Service Quality

(b) Cordial Staff Behaviour

(c) Reduction in Complexity in processes

(d) Others

49

8.How do you rate Central Bank of India regarding Home Loan as a whole?

(a) Excellent

(b)Very Good

(c)Average

(d)Poor

50