PERSONAL LOANS OFFERED BY PUBLIC

AND PRIVATE SECTOR BANK

BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V UNIVERSITY OF MUMBAI ACADAMIC YEAR (2010-2011)

SUBMITTED BY MANALI .N. DONGRE ROLL NO-408

S.S.& L.S. PATKAR VARDE COLLEGE OF ARTS, COMMERCE AND SCIENCE GOREGAON (WEST) MUMBAI-400062

PERSONAL LOANS OFFERED BY PUBLIC

AND PRIVATE SECTOR BANK

BACHELOR OF COMMERCE BANKING & INSURANCE SEMESTER V
SUBMITTED

In Partial Fulfillment Of the requirements For the Award of Degree of Bachelor Of Commerce-Banking & Insurance. By MANALI N. DONGRE ROLL NO-408

S.S.& L.S. PATKAR VARDE COLLEGE OF ARTS, COMMERCE AND SCIENCE GOREGAON (WEST) MUMBAI-400062

S.S.& L.S. PATKAR VARDE COLLEGE OF ARTS, COMMERCE AND SCIENCE GOREGAON (WEST) MUMBAI-400062

CERTIFICATE
This is to certify that Shri/Miss Manali N. Dongre of B.Com.Banking & Insurance Semester V (2010-2011) has successfully completed the project on under the guidance of honorable B .M. Rai. Course Co-ordinator Project Guide / Internal Examiner External Examiner Principal

ACKNOWLEDGEMENT

I take this opportunity to express my gratitude to Prof. B.M.RAI, my Project Guide for this help and valuable suggestions which helped me throughout the project. The Project on PERSONAL LOAN OFFERED BY PUBLIC & PRIVATE SECTOR BANK helped me in a big way as it allowed me to know more about type of personal loan. In making this project, the information has been drawn through internet websites, books and references and thereafter analyzed and compiled by me. I have put in my best efforts to gather as much information as I could, understand it well and then present it better so as to make this Project a success.

DECLARATION
I Miss Manali N. Dongre the student of B.Com. Banking & Insurance Semester V (2010-2011) hereby declare that I have completed the project on Personal Loan Offered by Public and Private Sector Bank. The information submitted is true and original to the best of my knowledge.

Manali N. Dongre

PERSONAL LOAN OFFERED BY PUBLIC AND PRIVATE SECTOR BANK

INDEX

Sr.no 1 2 3 4 5 6

Topic
Introduction of Bank Types of Banks Loans Types of Loan Personal Loan offered by Public & Private Sector Bank Types of Personal Loan Home Loan Car Loan Personal loan Education Loan Case Study Field Study

Page No.
1 3 8 9 13 14 15 21 27 30 36 40

7 8

Bank

Introduction:
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses.

Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location

The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.

HISTORY OF BANKING

Before we look into the knitty-gritty of banking sector reforms process, we must have a proper perspective of what is the history of our banking system in India and also understand the rationale of why reform is necessary and what reforms are essential. Like in many other aspects, India had a long tradition of banking. Evidence regarding the existence of money lending operations in India is found in the literature of the Vedic times, i.e. 2000 to 1400 B.C. The literature of the Buddhist period, for e.g., the jatakas, and recent archaeological discoveries supply evidence of the existence of sresthis, or bankers. Form the laws of menu. It appears that money-lending and allied problems had assumed considerable importance in ancient India. What were the interests? They were prescribed by almost all Hindu law-givers, Menu, Vasistha, Yajnavalkya, Gautama and Baudhayana as also Kautilya. A common base number was 15 per cent annum what the banker economist Dr. Thingalaya calls Hindu rate of interest. Incidentally, this is close to current Prime Lending Rate (PLR) of many banks. However, Chanakya gives a different approach. The interest works out for 15 percent annum for general advances. The traders are charged a rate of 60 % p.a. Where the merchandise has to pass through forests, the traders have to pay 120 % while those engaged in the export-import business handling sea-borne cargo have to pay 240 % p.a. Chanakyas interest rate structure is risk weighted; the rate of interest increases with the risk involved in the borrowers business. Again, it is not everyone who could take up banking business. The Dharmashastra laid down the rates according to the castes of the borrowers, and the eligibility of men belonging to Vaishya caste alone could take up the money-lending profession. In other words, in ancient times, your caste gives you license to banking; not RBI!!!

TYPES OF BANKS

PUBLIC SECTOR BANK

Public sector banks are those banks run under the control of government and their prime motive is the welfare of the general public. A public sector bank also looks for funding developmental work in the country as the government has a majority share in it. The first objective would always be to make profit. every organization whether private or public is here to make profits so that it could justify their existence. but public sector banks involves public also. Public here means common people like us. This refers to banks that have their shares listed in the stock exchanges NSE and BSE and also the government of India holds majority stake. It is as good as the government running the bank. Since the public decide on who runs the government. All the nationalised banks are public sector but all public sector banks are not nationalized

The following are the list of Public Sector Banks in India

Bank of India

Bank of Maharashtra

Canara Bank

Central Bank of India

CENTRAL BANK

Central Bank is a government-owned bank, is one of the oldest and largest commercial banks in India based in Mumbai. The bank currently has 3,168 branches and 270 extension counters across 27 Indian states

RESERVE BANK OF INDIA

Reserve Bank of India is also known as India's Central Bank. It was established on 1st April 1935. Although the bank was initially owned privately, it has been taken up the Government of India ever since, it was nationalized. The bank has been vested with immense responsibility of reviewing and reconstructing the economic stability of the country by formulating economic policies and ensuring a proper exchange of currency. In this regard, the Reserve Bank of India is also known as the banker of banks.

PRIVATE SECTOR BANK

Private Banks in India started way back. Private banking in India was practiced since the beginning of banking system in India. In India the year of 1935 the reserve bank of India was build and it became the centre of all the other banks taking the imperial responsibilities that includes the transfer of commercial banking completely The first private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of the fastest growing Bank Private Sector Banks in India. IDBI ranks the tenth largest development bank in the world as Private Banks in India. The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited, to set up a bank in the private sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995.

List of Private Sector Bank

 Bank of Punjab Bank of Rajasthan City Union Bank Development Credit Bank Federal Bank HDFC Bank ICICI Bank United Western Bank UTI Bank

LOANS

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding

Types of Loans

TYPES OF LOANS

SECURED LOAN

UNSECURED LOAN

Secured Loan

A loan which is backed by assets belonging to the borrower in order to decrease the risk assumed by the lender. The assets may be forfeited to the lender if the borrower fails to make the necessary payments.

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower.

A secured loan is one in which the borrowed funds are linked to a specific asset, which acts as collateral against the loan. The primary feature of a secured loan is the lender's right to possess the asset if the terms of the loan are materially breached and payment is not made. A mortgage loan is a popular example, where the house is the security. But, if the value of the collateral does not retire the loan, the lender can go after other assets.

Unsecured Loan

Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages: credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds (may be secured or unsecured)

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law.

Personal Loans
A personal loan is a short-term loan to assist you with your finances. This payday loan is secured against a future paycheck. These loans have become quite popular today, and now this is the main way to get financial assistance in the form of a cash advance. Personal loans are tricky - you never can quite make out whether it is absolutely necessary or if it is just a luxury you will be paying back for the next few years. That new computer or that credit card outstanding, or the house refurnishing...the need for personal. Advanced Personal Loans is your first stop for all your personal loan needs. We are established, safe, secure, quick, and customer service oriented. When you are looking for that perfect personal loan think of Advanced Personal Loans is never ending.

Personal Loans Includes:

Secured Personal Loan A secured personal loan is that type of loan which is secured against any property of the borrower. The interest charged on secured personal loan is low because of the guarantee of collateral. The lender is assured of the repayments and takes very little risk while providing such a loan. The monthly installments are small and the repayment is long depending upon your choice as well as the amount of loan. Unsecured Personal Loan Unsecured personal Loan doesnt involve any collateral. It comes with high interest rates. This is because there is no involvement of collateral and the lender takes high risk while providing such loans. The monthly installments are bigger and the repayments term is shorter. But it has its own advantages too. Unsecured personal loans dont involve any risk of repossession act by the lender. Bad Credit Personal Loan If you have bad credit history, you can avail bad credit personal loan. If you have defaults, arrears, missed payments or County court judgments against you then you will face difficulties in getting the loan. It has higher interest rate.

 Guaranteed Personal Loan Some loan lenders promise a guaranteed loan amount depending upon certain terms and conditions. Personal Signature Loan These are unsecured loans which require just a signature of the borrower and they have shorter loan amount period.

High Risk Personal Loan If the borrower has bad credit history and do not have anything to offer as collateral, than lender may have second thoughts about the borrower as lending to such a borrower could be highly risk.

Types of Personal Loan

(1)Home Loan

Home Loan is a Secured Loan offered against the security of a house/property which is funded by the banks loan, the property could be a personal property or a commercial one. The Home Loan is a loan taken by a borrower from the bank issued against the property/security intended to be bought on the part by the borrower giving the banker a conditional ownership over the property i.e. if the borrower is failed to pay back the loan, the banker can retrieve the lent money by selling the property

HOME LOAN RATE OF INTEREST

Home Loan Rate of Interest ( Last edited on : 15 August 2010 )

Bank Interest Rates 8.9% - 9.50% 8.25% - 9.25% 8.25% - 9.25% 8.50% - 9.50% 9% - 9.50% 8.50% - 9.25% 8%-11% 8.25% - 8.75%

LIC Housing HDFC Ltd ICICI Bank Home Loan DHFL Union Bank of India Bank of Baroda SBI Citibank

There are different types of home loans available.

Home Purchase Loan : This is the basic type of a home loan which has
the purpose of purchasing new room

Home Improvement Loan : This type of home loan is for the renovation or repair of the home which is already bought

Home Extension Loan : This type of loan serves the purpose when the borrower wants to extend or expand an existing home, like adding and extra room etc

Home Conversion Loan : It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan & fulfills the money required for new home.

Bridge Loan : This type of loan helps finance the new home of the borrower when he wants to sell the existing home, this is normally a short term loan to the borrower & helps during the interim period when he wants to sell the old home & want to buy a new one, Land Purchase Loan : It is that loan which is taken to purchase a land for construction & investment purposes.

Documents required for Home Loan

Generally the documents required to processing your loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions Age Proof Address Proof Income Proof of the applicant & co-applicant Last 6 month bank A/c statement Passport size photograph of the applicant & Co-application

In case of Self-employed Copy of audited financial statement for the last 2 years Copy of partnership deed if it is a partnership firm or copy of memorandum of association and articles of association if its is a company Profit and loss account for the last few years Income tax assessment order

In case of Salaried Employment certificate from the employer Copies of pay slips for last few months and TDS certificate Latest Form 16 issued by employer Bank statements

Tax Benefits in Home Loan

The home loan borrower enjoys Tax Benefits on both Interest paid & the Principal re-paid. Under Section 24(d) of Income Tax, the deduction of interest payable on the home loan is up to a maximum Under Section 80(c) of Income Tax, Principal amount for the repayment of loan along with other savings & investments is eligible for tax deduction up to a maximum Rs of 1000000.

TAX BENEFITS IN HOME LOAN

Car Loan
Car loans come under secured loan (exp - Home Loan) section of banks as most of these loans when disbursed your car is hypothecated under the lenders name and your name. These days a large set of cash discounts are available when you try to buy the dream vehicle . So the important part is that you know what you can get while taking loan Covers the widest range of cars and multi-utility vehicles in India. Flexible repayment options, ranging from 12 to 84 months. Repay with easy EMIs. Among lowest interest rates.

Particul ars

Salaried Individual
The applicant should be atleast 25 years old at time of application, and below 58 years of age at time of maturity of the loan. Gross annual salary is Rs 2 lakh p.a (Gross Income) minimum and this varies with respect to the state of application.

SelfEmployed Individual

Private / Partnership Public Ltd Firm Co

Limited companies should have been in existence for at least 2 years

Age Criteria

Any Proprietor, partner, professional or director above 28 years of age but below 65 at the time of the loan's maturity

Income Criteria

Gross annual income is Rs 2 lakh p.a minimum

Firm should have a minimum PAT (profit after tax) income of Rs 60,000

Minimum PAT (profit after tax) of Rs 60,000

Documents Required
Salaried

KYC Documents Latest 3 months Salary slip Last 2 years form 16/ ITR & Bank statement which reflects 6 months salary credit photograph

Self Employed

KYC Documents Business proof in name of applicant Latest 3 years ITR along with computation statement Ownership proof of either office or residence Photograph Partnership Firm Application form Photograph of signing partner Last two years' income proof (audited account or ITRs + CA certified financials)

Partnership deed Partners authority letter Private / Public Ltd Co Application form Guarantor's photograph (for private limited company only) Last two years audited financials Certified true copy of the MOA & AOA Board resolution (format available on request)

Application Process

You may contact the nearest Bank branch for the best deal available on the car of your choice. The loan will be disbursed within one day of submitting all the required post-sanction documents. If the vehicle is readily available with the dealer, you can get your car as soon as the disbursal is made to the dealer. However Bank is in no way responsible for car deliveries as they are regulated by the car manufacturer's delivery schedules. You can retain the original Registration Certificate, Invoice and the Insurance Policy. We simply require a photocopy of these documents.

BANK RATES

Banks/Rates ICICI Bank HDFC Bank Kotak Mahindra Axis Bank State Bank of India (SBI) Bank Of India Federal Bank

Used car Loan (Reducing)

16%

New Car Loan (Reducing)

9.50% - 11.50%

Processin g fee
Rs.2500/- to Rs.5000/Rs 2950/- to Rs. 3950/3% of loan amount Rs.3000/- to Rs.3500/0.5% of loan Amount N.A

17% - 19%

10.50% -11.25%

15% - 16%

12% - 13%

16.50% - 18%

9.50% - 10.50%

N. A.

10.50% 10.75% N. A.

8.25% (Fixed for one year), than 10% to 11.25% 10.75%(upto 3 yrs ),Then 11.25% 9.75% for 3 yrs, 10.25% for 5 yrs

Rs 1655/- to Rs 2758

PERSONAL LOAN
Go on your dream holiday, buy the latest lifestyle gizmo, gift your wife a lovely diamond ring, and renovate your house or just squash a temporary cash crunch. Let us give you a helping hand. Our personal loans will meet all your personal requirements.

Loans for salaried individuals of select companies

Special loans for doctors, chartered accountants, engineers, architects, CS and ICWA Loans are available from Rs 1 lac to Rs 20 lacs Repayment tenures from 12 to 60 months Attractive interest rates A balance transfer facility available for those who want to entire any higher cost debt Loans available against repayments track record of any existing auto, personal or home loan Zero balances SB account facility for personal loan customers Simple procedure, minimal documentation and quick approval

Eligibility Salaried Employees

Salaried doctors, CAs, employees of select MNCs, public and private limited companies, government sector employees including public sector undertaking and central and local bodies: Minimum age of applicant: 21 years Maximum age of applicant at loan maturity: 60 years Minimum Employment: Minimum 1 year of cumulative experience for both salaried individual/professional. Salaried Doctors require 3 years of cumulative experience Minimum Net Monthly Income: Rs 15,000per moth Special Offer for employees of select companies

Self-employed Doctors

Self-employed doctor include self-employed MBBS or BDS and doctors with higher qualification. Minimum age of applicant: 24 years to 65 years at the time of loan maturity Experience (doctors): 2 years continuous employment Minimum annual income: Rs 2.40 lacs per annum gross receipts (Rs 1.80 lacs per annum for select locations) Maximum loan per available: Rs 20 lacs for self employed doctors Special scheme for Self Employed doctors

EDUCATION LOAN

Education is the essence of life. To ensure that no deserving student is denied education for want of funds, the government is promoting education loans in a big way. The basic aim or idea behind education loan is to bring education within the reach of students and help them improve their prospects in life Education loans cover cost of the school/college fee, hostel expenses, and cost of books and stationery. The maximum amount of education loan is up to Rs. 7.50 lakh in case of studies in India and Rs 15 lakhs for studying abroad. The sum of money offered is against a third-party guarantee. An education loan is a form of financial support from any bank or financial institution that enable a student for taking higher education. All graduation, post-graduation and professional courses from institutes approved by the state and central government and also from foreign universities are eligible for a loan. For studies in India one can get loans up to Rs.7.5 lakh and up to Rs. 15 lakh for studies abroad.

Eligibility Criteria
The applicant should be an Indian national.

Professional/technical courses, through entrance test/selection process

He/she should be around 16-26 years of age or any other range specified by the bank.

He/she should not be a minor.

He/she should have a good academic track record.

He/she should have parents or guardians with stable source of income.

He/she should have secured admission to a recognized university in India or abroad.

Documents Required
Mark sheet of last qualifying examination for school and graduate studies in India

Proof of admission to the course

Schedule of expenses for the course

Copies of letter confirming scholarship, if any

Statement of Bank account for the last six months of borrower/parents

Income tax assessment order, not more than 2 years old

Two passport size photographs

Marriage Loans

Wedding are a time for family jublilation. No stone is left unturned to make wedding functions complete success. Marriage Loans are gaining in both rural as well urban areas. Such a loan can also be availed under the person loans category.

Loan Amount
The maximum amount of loan varies form customer to customer, depending on a number of factors like, security/ collateral offered by the customer, repayment capacity through monthly/ quarterly/ half yearly installments or under Equated Monthly Installments or EMI.

Documentation
Salaried Individuals: Proof of Identify(Passport Copy/ Voters ID card/ Driving License). Address Proof (Ration card Tel/elec.Bill/ Passport copy) Bank Statement (latest 6 months bank statement/ passbook) Latest salary slip or current dated salary certificate with latest Form 16

Self Employed Professionals and Businessmen

Proof of Identity( Passport Copy/ Voters ID card/ Driving License). Address Proof(Ration card Tel/ electricity Bill /passbook) Latest ITR along with computation of income, B/S & P&L a/c for the last 2 yrs. Certified by a CA Qualification proof of the highest professional degree Proof of continuation Other Mandatory documents

Interest Charged by Banks:

The rate of interest is governed by the prevailing market rate at the time of loan taken. Fixed interest rates are generally preferred by customers

CASE STUDY
ICICI BANK PERSONAL LOAN Eligibility Criteria for ICICI Personal Loan

Eligibility Criteria

Salaried

Age Loan Amount Annual Income Tenure Current Experience Current Residential Status

25yrs 58 years Rs 1,44,000 (p.a) Maximum to 15 lakhs 12 60 month Minimum 1 year Minimum 1 year

Documentation

Latest 3 month Bank Statement 3 Latest Salary slips Proof of Continuity current job(Form 16/ Company appointment letter) Proof of Identity Passport/ Driving Licence/ Voters ID.

Proof of Residence Ration Card/ LIC Policy Receipt Proof of Qualification Highest Degree.

IDBI PERSONAL LOAN

Key Features
Loan upto Rs. 10 lakhs Attractive Interest Rate Low Processing Fees & Documentation Charges Faster Approval & Minimum Documentation Repayment period up to 60 months No collateral/ security

Eligibility
Salaried Individuals Eligibility Amount (INR) Repayment Month Age Minimum Rs 50000 12 month 23 yrs Maximum Rs 10,00,000 60 months 23 yrs(At end of loan)

Documentaion

Salaried Individuals Photograph Age Proof Identity and Signature proof Salary slip Latest form 16 Credit Card statemnt or repayment track record

Interest Rate and Other Charges

Interest Rate: 16% to 18% Processing Fees: 1.5% Documentaion Charges: 0.5%

FIELD STUDY
What are the principal types of loans made by your bank?

Bank loans are usually classified by the purpose of the loans. The most common classifications are real estate loans, commercial and industrial loans, loans to financial institutions, credit-card and other loans to individuals, and agricultural production loans Bank loans may also be classified by maturity - over one year and one year or less.

What is a bank customer's share of the profits made on loans?

Savings account interest & all other forms of interest earned on our deposits with a bank is our share of the banks profit made on loans ex: fixed deposits, recurring deposits, savings accounts etc.

What is the main purpose of the loans made by the World Bank?
To help countries achieve sustainable development

Would banks decrease or increase interest rates if they had less money to loan?
If banks had less money to loan they would increase their interest rates. This is because they would have to make the most profit off of the little money that they had to use. When banks have a lot of money to loan, interest rates are lower because they can still get a lot of interest even from the lower interest rates.

Who determines the interest rate banks charge for loans?

The central bank does not directly determine the rates but the rates that it fixes like the Repo rate, Cash reserve ratio etc have a direct impact on the rates .When the repo rate is less and CRR is less then banks charge a lesser rate of interest and vice versa.

Which Loan is most preferred by customers?

Basically Home Loan is preferred by Customer.

Do you think that your interest rates are less than other banks?
Yes, our interest rate is comparatively less from all other banks.

BIBILOGRAPHY

PRINCIPLES OF BANKING -DEENDAYAL SHARMA

INTERNATIONAL BANKING & FINANCE -VIPUL PRAKASHAN

http:/banknetindia.com http:/financeindiamart.com