PROJECT REPORT

ON
Growth Of NBFC In India & Challenges Faced By Them

Submitted in Partial Fulfilment for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)
(BATCH 2017-2019)

Submitted by:
VISHAL
(Enroll. No: 10212303917)

Under the Guidance of:

Dr. Ruchika choudhary
Assistant Professsor

DELHI INSTITUTE OF ADVANCED STUDIES

(Affiliated to Guru Gobind Singh Indraprastha University)

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CERTIFICATE (ISSUED BY THE COMPANY)

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 CERTIFICATE ISSUED BY THE COLLEGE

DATE

CERTIFICATE
This is to certify that the project entitled “Growth OF NBFC
IN INDIA & CHALLENGES FACED BY THEM”
submitted by Mr VISHAL, RollNo. 10212303917 has been done
under my guidance and supervision in partial fulfillment of the
requirement for the award of Master of Business
Administration.

To the best of my knowledge the work and analysis mentioned

in this Project Report have been undertaken by the candidate
herself and necessary references have been recognized and
acknowledged in the text of the report.

Project Guide

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ACKNOWLEDGEMENT

I would like to express my gratitude to all those who gave me the possibility to complete this
project.

I am deeply indebted to my guide Ms. RUCHIKA CHOUDHARY from Delhi Institute of

Advanced Studies whose help, stimulating suggestions and encouragement helped me in all
the time of research and writing of this project.

The learning was immense and valuable

VISHAL

10212303917

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DECLARATION

I hereby declare that the project work entitled “Growth of nbfc in

india & challenges faced by them” submitted to the Delhi
Institute of Advanced Studies, is a record of an original work done by me under the guidance
of Amit ranjan, Head (Finance) and this project work is submitted in the partial fulfillment
of the requirements for the award of the degree of Master of Business Administration.

I hereby certify that all the endeavor put in the fulfilment of the task are genuine and original
to the best of my knowledge and I have not submitted it earlier elsewhere.

VISHAL

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 EXECUTIVE SUMMARY

A Non Banking Financial Company (NBFC) is a company registered under the Companies
Act, 1956 of india. engaged in the business of loans and advances, acquisition of shares,
stock, bonds, hire-purchase insurance business or chit-fund business but does not include any
institution whose principal business includes agriculture, industrial activity or the sale,
purchase or construction of immovable property.

A non-banking financial institution or non-bank financial company is a financial institution

that does not have a full banking license or is not supervised by a national or international
banking regulatory agency.

It is accepted by everyone that NBFCs have been playing an important role in channelizing
the scarce financial resources in capital formation. NBFCs have been supplementing the role
of the organised banking sector by bridging the credit gaps, i.e., in meeting the increasing
financial needs of the corporate sector, delivering credit to the unorganized sector and to
small local borrowers. NBFCs have enjoyed a more flexible structure than banks in the
organised sector. From time to time, the Central Government as well as Reserve Bank of
India have been working towards regulation of these NBFCs. The Department of Non-
Banking Supervision of RBI has been indulged in these activities of regulating as well as
supervising the NBFCs.

The Contribution made by these NBFCs in the economic growth as well as in meeting the
credit needs of the economy is needed to be appreciated and there is also a need to keep an
eye on their functioning as some of these NBFCs have looted people's money who were
innocent investors to them.

The present paper “Growth and Development of Non-Banking Financial Companies in India”
have given focus on areas like defining the term NBFCs, evolution, growth and development
of NBFCs, regulatory authorities and supervision of NBFCs. The paper is an attempt to
analyse evolution, growth and development of Non-Banking Financial Companies in India.

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 TABLE OF CONTENTS

EXECUTIVE SUMMARY...................................................................................................................6

CHAPTER 1: INTRODUCTION..........................................................................................................9

CHAPTER 2: LITERATURE REVIEW..............................................................................................12

CHAPTER 3: RESEARCH METHODOLOGY..................................................................................17

CHAPTER 4: DATA COLLECTION & ANALYSIS..........................................................................50

CHAPTER 5: DATA ANALYSIS & INTERPRETATION..................................................................52

CHAPTER 6: KEY FINDING.............................................................................................................66

CHAPTER 7: CONCLUSION............................................................................................................68

BIBLIOGRAPHY...............................................................................................................................72

CHAPTER 1
INTRODUCTION

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It’s been a Year and a half that DPS Finance started its Business in Gurugram. Housing
Finance Companies give almost the same features as there are very few products in the Home
Loan Market. So it’s been difficult for the Home Loan Companies to distinguish there
Products. To differentiate from its competitors, DPS Finance, during its first year, had taken a
step to launch innovative products with high yield. These products though involved a higher
Risk but brought a positive and profitable response to the Company, despite being a new
launch.

DPS Finance however focused majorly on the LAP Business. With High Yield Products, DPS
Finance was able to develop a profitable Business with a good yield of 13%-14% in surrogate
Products and 9%-10% in Home Loans. The Company now had created a stabilised position in
the market but with the start of the new Financial Year (April 2017), it decided to shift its
focus on Home Loans as well, in order to balance the portfolio.

To be a part of that Competitive league it’s very important to bring a balance between Home
Loans and LAP. Home Loans can cover more Customers than LAP; moreover the rise in
demand for small ticket Loans and Priority Sector lending has increased the demand for
Home Loans. Thus for DPS it is very important to bring the ratio of LAP and Home Loans
closer.

Home Loan VS LAP

The basic reason of tapping on Home Loans is

· All Nationalised Banks provide Home Loan products.

· Housing Loan by salaried class is better than LAP for Business class

· Home Loans has lesser Risk than LAP ( because the emotional connect of a
residential property is always higher than a Commercial or Industrial Property )

· Interest paid on Home Loans up to 1.5 lakhs is exempted. ( This does not happen
in case of LAP)

· Government wants affordable housing for the people below the Poverty line and
conversion of slums into Houses. Due to this there is a rise in demand for Home
Loans.

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This makes it imperative for DPS Finance to focus not just on LAP but also on Home
Loans.

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10
 CHAPTER 2

LITERATURE REVIEW

A Non Banking Financial Company (NBFC) is a company registered under the Companies Act,
1956 of India, engaged in the business of loans and advances, acquisition of shares, stock,
bonds, hire-purchase insurance business or chit-fund business but does not include any
institution whose principal business includes agriculture, industrial activity or the sale,
purchase or construction of immovable property.
The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within
the framework of the [[Reserve Bank of India Act, 1934]] (Chapter III-B) and the directions
issued by it. On November 9, 2017, Reserve Bank of India (RBI) issued a notification outlining
norms for outsourcing of functions/services by Non-Bank Financial Institution (NBFCs) As per
the new norms, NBFCs cannot outsource core management functions like internal audit,
management of investment portfolio, strategic and compliance functions for know your
customer (KYC) norms and sanction of loans. Staff of service providers should have access to
customer information only up to an extent which is required to perform the outsourced
function. Boards of NBFCs should approve a code of conduct for direct sales and recovery
agents. For debt collection, NBFCs and their outsourced agents should not resort to
intimidation or harassment of any kind. All NBFCs’ have been directed to set up a grievance
redressal machinery, which will also deal with the issues relating to services provided by the
outsourced agency.
Non-banking financial institutions (NBFIs) are an important alternative channel of finance for
the commercial sector in India’s bank dominated financial sector. Their role in promoting
financial inclusion and catering to the needs of small businesses and specialised segments is
an additional dimension of their relevance in the Indian context. Regulations relating to
governing non-banking financial companies (NBFCs) are being increasingly harmonised with
those of banks to forge the right balance for financial stability while encouraging them to
focus on specialised areas.

Non-banking financial institutions (NBFIs) have been intermediating a growing share of the
resource flows to the commercial sector. NBFIs regulated by the Reserve Bank are all-India

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financial institutions (AIFIs), non-banking financial companies (NBFCs) and primary dealers
(PDs).

Non-BankingFinancialInstitutionsRegulatedbytheReserveBankofIndia

Fig 1 NBFI’s Regulated by RBI

Non Banking
Non Banking Financial
NBFCs are classified on the basis Institution
of their liability structures, the type of activities they
undertake and their systemic importance. In terms of liability structure, NBFCs are classified
into two categories – deposit-taking NBFCs or NBFCs-D, which accept and hold public
deposits and non-deposit taking NBFCs or NBFCs-ND, which do not accept public deposits.
Among NBFCs-ND,
Non Banking those with an asset size Primary
of 5 billion or more are classified
AllIndiaFinancia as non-deposit
Financial Companies Dealer
l Institutions
taking systemically important NBFCs (NBFCs-ND-SI). (
,
FOR THE PURPOSE OF ISSUING CERTIFICATES OF REGISTRATION (CORS),
NBFCS WERE CATEGORISED AS TYPE I AND TYPE II COMPANIES IN JUNE 2016.
THE APPLICATIONS FOR TYPE I NBFCS, WHICH DO NOT HAVE / INTEND TO
ACCEPT PUBLIC FUNDS AND DO NOT HAVE / INTEND TO HAVE CUSTOMER
Cs-N
INTERFACE,
NBFC’s ARE CONSIDERED
NBFC’s ON A FAST TRACKBankPDs
BASIS. NBFCS ARE ALSO
StandalonePD
D ND BASIS OF THE ACTIVITIES UNDERTAKEN BYs THEM
CATEGORISED ON THE,

WITH A VIEW TO MEETING SECTOR-SPECIFIC REQUIREMENTS, ENTAILING

APPROPRIATE MODULATION OF THE TIME, THERE WERE 12 TYPES OF NBFC’S
AS OF DATE UNDER THIS CATEGORISATION(TABLE1).

SystemicallyImportant OtherNBFCs-ND
NBFCs–ND
NBFCs-
( NBFCs-ND-SI ND)

Figuresinparenthesesarethenumberofinstitutions.

R
B
I.

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 Table1: Classification of NBFCs Based on
Activity

1. Asset Finance Company (AFC) Financing of physical assets

supporting productive / economic activities, including automobiles,
tractors and generators.
2. Loan Company Providing of finance whether by making loans or
advances or otherwise for any activity other than its own but does not
include an asset finance company.
3. Investment Company Acquiring securities for purpose of selling.
4. NBFC- Infrastructure Finance Company (NBFC-IFC) Providing
infrastructure loans.
5. NBFC-Systemically Important Core Investment Company (CIC-
ND-SI) Acquiring shares and securities for investment mainly in equity
market.
6. Infrastructure Debt Fund-NBFC (IDF-NBFC) For facilitating flow
of long-term debt into infrastructure projects.
7. NBFC-Micro Finance Institution (NBFC-MFI) Extending credit to
economically disadvantaged groups.
8. NBFC-Factor Undertaking the business of acquiring receivables of an
assignor or extending loans against the security interest of the receivables
at a discount.
9. NBFC- Non-Operative Financial Holding Company (NOFHC) For
permitting promoters / promoter groups to set up a new bank.
10. Mortgage Guarantee Company (MGC)Undertaking mortgage
guarantee business.
11.NBFC-Account Aggregator (NBFC-AA) Collecting and providing
information about a customer’s financial assets in a consolidated,
organised and retrievable manner to the customer or others as specified
by the customer.
12.NBFC-Peer to Peer Lending Platform (NBFC-P2P) Providing an
online platform to bring lenders and borrowers together to help mobilise
funds.

Source: RBI.

Table1: Classification of NBFCs Based on Activity

At end-March 2017, there were 11,522 NBFCs registered with the Reserve Bank, of which
178 were NBFCs-D and 220 were NBFCs-ND-SI. The number of NBFCs has been declining
over time with cancellations of registrations exceeding new registrations on account of
voluntary surrender or cancellation of CoR due to noncompliance of revised criteria of net
owned fund.

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 Fig 2 NBFC’s registration and cancellations of cor

Double-digit growth in credit extended by NBFCs has improved resilience and stability of the
economy by filling up the financing gap opened up by the muted bank credit growth from
201415. NBFCs’ consolidated balance sheet1 turned around and expanded during 2016-17
from a marginal decline in the previous year. Borrowings by NBFCs from various sources,
which accounted for 70 per cent of their total liabilities, increased by 12.1 per cent in 2016-17
mainly through market-based instruments such as commercial paper (CPs) and debentures
even as borrowings from banks contracted. Growth in public deposits decelerated which is,
however, attributable to the revised regulatory guidelines issued in November 2014
mandating that only rated NBFCs-D can accept and maintain public deposits. Unrated
companies were required to get rated by March 31, 2016 to be able to renew existing deposits
/ accept fresh deposits or else return deposits to the public. Further, the limit on acceptance of
deposits for rated asset finance companies (AFCs) was reduced from 4 times to 1.5 times of
their NOF as part of harmonisation across the sector. Loans and advances, constituting three-
fourth of total assets, picked up sharply as space opened up with the reduced pace of bank
credit growth. Investments too reversed from contraction in the previous year and rose
strongly during 2016-17 reflecting higher investments in equity shares in the wake of
ebullient market.
1

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NBFCs specialise in catering to sector specific financial needs covering retail; consumer and
vehicle loans; micro, small and medium enterprises (MSMEs); large industry / infrastructure;
and micro finance among others. A significant growth in credit to retail and services segments
also underlines their increasing role in financial inclusion. Industry receives about 60 per cent
of total credit by NBFCs, followed by retail, services and agriculture.

Within the sectoral deployment, retail credit increased at the highest pace on account of
consumer durables and credit card receivables; this was followed by services and industry.
On the other hand, credit to agriculture and allied activities contracted perhaps on account of
transitory disruptions in cash-intensive value chains due to demonetisation to the micro and
small segments in both industry and services sectors displayed robust growth while vehicle
loans declined during 2016-17 reflecting

Fig 3 Profitability Ratio of NBFC’s

NBFCs-ND-SI constitute 86 per cent of the total assets of the NBFC sector. The number of
these companies declined by more than half in 2015-16 in view of the revised regulatory
framework for NBFCs, which raised threshold asset size for NBFCs-ND-SI to 5 billion or
more from 1 billion. Accordingly, many of the NBFCsND-SI were reclassified as NBFC-ND
in view of the changed definition. In terms of ownership, non-government NBFCs-ND-SI
held 62.9 per cent of the total assets of NBFCs-ND-SI .The consolidated balance sheet
ofNBFCsND-SI expanded strongly in 2016-17 due to growth in credit, which has improved

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the resilience and stability of the economy by filling up the financing gap opened up by the
muted bank credit growth.The accretion to liabilities was mainly on account of share capital,
debentures and CPs; on the other hand, borrowings from both banks and the
governmentdeclined during the year. Although loans and advances ofNBFCs-ND-SI
increased during the year, investments grew at a faster pace reflecting a preference to park
funds in high yield instruments such as debentures, corporate bonds, equity shares and mutual
fund units Category-wise, loan companies (LCs) contributed the most to the increase in the
consolidated balance sheet of NBFCs-ND-SI during 2016-17, supported by a healthy growth
to promote the company's products and services for a percentage of its revenue. This is a
"pay-for-performance" model, because the affiliate is paid only after the transaction is
completed and there are no additional costs for the merchant if it is not. Banner-exchange,
pay-per-click and revenue sharing programs are examples of affiliate marketing.

2.1 All India Financial Institutions

There are three broad categories of nonbank financial institutions: First, term-lending
institutions such as the Export Import Bank of India (EXIM Bank) that engage in direct
lending by way of term loans and investments. Second, institutions such as the National Bank
for Agriculture and Rural Development (NABARD), the Small Industries Development Bank
of India (SIDBI) and the National Housing Bank (NHB), which mainly extend refinance to
banks and NBFIs. Third, investment institutions such as the Life Insurance Corporation of
India (LIC), which deploy their funds largely in marketable securities. State/regional level
institutions are another distinct group and comprise State Financial Corporations (SFCs),
State Industrial and
Development Corporations (SIDCs) and NorthEastern Development Finance Corporation
Ltd. (NEDFi).

Four AIFIs viz., the EXIM Bank, the NABARD, the NHB and the SIDBI, are under the
oversight of the Reserve Bank AIFI’s Operations Financial assistance sanctioned by AIFIs
during 2016-17 increased by 15.7 per cent whereas their disbursement growth was moderate
at 7.7 per cent amidst sluggish demand conditions. Notably, disbursements by the SIDBI
contracted during the year indicating moderation in industrial activity while those by the
EXIM Bank declined due to deleveraging in view of bad assets and provisioning
requirements. The increase in disbursements by the NABARD and the NHB reflects
resilience in the agriculture and housing sectors

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AIFIs’ consolidated balance sheet expanded during 2016-17 on the back of loans and
advances, which constituted the largest share of assets. Investments contracted in contrast,
with the NHB showing a significant decline due to redemption of treasury bills (T-bills) in
June 2017. Notably, AIFIs’ cash and bank balances at the close of 2016-17 were 30 per cent
lower than a year ago as they did not renew their fixed deposits with banks that matured
towards the end of the year and instead used them for normal business activities. Growth in
deposit mobilisation was moderate leading to a decline in their share in total liabilities over
the year. On the other hand, resources raised through borrowings expanded sizeably during
the year.

The resources mobilised by the AIFIs picked up during 2016-17 resulting in the utilisation of
about 83 per cent of their ‘umbrellalimit’ for raising resources from the money market as
compared to 71 per cent a year ago. Mobilisation through CPs increased significantly,
reflecting competitive interest rates on these instruments.

Sources and Uses of Funds

During the year, internal sources of funds increased with scaling up of operations as well as
higher capital and reserves. External sources, which include resources raised from the market
and capital infusion from the government, increased marginally The deployment of resources
during 2016-17 indicates a preference for investments followed by fresh deployment and
repayment of past borrowings. The share of interest payments in the deployment of funds has
declined in 2016-17.

2.2 Recent Developments

This section discusses developments in the NBFI sector during April-September 2017. In
view of the limited availability of data for this period, the discussion is focussed on select
variables.

NBFCs Sector

NBFCs’ consolidated balance sheet in the first half of 2017-18 expanded on the back of
strong credit growth financed through higher borrowings (Table 8).

NBFCs’ credit growth during AprilSeptember 2017 was about seven percentage points higher
than in the previous year on the back of retail and services sectors.

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Disaggregation of credit extended by the NBFCs-ND-SI segment indicates a sharp growth in
credit provided by LCs, followed by AFCs and ICs. LCs have relatively large exposure to
commercial real estate, which saw a sharp increase in credit, signifying the revival of
economic activity. NBFCs-IFC credit growth, on the other hand, remained subdued during
the first half of 2017-18 amidst asset quality concerns in the sector. The share of retail and
services sectors improved during the first half of 2017-18.

Table 2: Abridged Balance Sheet of NBFC (Amount in billion)

Items End- Y-o-Y variation Financial year

Sept. (up to Sept.) variation
2017 (Apr-Sept.)

2016-17 2017-18 2016-17 2017-18

1 2 3 4 5 6

1. Borrowings 14,739 5.1 4.9 12.8 4.9

2. Loans and advances 15,821 7.6 14.9 13.5 7.3
3. Total assets/ liabilities 20,631 7.8 6.5 13.9
4.6

Source: RBI Supervisory Returns.

Lending rates of NBFCs-ND-SI

The weighted average lending rates (WALR) of NBFCs-ND-SI have been declining in line
with the monetary easing cycle across all categories barring NBFCs-MFI which showed some
uptick in the WALR.

Fig 4 Sectoral Credit Deployment by NBFC’s-ND-SI

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NPAs of NBFCs-ND-SI, which recorded some deterioration in the quarter ending-June 2017,
improved at end-September 2017 partly reflecting higher write-offs.

Payments Banks

Among the payments banks, Airtel PB became the first payments bank in India to integrate
the unified payments interface (UPI) on its digital platform. Jio Payments Bank, a joint
venture of Reliance Industries Ltd. (RIL) and the State Bank of India (SBI), is expected to
begin operations in December 2017. The government is working on expanding India Post
payments bank’s branches for reaching out to rural people. These developments indicate the
potential role of payments banks in promoting financial inclusion in the country. New
categories of NBFCs engaged in P2P lending and account aggregation are expected to evolve
over time.
2.3 Overall Assessment

The number of NBFCs has declined because of the regulatory initiatives aimed at protecting
depositors’ interests and safeguarding financial stability. Nevertheless, the overall balance
sheet size of NBFCs has expanded with their credit growth recording a higher reading in
2016-17 when bank credit witnessed historically low growth. More importantly, credit to the
micro and small segments, both in industry and services sectors, displayed robust growth.
Financial performance of these companies came under stress with a decline in profitability
and deterioration in asset quality. Their capital positions also deteriorated during 2016-17
though they remained well above the stipulated norms. Their exposure to sensitive sectors
such as capital markets and real estate at 13.4 per cent of their total assets as of March 2017
was marginally higher than the previous year. Notwithstanding a double-digit growth in
public deposits mobilised by NBFCs, they remained well below 1 per cent of bank deposits.
NBFCs took higher recourse to market-based instruments for resource mobilisation while
reducing their dependence on bank borrowings. Conversion of a few large NBFCs-MFI into
small finance banks may have implications for credit to the micro finance segment. Primary
dealers reported an increase in profits during the year due to favourable yields and higher
trading profits. Payments banks reported negative profits due to high operational expenditures
in the initial stage. Financial assistance sanctioned by AIFIs during 2016-17 increased by
about 16 per cent while growth in disbursements was moderate at 7.7 per cent, a possible
indication of demand conditions turning lacklustre during the year. NABARD and NHB
disbursed significantly higher financial assistance supporting agriculture and housing sectors.

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Regulations governing NBFCs are being increasingly harmonised with the banking sector
while encouraging them to focus on specialised areas as evidenced by the recent notifications
for setting up two new types of NBFCs by the Reserve Bank – Account Aggregator and Peer-
to-Peer Lending Platform.Another recent regulatory development in the sector was the
issuance of a comprehensive Information Technology Framework for NBFCs-ND to be
adopted by June 30, 2018.

In the context of a regulatory regime for the sector, Financial Stability Board’s peer review of
India has suggested that there is need for improving the sector’s risk assessment capacity and
developing appropriate policy tools for non banking financial entities (NBFEs) to ensure
sustainable market-based finance and balance between promoting financial inclusion for
supporting economic development with the consideration of financial stability risks. The
review also suggested that the Reserve Bank may revisit the business criteria definition for
NBFCs on a regular basis, review the merits of deposit taking activities by non-financial
firms, eliminate regulatory exemptions for government-owned NBFCs, rationalise the
number of NBFC categories and continue harmonising NBFC prudential rules with those for
banks. Also, there is a need to improve the timeliness and granularity of data collected from
NBFEs, and enhancing its analysis.

The latest developments suggest a healthy growth in NBFCs’ credit during the first half of
2017-18 particularly in the retail and services sectors. A substantial improvement in credit to
commercial real estate during the current year up to September portends well for economic
activity. Available data also show improvements in NBFCs’ asset quality in the recent quarter
pointing to the fading impact of demonetisation. The goods and services tax related
adjustments may, however, need to be watched going forward.

2.4 Details of the organisation

DPS Finance is a company working in over 20States. One of the Largest Corporate Business
correspondent in India with 6300+ Customers Service Points. Average revenue Rs.
11232/month/Active CSP (2.5 times of National Average) and with presence in 20 States and
326 districts across India.Total customer Base 8.2 Million and increasing with Average
transaction volume per day (Kiosk Channel) : Rs. 38-40 Crores.

The housing Finance is huge. Many big players are working from years and had established
trust and created its brand name for its customers. As a new company DPS Housing and

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Finance has set up its own benchmark to become a leading company amongst all. In attempt
to increase its market share, DPS Finance is planning to focus on Home Loans as well. DPS
used to deal only in LAP business but as the demand for Home Loans is increasing, DPS is
trying to make a mark in this field as well.

This study is conducted to decide a Strategic plan for the Positioning and Balancing of
Portfolios between LAP and Home Loans.

There are various banks like HDFC Bank, AXIS Bank, ICICI Bank, PNB Bank etc. which are well
established and make it a challenge for DPS to emerge. It’s only been 1.5 years, but DPS
Housing and Finance has been able to create a mark in the corporate world.

The Organisation

DPS Housing Finance

DPS Housing and Finance limited is a wholly owned subsidiary of DPS Finance Private
Limited. It was originally incorporated as Karamyogee Pvt Ltd on 31 st August, 2006 under the
company’s act 1956. It is registered as a housing finance with National Housing Bank Act,
1989.

SHFL offers a wide range of housing finance products like home loans, home improvement
loans, loan against property, balance transfer and top up loans to salaried and self-employed
customers predominantly across the middle and premium segments. Construction finance is
also available to real estate developers and builders.

SHFL shares the professional values and ethos of its parent company, and has acquired and
maintained a reputation for reliability, transparency of operations and absolutely integrity.

SHFL is continuously expanding its business horizons to various locations in India and
constantly to introduce innovative products and services to cater to the requirements of its
customers.

2.5 Products

Home Loans: Home Loans can be given for many purposes.Home Loans: Home loans open
the door to one’s dream home. At DPS Housing Finance Ltd., they ensure that they give you

21
unmatched quality service and transparency right through the loan procedure and a
handholding experience that remains with you till the time you realise your dream home.

Home Loans can be provided for below stated purpose:

Loan for Construction: This facility is to provide financial assistance for construction of
residential House.
Loan for Purchase of House: This facility is to provide financial assistance for acquisition of
new or resale residential House. Property can be ready built/under construction.
Loan for Take over from Approved Institutions: This Facility allows the customer to transfer
his existing Home Loan from approved institution within a period of 6 months.
Composite Loan Scheme: This Facility is to provide finance for purchase of plot and
construction of residential House thereon within a specific time.
Home Improvement Loans
Looking to give your Home a new look, DPS Housing Finance Ltd is definitely the right place.
DPS Finance has exclusive Home Improvement Loans to provide you with the desired
makeover for your Home. We provide financial assistance for carrying out improvements
(repairs and maintenance), both external as well as internal, in your existing residential
home.
SHF Provide Home improvements loan for the following:
External/Internal repairs
Tiling and Flooring
Internal and External painting
Plumbing and electrical work
Waterproofing and roofing
Grills and Aluminium windows
Paving of compound wall (with stone/tile/etc.)
Home Extension Loans
At DPS Housing Finance Ltd., we understand your budding needs as an individual. We
provide financial assistance for extending the existing residential unit. Use the amount for
creation of an additional floor for your growing family, a separate room for your growing
child, a small space for yourself, for office work or a reading corner.
Balance Transfer
Balance Transfer facility enables customers to transfer their existing loan with other financial
institution to DPSHousing and Finance and also take Top up Loan which is over and above
your existing Loan. With the facility you not only end up saving on interest expenses on your
home loans, but can also avail additional loan which you can use as per your need.
Top Up Loans

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Top up Loan is a facility that DPS Housing Finance offers to its existing resident Indian
customers. It enables the customer to avail Loan which is over and above their existing loan
against the mortgage for existing property.
SHF provides Top Up loans for
Buying of Consumer durables/furniture/vehicle
Finance your children education/marriage
Medical expenses
Business Requirement
Any other personal expenses

Loan Against Property

Loan against Property is the best way to know the value of your property. If you have a
dream, we at DPS Housing Finance Ltd. will ensure that nothing comes in your way of
fulfilling your dream.Live you dream with a Loan Against Property! We are only a call away.
The multi-purpose Loan put funds at your disposal to use as you wish. What’s more, this
Loan is available at a reasonable rate and can be repaid comfortably over 15 years’ time.
SHF provides Loan Against Property for:
Business Expansion
Your Child getting Married
Your Child’s Higher Education
Going Abroad
Construction Funding
Construction Funding helps DPS Housing Finance Ltd. to provide project finance to leading
developers/ builders who marketable project/s in the area of demand.
Following are types of Funding:
Construction Funding- Financing Cost of Project.

Discounting of receivables towards flats/apartments already or to be sold.

2.6 Review of Relevant Literature, quoting the source of cash

To understand the services offered by the company and to get the basic knowledge of the
industry, reading material provided by the company was referred. Along with this, several
web links were referred to and the information derived from them was put into use. The
third source of information was direct interaction with the mentor and various associates of
the company who gave a lot of insight about the project and how to carry it through. As a
part of the project we had to understand a few concepts which are:

LTV: LTV refers to Loan to Value. It is nothing but the per-cent amount given by any bank to
the customer as loan. As giving loan does not mean that the whole amount will be financed

23
by the bank, it just gives some per-cent of amount while rest of the amount is asked by the
customers to invest on their own so that customer will keep their seriousness in the loan.
DPS is the only company in Gurugram that is providing 90% LTV. Other Banks and NBFC’s LTV
lies between 60% - 70%.
LAP
Industrial LAP: Industrial LAP is loan against Industrial Property which means that any
customer can take loan from the company and keep industry (factory) as a security. There
are few Banks/NBFCs other than DPS which provides Industrial LAP.
Land LAP: Land LAP refers to Loan against Land (Plot). This means that any customer can
take loan from the company and keep Land (Plot) as security.
Home Loans
Fresh Purchase from Builders:
In case of Purchase from Builders, the properties will be either under construction or ready
to move in after purchase. APF (Advance Processing Facility) is done in advance based on
the verification of title documents of project, categorisation of builders and verification of
approved plans.
Resale of Property:Under this category of Home Loans, the buyer identifies the property
which is already complete and meets all his requirements. Funding of such properties is easy
and quick.
Self-Construction:In case of Self Construction Loans, the customer has his own plot which is
mortgaged to the company. Loan is secured by mortgage of Residential property.
Direct Sales Agents: DSAs are the people who deal with the Banks and NBFCs. They work as
mediator between the bank and the customers.
Home Loan Business is mainly segmented into Three Categories:
Fresh Purchase from Builders:
In case of Purchase from Builders, the properties will be either under construction or ready
to move in after purchase. APF (Advance Processing Facility) is done in advance, based on
the verification of title documents of project, categorisation of builders and verification of
approved plans.
Resale of Property:
Under this category of Home Loans, the buyer identifies the property which is already
complete and meets all his requirements. Funding of such properties is easy and quick.
Self-Construction:
In case of Self Construction Loans, the customer has his own plot which is mortgaged to the
company. Loan is secured by mortgage of Residential property.
Loan Against Property (LAP) is broadly divided into Two Categories:
Residential Property

24
Under this Category, customer owns the residential property and the same is mortgaged to
raise funds. This is generally taken by Business community in order to augment their
business growth by unlocking their capital in their residential property. This is generally
taken by Business class.
Commercial Property Purchase
Under this Category customer owns the commercial Property and the same is mortgaged to
raise funds. This is generally preferred be Business Community and rarely by Salaried class.
Here, the funds are required for the growth of business of the borrower.

CHAPTER 3
RESEARCH METHODOLOGY

The research involved three processes. The first step included reading and collection of data
already available with the company. The second step was interacting with the DSAs, DSTs,
lawyers, connectors and carrying out practical work like working on CAM (credit appraisal
memo), interacting with the final customers and imparting knowledge to them about the

25
various services provided by the company. The final part involved getting the questionnaires
filled and interpreting the data according to the guidelines set by the company.

3.1Objectives
The main aim of understanding this study is to accomplish the following objective:

· Find the potential of Home Loan Products: The main objective of the project is to
find the potential of the Home Loan products and what benefits would it bring to the
Company.

· Features of other NBFCs and Banks: The secondary aim is to find out what are the
features and rate that different Banks are providing to their customers. So as to find
what features should DPS provide with respect to Home Loans.

· Proportion of LAP and Home Loans: To find the proportion of LAP and Home
Loan and how many businesses are dealing with LAP and Home Loans

· Customer Profile: Most of the Customers that DPS is dealing with are businessmen
and salaried employees.

3.2 Problem Statement

Need for the project

Being a new entrant in the Gurugram market, DPS Housing finance had to face a stiff
competition from both, the banks and the NBFCs. Leading banks like ICICI Bank, HDFC
Bank, Axis Bank etc. and NBFCs like LIC Housing, DHFL, PNB Housing,
India bulls, Tata Housing, IIFL etc. have a very strong presence in the local market by
virtue of their vintage as well as huge set-up developed over a period of time. It was a
challenging task to make inroads into this market which required some innovation and out
of the box thinking. With innovative products like 90% LTV, Industrial LAP and Land
LAP, DPS Finance was able to overcome the challenge of being a new entrant. Now the
next big challenge which comes in its way is creating a Strategic Balance between Home
Loans and LAP.
As DPS Housing and Finance had already established itself in the LAP business and had a
good share of the market, hence the time is crucial for them to expand their roots. To do
so, they are thinking of expanding themselves into the home loan business as well. To

26
 achieve this and to get a fair bit of knowledge about the current market conditions they
carried out the research.
The primary reason for the above mentioned expanding process was that all the
nationalised banks and the competitor banks are already dealing with home loans.
Moreover, the risk involved in the home loans is less as compared to LAPs because of the
emotional connect associated with a house. Government of India has launched an
initiative wherein they are involved in the construction of affordable houses for people
lying below the poverty line hence creating an environment suitable for the industry
catering to home loans.

3.3 Scope of Study

By doing this survey, we will be able to

· Find out the potential of the Company.

· Evaluating the ways to increase focus on Home Loan products.

· Help in increasing the focus on Home Loan products without affecting the LAP
Business

· To find out the extra features that other Banks and NBFC’s are providing to their
customers.

3.4 Limitation of Study

· No previous research

· Norms keep on changing

· DSAs were unable to share some of their confidential data.

· The study is limited to one prospect, i.e. DSAs. Others like Customers, Builders
are not taken into consideration for the survey.

· As the company is new, no secondary data is available for reference.

27
3.5Methodology
The study of topic required a survey to find out more about Home Loans and LAP and
also to find a Competitive edge for the Company. The survey was done to find out a
Strategy which helps the Company in bringing a Balance between Home Loans and LAP.
For this Survey Primary Data has been collected. On the basis of this data, descriptive
research has been done.
Descriptive Research: Descriptive research is a research methodology to better describe
marketing problems, situations or the market potential for a product and also the
demographics and attitudes of consumers.
Here, for the study Descriptive Research has been used to find out the market potential of
newly launched products. In descriptive research cross sectional design is used i.e. one
time interaction with a sampled population of 20 DSAs.
Research Instruments
Tools used for primary data are:

· Questionnaire regarding Home Loan and LAP

· Interview of Direct Sales Agents (DSAs) who is associated with DPS and other
Financial Institutes.

To process &Analysedata:-

After the data was collected it was tabulated, analyzed and interpreted to the conclusion reach

Techniques Applied

Bar Chart:- A chart in which the length of the bar represents the amount of the item
associated with the bar.

Pie Chart:- A circular statistical graph which is divided into slices

28
29
 CHAPTER 4

DATA COLLECTION AND ANALYSIS

4.1 Sampling Frame

A population of Direct Sales Agents in Gurugram is taken for this survey. 20 samples out of
all DSAs have been targeted. As there are limited Housing Finance associates in Gurugram.
Direct Sales agents are the mediators who give customers to Private Sector Banks and
NBFCs. DSA finds perspective customers through cold calling and references and by
knowing customers’ needs i.e. what they want in Home Loans, and accordingly suggest them
the Banks or NBFCs that fulfils their needs.

4.2 Data Collection Method

Survey: It is a structured survey, as a questionnaire has been prepared for the DSAs in which
questions related to Home Loans and LAP and various features that other banks are providing
have been asked. DSAs were interviewed to get an idea about what the customer preferences
are and to know which Banks and NBFCs are working the best.

4.3 Sources of Data Collection

Direct Sales Associates (DSAs): The main source of collecting data is from the DSAs. DSAs
are the people who deal with Banks and NBFCs as a mediator between the bank and the
customers. Therefore the questionnaire is prepared for the DSAs in order to get the detailed
information about all banks and NBFCs.

Interview: Apart from the questionnaire, questions have also been asked from the DSAs
about the suggestion that they would like to give for the improvement in the functions of DPS
and how DPS should expand its Home Loan Business.

Questionnaire:A questionnaire is designed, where the questions are related to Home Loan
and LAP. The questions were put up in a manner so as to know how much focus should DPS
give on the Home Loan products and how can they Balance portfolios between LAP and
Home Loans.

30
4.4 Presentation and Processing of the Data for Analysis
As it’s a descriptive analysis, the data is not presented through bar graphs or pie chart. All the
data has been analysed descriptively except the ratio of LAP and Home Loans which is
presented graphically.

DSAs are targeted for the collection of data, as they know more about the financial institutes,
because they are the mediator between Banks/NBFCs and prospective customers.

Builders and developers have not been targeted as builders would give different views and it
would have created chaos to get two different views i.e. from DSA as well as Builders.

Customers are not considered because it is difficult to track the potential customers who
know about the terms and products of Home Loan.

4.5 Competitive Analysis

There are a lot of other NBFCs and Banks in Gurugram’s Industrial Market which deal with
housing finance.

NBFCs

· LIC Housing Finance: The Company laid emphasis on strengthening its distribution
channels. The company increased the strength of its Home Loan Agents, Direct Sales
Agents and Home Loan Counsellors. It had also introduced a new product - “Flexi-
scheme” for which the home loan Borrowers will pay a fixed rate of interest for 5
years, after which they will exercise the option and decide to either continue with
fixed rate loans or convert it into floating rate loans at the prevailing rate of interest.

· PNB Housing: PNB Housing provides safe investment options to various deposit
schemes, with attractive rate of interests. With over two decades of specialized
experience in housing finance, PNB Housing has a robust network of branches spread
across the country which helps its customers avail financial services seamlessly.

· India bulls Financial Services: It is spread across housing Finance, real estate and
wealth management. Main aim is to ensure utmost convenience in the home loan
buying experience and making housing finance more affordable by contributing
towards the organisation of the housing finance.

31
Other NBFCs are as follows Bajaj Finance Limited, DHFL, Adhar Housing and IIFL.

Banks:

· ICICI Banks: It is one of the largest banks in India in terms of assets and market
capitalization. It offers a wide range in India, in terms of assets and capitalization. It
also offers a wide range of banking products and financial services for corporate and
retail customers through variety of delivery channels and specialised subsidiaries.
ICICI Banks offers attractive rate of interest on Home Loans.

· HDFC Bank: It gives attractive interest rates and smaller EMIs with 30 years loan.
The range of housing finance products includes Home Loans, Home
Improvement/Renovation Loans and Home Extension Loans, that means it gives a
wide range of Home Loans Product.It also provides flexible loan repayment options.

· Corporation Bank: Started about 110 years ago in 1906, with an initial capital of
just Rs.5000. Corporation Bank has recorded RS.345493 Crore mark in Business and
even far more, with over 10,2014 service outlets across the nation, served by
committed and dedicated 19000 plus Corp Bankers. Proof of which is enviable track
record in financial performance. They have many reasons to cheer; predominant of
them is, being able to participate in nation building by empowering the rural and
urban population alike. Today, they are proud to be significant contributors to the
growth of the country’s economy.

As lots of the private sector Banks, NBFCs are entering in the market and almost all
deals in same product so customers generally prefer to finance through Public Sector
Banks, as they have relatively low interest rates.

4.6 Industry Analysis

The Housing Finance sector in the country is flooded with many big and small players.
Players have spread geographically but only some of them are popular to customers. Housing
Finance industry had been majorly ruled by government for many years. As the demand for
the housing loan increased, many of the private sectors have also entered into this housing
finance industry. As almost all the housing finance products are similar, it’s been difficult for
customers to distinguish between the companies.

32
With increasing competition, the chances of fraud increases. To DPS the customer interest,
two bodies take the command of these housing finance companies and banks, Reserve bank
of India and National Housing Bank which is a subsidiary of RBI formed in 1988. RBI
controls the working of Banks and Non-Banking Financial Companies.

According to a report of IFMR Capital updated in Jan’17, Indian Housing Finance market is
worth estimated Rs. 9.7 trillion and has achieved steady growth over last 3 years. The market
is dominated by few big players accounting for close to 70% of the market. Currently there
are 43 banks which provides home loan. According to a report issued by National Housing
Board on Jan 2016, there are 72 Non-Banking Housing Finance Companies working in the
industry.

As on April 2017 the top 5 companies, in the Industry, in respect of Market Capitalisation and
Net Sales are as follows:

Figure 5: Top Five Companies(Reference : Bloomberg)

With the Housing for all by 2022 scheme launched by government, there are chances that
more companies and banks will enter in the market to fill up the gap.DPS group has many
sectors and has been working from many years. DPS Hosing Finance was started 4 years
back. It realized its geographical absence in the Northern Region and decided to setup its

33
Branch in Gurugram. Since then it has achieved a good amount of recognition in the market.
Its biggest strength is its brand name and networking, as DPS group is already a well

established organisation. Despite being in a corporate market it had shown a great impact on
housing market

34
 CHAPTER 5

DATA ANALYSIS AND INTERPRETATION

5.1 Choice of Data Analysis Techniques

As it is a qualitative research it deals with descriptions and characteristics. To collect the data,
a questionnaire is made and interview is also conducted for DSAs of Housing Loan,
Gurugram. Questionnaire is based on Home Loan Products and LAP products and the
features provided by Banks and NBFCs to their potential Customers.

Outcomes and Interpretation of Outcomes

The interpretation came out from this survey are as follows:

Q1. DSAs associated with Banks/NBFCs:

As per the first question from the questionnaire it is found that DSAs are associated with the
following Banks and NBFC’s:

Figure 6: Most preferred Banks in terms of % DSA

(Reference : Sample Data Collected from DSAs/DSTs)

35
Interpretation: As can be seen from the graph, the proportion of association of DSAs is
100% with DHFCL and HDFC followed by ICICI which is at 95%. The reason being the
higher yield. However, DPS though being currently focused on the LAP business is still not
lagging behind. If it starts focusing on home loans as well, there is a high probability that
they will be able to achieve greater results.

Q2. Products in which DSAs deal with respect to the interest rates: Most of the DSAs
deal in Home Loans and Loan against Property. Some are dealing with Car Loan and
Personal Loan as well. By this we know that the demand for Home Loan and Loan Against
Property is more than other Loans. By this we get to know that the demand for Home Loans
and Loan Against Property is more than other Loans.

Banks/NBFCs Interest rates (%)

Home Loans Loan Against Property
HDFC Ltd. 9.40 10.60 – 11.50
DFHL Home Loans 9.75 – 10 13.75
ICICI Home Loans 9.45 – 9.70 11.50
Tata Capital Housing Finance 10.25 – 11.00 12.50 – 13.00
Megma Housing Finance Limited 12.50 13.50

IIFL 10.99 – 12.50 10.00

Indiabulls Housing Finance Ltd. 9.95 – 10.40 12 – 14.50

IDBI Home Loans 9.75 – 10.50 11.10

Table 3: Interest rates

Q3. Sources of lead generation: There are many sources of lead generation.
According to the Questionnaire Analysis, the most common sources of Lead
Generation are

· Tele Calling

· C.A. References

· Personal References

· Old Customer Preferences

36
 Interpretation: DSAs establish strong relation with the customers as well as
withother agents in the industries. They get their business from old customers and
connections.

Q4. Average Business per month: This question is set to know the market size of
Gurugram through compiling the business of each DSA.

The Average Business in terms of the Number of Casesis 7 per month for both
Home Loans and LAP.

The volume of Business in case of LAP is bigger than that of Home Loans. The
Business made in-case of HL is 2-3 Cr. while LAP makes a Business of 6 Cr.
The basic difference between the two is that LAP leads to greater generation of
revenue which was one of the major reasons for DPS’s focus on LAP for all these
years.
Q5. Banks which have the most reliable Home Loan Product: On analysing and
interpreting the responses of the DSAs, the Banks which have the most reliable Home
loan Products are Ranked in the following manner:

1) HDFC
2) ICICI
3) Axis Bank
4) PNBHFL
5) DPS Housing and Finance
6) SBI

37
 Figure 7: Percentage of reliability on Home Loans
(Reference : Sample Data Collected from DSAs/DSTs)

As per the Current Scenario, the reliability for Home Loans is maximum in case of HDFC
which is 29% followed by ICICI at 22% and is the least in case of SBI. The reliability of Home
loans in case of DPS Housing and Finance is near about 15%, which is pretty low. DPS
Housing and Finance should thus start focusing on Home loans to establish a better position
in the market.

Q6. Main reason for the above:

Reasons Rank

Attractive Rate of Interest 2

Service Provided 3
Schemes 1
Payback Period 4

Table 4: Ranking of services

(Reference : Sample Data Collected from DSAs/DSTs)
Interpretation: According to the DSAs, the most important reason behind relying on
a Banks Home Loan Products is the various Schemes that the Banks provide, while
the least important reason is the Payback period. DPS Housing and Finance focuses
majorly on the services provided, its rate of interest is pretty high as compared to its
Competitors.
Q7. Products in which the DSAs deal: This question is set to know the trendiest
product among DSAs. The data is analysed by counting the number of DSAs that deal
in a particular product. And its percentage has been calculated in respect of total
DSAs surveyed. In the same way percentage of DSAs deals in each and every product
has been calculated.

38
 Figure 8: Products (Reference : Sample Data Collected from DSAs/DSTs)

Interpretation: All DSA’s are dealing in LAP while 80% deal in Home Loan.DSA consider every
type of property for LAP case. It is depend onthe policy of company, which type of property
they will consider. DSAs just take case and handover it to company whichever is suited with
the case. However the second most important service is Home Loan Business. ThusDPS must
focus on this Business as well.

Q8. Kinds of properties that are being mortgaged.

The Loan against Property (LAP) is given by mortgaging the property of applicant. There is a
restriction on the type of property to be considered for loan. This is due to the risk and laws
associated with it. This question is set to know the properties which are been considered as
mortgage in LAP.

The data is analysed by counting the number of DSAs consider a particular property. And its
percentage has been calculated in respect of total DSAs surveyed. In same way percentage
of DSAs for each and every property has been calculated.

39
 Figure 9: Property for LAP

(Reference : Sample Data Collected from DSAs/DSTs)

Interpretation: DSA consider every type of property for LAP case. It is depend onthe policy
of company, which type of property they will consider. DSAs just take case and handover it to
company whichever is suited with the case.

Q9. Ranking the Products:

In housing finance there are 3 major products, namely:

· LAP

· Home Loans

· Balance Transfer + Top Up

The preference of product depends upon the need of customer.

The data is analysed by allotting the point to each rank that has been assigned to each
product. Then the average total point has been calculated for each and every product by
adding up all the points assigned to each product and dividing it by total number of surveys.

The point has been assigned in this way:

Rank 1 2 3

Points 30 20 10

40
 Table 5: Rank Points for Products

(Reference : Sample Data Collected from DSAs/DSTs)

The table given below shows the number of DSAs given different ranks to different Products.

HL LAP BT

Rank 1 0 9 1
Rank 2 3 1 6
Rank 3 7 0 3
Table 6: Ranking of products

Reference : Sample Data Collected from DSAs/DSTs)

Figure 10: Products Rank

(Reference : Sample Data Collected from DSAs/DSTs)

Interpretation: most of the DSAs prefer LAP as their main customers arebusinessmen who
prefer LAP.

Q.10 Rank Customer Profile:

There are different types of Customer Profile. Risk level differs with the type of profile.
Businessman, SMEs and Rented Person is riskier profile as there income is not fixed and
Salaried Person is low risk profile as they have fixed income.The data is analysed by allotting

41
the point to each rank that has been assigned to each Customer Profile. Then the average
total point has been calculated for each and every Customer Profile by adding up all the
points assigned to each Customer Profile and dividing it by total number of surveys.

The point has been assigned in this way:

Rank 1 2 3

Points 30 20 10

Table 7: Rank Points for Customer Profile

(Reference : Sample Data Collected from DSAs/DSTs)

The table given below shows the number of DSAs given different ranks to different Customer Profiles

Salaried Employee SENP SEP

Rank 1 0 0 10
Rank 2 9 1 0
Rank 3 1 9 0

Table 8: Ranks of Customer Profile

(Reference :Sample Data Collected from DSAs/DSTs)

Figure 11: Customer Profile Rank

42
 (Reference : Sample Data Collected from DSAs/DSTs)

Interpretation: SEP profile gets full points as every DSA prefer business profileand
businessman take huge loans which add up to their higher disbursement.

Q11. Rank the Program with respect to your preference.

The cases of loan are categorised in different programs according to the requirement and
conditions of the case. The decision of suitable program to different cases is taken by Bank/
NBFCs itself.The data is analysed by allotting the point to each rank that has been assigned to
each Program. Then the average total point has been calculated for each and every Program
by adding up all the points assigned to each Program and dividing it by total number of
surveys.

The point has been assigned in this way:

Rank 1 2 3 4 5 6

Points 60 50 40 30 20 10
Table 9: Rank Points for Programs

(Reference : Sample Data Collected from DSAs/DSTs)

The table given below shows the number of DSAs given different ranks to different Programs.

ITR based EMI Gross Gross Liquid Banking

Equaliser Margin Receipt Income Based
Program Lending
Rank 1 3 1 0 0 3 3
Rank 2 1 0 0 0 5 4
Rank 3 2 5 1 0 2 0
Rank 4 2 2 5 0 0 1
Rank 5 2 1 0 5 0 2
Rank 6 0 1 4 5 0 0

Table 10: Ranking of Programs

(Reference : Sample Data Collected from DSAs/DSTs)

43
 Fig
ure 12: Products Rank

(Reference : Sample Data Collected from DSAs/DSTs)

Interpretation: According to DSAs most trending program is LIP as businesses domany

trading which are not recorded in books of accounts. So it is a beneficial program for them.

Q 12. More than 80% LTV

LTV (Loan to Value) is the proportion of value of mortgage property given as loan to the
customer. The whole amount is not provided by company due to risk of reduced future value
is associated with the property.

Interpretation: As per the DSAs, in Gurugram, only Yes Bank and DPS housing and Finance is
giving LTV morethan 80% LTV. According to the DSAs it is a good product having huge
potential and DPS Housing and Finance would benefit from this.

Q 13. Reason for less focus on Home loans, traditionally:

The basic reason behind having less focus on Home Loans was that there is less profit in
Home Loan Business and more in LAP business. Moreover LAP enables greater Monetisation
of Property.

Q 14. Main Reason behind increase in demand for Home Loans:

The main reason behind the increase in Home Loans is the demand for small ticket loans and
priority sector lending and also the implementation of GST, which has lead to an increase in
the tax paid on Housing sector thus leading to a rise in demand for Home Loans.

44
To focus more on Home Loans, DPS Housing and Finance should provide good schemes and
Interest rates.

45
46
 CHAPTER 7

KEY FINDINGS

Following points were drawn from the entire project:

· The current market scenario favors the Home Loans business and to gain a
respectable position in the Home Loan market, DPS has to increase its reach
and shift its focus from LAPs to Home Loans in such a way which does not
lead to reduction in the LAP business.

· Out of the four major categories of loans viz. LAPs, Home Loans, Car Loans,
Personal Loans, the majority of the revenue is generated from LAPs and
Home Loans wherein the volume of business from Home Loans is around 2-3
crores per month.

· On the reliability index of Home Loans, DPS ranks fifth while HDFC leads
other financial institutions. The main reason being that DPS focuses mainly
on the services provided by it while HDFC and ICICI focus on the schemes
offered and the rate of interest. The rate of interest of HDFC and ICICI being
slightly better and more flexible. **

· DSA’s focus mainly on SEPs (Salaried Employed Professionals) and Salaried

Employees. SEPs prefer LAP Business while the salaried class prefers Home
Loan business. Hence, we can conclude that DPS must also focus on Salaried
Employees.

· The main reason for the shift in focus to Home Loans is due to Priority Sector
Lending which has already been explained.

· Liquid Income Programs and ITR based programs are the most preferred by
the salaried employees who prefer Home Loans.

47
 · The upcoming GST would lead to an increase in tax paid on housing sector
which will again lead to increase in the demand for Home Loans.

CHAPTER 7

CONCLUSION

This survey was very helpful in understanding the reason behind why there should be an
increase in focus on Home Loans. We notice that the overall focus on LAP is greater than the
focus on Home loans. According to the survey, the proportion of LAP is higher in DSAs
business as LAP is beneficialfor businessmen and most of the businessmen contact DSAs for
their loan sanction to DPS time and DPS them self from procedural hiccups. Generally
salaried customers directly contact company for loan. Thus, DSAs bigger portion of business
is from LAP.

Figure 13: LAP VS Home Loans

(Reference : Sample Data Collected from DSAs/DSTs)

DPS Housing and Finance is doing a great LAP business. However now is the right time to
focus on Home Loans. For better growth and expansion and for surviving in the
competitive market, DPS’s rising focus on Home Loan is essential. According to the
DSA’s the main reasons behind this shift are that firstly All Nationalised Banks
provide Home loan products, secondly Home Loans are less riskier than LAP and
lastly Increase in the demand for small ticket loans and priority sector lending. As

48
 DPS Housing and Finance is already an established organisation, hence capturing the
market would not be any difficult. DPS’s major focus has always been on the services
provided by it rather than on the interest rates. Despite the interest rate being high,
DPS has managed to make a mark but once it starts focusing on Home Loans, it must
also start concentrating on the yield rate and the schemes

All these factors have led to an increase in the entire Home Loan industry and
therefore DPS Finance must shift their focus to Home Loans as well, without letting the
LAP business get affected. It is also very important to understand that as LAP business
is still more popular amongst the DSAs, DSTs and Connectors therefore there should a
be near about Balance of 60:40 between the LAP and Home Loan Business
respectively.

As DPS Housing and Finance is already an established organisation, hence capturing

the market would not be any difficult. DPS’s major focus has always been on the
services provided by it rather than on the interest rates. Despite the interest rate being
high, DPS has managed to make a mark but once it starts focusing on Home Loans, it
must also start concentrating on the yield rate and the schemes.

The leading Banks like HDFC and ICICI are offering a minimum of 9.40% of yield on
Home loans, while DPS Housing and Finance offers a minimum yield if 9.75%.
According to the survey, DPS housing and Finance should lower their interest rates so
as to be a part of this competitive Industry.

49
 BIBLIOGRAPHY

1.World Wide Web: Various websites related to Home Loans and LAP:
https://www.ltfs.com/companies/lnt-housing-finance.html

· https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapid=114724003

· https://www.ltfs.com/companies/lnt-housing-finance/our_products/new_home-
loans.html

2. Research Papers referred to:

· http://www.bseindia.com/downloads/HomeLoans.pdf

· http://www.ffsiltech.com/report/FAQ_Loan_Against_Property.pdf

· https://www.idbi.com/pdf/soc/home-loan-and-Loan-Against-Property.pdf

3. Company Annexures

4. Company Reports

5. RBI 2017 Report On NBFC’s

50
 ANNEXURE

QUESTIONNAIRE
Q.1. Which are the Banks/NBFCs you are associated with? Name them.

· __________________________

· __________________________

· __________________________

· __________________________

Q.2. Interest rates of these associated Banks/NBFCs.

Interest Rates

Banks/NBFCs Home Loans Loan Against Property

% %

% %

% %

% %

% %

% %

% %

51
Q.3. What are the sources of lead generation?

· ____________________________

· ____________________________

· ____________________________

· ____________________________

Q.4. What is the Average Business per month?

Number of Cases:

· HL ____________

· LAP ___________

Volume of Business:

· HL____________

· LAP ___________

Q.5. Which bank’s home loan product do you find most reliable?

· _____________________

· _____________________

· _____________________

· _____________________

Q.6. What is the main reason for the above?

· Attractive interest rates

· Service provided

· Schemes

· Payback period

· Others

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Q.7. What are the products you deal in? (Tick as many as applicable)

· Home Loan

· Loan Against Property

· Car Loan

· Personal Loan

· Business Loan

· Others (Please Specify) __________________________

Q.8. Which Financial Institutions are funding the below mentioned properties? (Tick as many
applicable)

· Residential ______________________________

· Industrial _________________________________

· Commercial _______________________________

· Land (plot)_________________________________

· Hotels/Marriage Halls _______________________

· Hospitals /Nursing Home______________________

Q.9. Rank the product with respect to its demand.

Product Rank

Home Loan

Loan Against Property

Balance transfer + top-up

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Q.10. Rank the Customer Profile with respect to your preference.

Customer Profile Rank Reason

Salaried Employee

SENP

SEP

Q.11 Rank the program with respect to its preference.

Program Rank

ITR based

EMI Equaliser

Gross Margin

Gross Receipt

Liquid Income Program

Banking Bases Lending

Q.12. Does any Bank/NBFCs offer more than 80% LTV?

· Yes

· No

If yes, which Bank ________________________________________

At what rate? ___________________%_

Q.13. Traditionally there was less focus on Home Loans. What according to you is the reason
for the above?

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___________________________________________________________________________
___________________________________________________________________________

Q.14. Do you think the rise in the demand for small ticket Loans and Priority Sector lending
is leading to an increase in Home Loans?

· Yes ________________________________________________________

· No ________________________________________________________

Q.15. DPS Housing and Finance now wants to focus on Home Loan business along with
LAP Business. What suggestions will you like to give the Company to expand its Home Loan
Business?

___________________________________________________________________________
___________________________________________________________________________

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