TO STUDY THE CREDIT APPRAISAL SYSTEM OF HDFC LTD AND

ALSO DO A COMPARATIVE STUDY BETWEEN HDFC LTD AND

STATE BANK OF INDIA (HOME LOANS)

NAME- SIMREEN HUDDA

ROLL NO – 135
PGDM M1
 INTRODUCTION TO THE INDUSTRY
• The purpose of a housing finance system is to provide the funds which home-buyers need to purchase
their homes. It allows the production and consumption of housing.
• The Indian housing finance sector may consists of more than 80-plus players. But the industry is
dominated by a few select. 
• Some of the major players are –HDFC home loans, SBI home loans, ICICI home loans, Bajaj Housing
finance, Axis Bank Home loans, LIC housing Finance Ltd.
• NBFCs and HFCs have been leading the housing finance innovation, with 40% market share of the
home loan industry. 
• The home loan market in India is not what it used to be. Over 4-5 decades ago, the home loan market
was being considered as rather unproductive sector. But they are now being curated in a manner that
is beneficial to the borrowers.
• The recent trends that are seen in the Home Loan segment are – Determination of loan amount where
higher amount is approved considering the costs, Calculation of interest on regular basis, Flexible EMI
options, Modernization of systems, Better customer experience, initiatives taken by government
(Pradhan Mantri Awas Yojana), New technology and analytics in managing portfolios.
• All in all, the home loan industry is undergoing metamorphosis from a disorganized state to a more
organized and transparent state. This augurs well for the home buyers as well as home loan providers.
 INTRODUCTION – HDFC LTD (HOME LOANS)
• Pioneered housing finance in 1977
• Founder – Hasmukhbhai Parekh
• Major subsidiaries – HDFC Bank, HDFC Standard Life
Insurance Company, HDFC AMC, HDFC RED, HDFC Ergo
• Core Values – Trust, Integrity, Transparency and Professional
Service
• Brand equity and Market Share of approx. 19%
• Cumulative housing units financed – 7 Million
• Gross Loans – 4.6 Trillion
• Extensive distribution network of 546 interconnected offices all
over India
• 3 representative offices in Dubai, Singapore and London
• Top management –
Chairman – Mr. Deepak Parekh
Vice Chairman and CEO Mr. Keki Mistry
Managing Director – Ms. Renu Sud Karnad
Executive Director – Mr. Srinivasa Rangan
 INTRODUCTION – STATE BANK OF INDIA

• SBI is an Indian Multinational, Public sector banking and

financial services statutory body established in 1806 in Kolkata.
• Major Subsidiaries – SBI Cards, SBI Life Insurance Company,
State Bank of Bikaner and Jaipur, State Bank Of Indore, SBI
Capital Markets, SBI General Insurance, YES Bank Etc.
• Market Share – 23%
• Values – Trust, Transparency, Integrity, Excellence
• 24,000+ branches and 1600+ member strong dedicated Sales
Team
• SBI International presence is spread over 36 countries, one of
the largest presence in foreign markets among Indian Banks
• Board of Directors –
 Mr. Rajnish Kumar – Chairman
Mr. Dinesh Kumar Khara – MD
Mr. Arijit Basu – MD
Mr. C.S. Shetty – MD
 LOAN PRODUCTS
HDFC LTD
• Housing loans – (a) Home Loans (b) Plot
Loans (c) Rural Housing Loans
• Other Home Loan Products – (a) Home
Improvement Loans (b) Home extension
Loans (c) Top Up Loans
• Non Housing Loans – (a) Loan Against
Property (b) Commercial Property Loans (c)
Commercial Plot Loans
• Affordable Housing – (a) HDFC Reach
Loans (b) Pradhan Mantri Awas Yogana
• Refinance – Balance Transfer
• Non Resident Indian – Loans for NRI
STATE BANK OF INDIA
• Regular Home loan
• Balance Transfer
• Flexipay And Priviledge Home Loan
• Other Home Loan Products – (a) Pre- approved
Home Loan (b) Top Up Loan (c) Bridge Home
Loan (d) Insta Home Top Up Loan
• Corporate Home Loan
• Home Loan to Non- Salaried
• Non Housing Loans – (a) Reverse Mortage Loans
(b) Loan Against Property (c) Commercial Plot
Loans
• Non Resident Indian – Loans for NRI
 STRENGTHS
• Great brand image
• Superior Customer Service
• Pioneering housing finance
since 1977
• Low attrition rate
• Operational efficiency
• Responsible for several CSR
activities and also been
recognized with several
awards.
OPPORTUNITIES
• New customers from online
channel
• Could extend to overseas
• Providing more complex
products to ever increasing
demands of the industry
WEAKNESSES
• Not very good at product demand
forecasting
• Lacks innovative marketing
strategies
• Does not directly deal with sales
activity because of which
there is miscommunication.
• Home loan overdraft facility not
available
THREATS
• Foreign Banks and private
sector banks that offer
Complex products and lower
ROI
• There might be a various
threats such as rise in bad
loans and Fall in real estate
sector due to Covid- 19
 SOCIAL RELEVANCE OF HDFC LIMITED
• Over the past few years, HDFC’s CSR activities have focused on three key
sectors – Healthcare & Sanitation, Education and Skilling & Livelihoods.
•  Apart from these core sectors, HDFC has identified a few special projects in
specific sectors such as supporting the Differently Abled, Environment
Conservation and Sports.
• HDFC’s CSR activities are not restricted to a particular geographic area and the
beneficiaries are from both urban and rural areas. In terms of geographic spread,
43% of HDFC’s CSR projects were in the Western region of India, 22% in the
North, 22% in the South and 13% were in Eastern region which includes the
North East.
• Housing Development Finance Corporation Limited (HDFC/the Corporation) has
framed a Corporate Social Responsibility (CSR) Policy in compliance with the
provisions of Companies Act, 2013
• Shelter Assistance Reserve (SAR) - The Corporation in 1988 established a fund
called `Shelter Assistance Reserve (‘SAR’), with the main objects of participating
and supporting worthwhile projects undertaken by non-governmental
organizations (‘NGO’), community groups, local bodies and others, in order to
encourage activities related to the shelter problem in general, and the shelter
needs of the poorer and economically weaker sections of the society in
particular.
• H T PAREKH FOUNDATION - To commemorate the enormous
contribution of late Shri H. T. Parekh, the Founder Chairman of the
Corporation, HDFC has incorporated the H T Parekh Foundation as a
not-for-profit company licensed under the Companies Act, 1956.
• The Foundation has been incorporated with the aim to undertake,
pursue and be concerned with the welfare, betterment and
advancement of society as a whole across multiple social sectors.
This will be carried out either through direct programme
implementation by the Foundation or through partnerships with
NGOs.
• The Board of Directors of the Corporation has constituted a CSR
Committee of Directors.
• The Corporation would be undertaking the CSR activities primarily
through contributions to the Foundation or through implementing
agencies or contributions to specific funds maintained by the Central/
State Government of India. The Foundation in turn will execute the
CSR responsibilities of HDFC either (i) directly, by executing and
implementing programmes or (ii) by entering into partnerships with
implementing organizations.
 SECTOR WISE CSR EXPENDITURE 2018-19

• Healthcare - Healthcare formed 39% of the total CSR

expenditure during the year. The Corporation continued
to support programmes for the detection, prevention and
treatment of cancer, the prevention and treatment of
avoidable blindness, Support for a diabetic retinopathy
programme, early diagnosis and treatment of eye cancer
especially among children below 5 years. HDFC
continued to support critical life changing surgeries as
well.

• Education - Education constituted 33% of HDFC’s

CSR expenditure during the year. HDFC partnered with
organisations that had a specific objective of identifying
and mainstreaming school dropouts (especially the girl
child from rural areas. Additionally, scholarships were
offered to students from underprivileged
backgrounds.They also supported organisations that
empowered children with special needs
 Skilling and Livlihoods - The sector contributed to 22% of
the CSR expenditure. HDFC’s support has primarily been
for empowering the excluded and neglected segments of
the workforce i.e. unskilled migrant workers, Persons with
Disabilities (PwDs) and women. HDFC partnered with
organisations that focused on job placement of PwDs

CSR EXPENDITURE (%)

Others – This
Healthcare includes Art and
6% Sports,
22% Education Environmental
39%
Skilling and
sustainability,
livelihoods Community
33%
Development etc.
Others
• CSR AMOUNT - The Corporation shall endeavor to spend in every financial year, at least 2% of its average net profits
made during the 3 immediately preceding financial years, in pursuance of its corporate social responsibility and subject
to Section 135 of the Companies Act, 2013 and the Rules made thereunder from time to time.

CSR REPORT OF 2018-19

Average net profit of the company for last 3 financial years ₹ 8,340.57 Cr
Prescribed CSR Expenditure (2% of the above) ₹ 166.81 Cr

Total Amount Spent During the Financial Year 2018-19 ₹ 173.52 Cr

Amount Unspent (If any) Nil

• The CSR Committee shall report to the Board of Directors of the Corporation, the status of the CSR projects/ activities
undertaken by the Corporation as part of the Annexure to the Directors’ Report, in the Corporation’s Annual Report.
 FUNCTIONAL PERSPECTIVE
RESEARCH OBJECTIVE
To understand the market position of
HDFC Ltd viz-a-viz that of SBI
To analyse the perception and
decision making process of
customers
To do an in-depth study of the
credit appraisal system of HDFC
Ltd
To have firsthand information on
loan procedure, sanctioning and
disbursement
RESEARCH METHODOLOGY
For the purpose of fulfilling the research
objectives primary data was collected by
forming a questionnaire for the customers
to make data comparable and amenable
to analysis as well as in- depth interview
of the employees and branch managers to
understand the credit appraisal system.
Since the research topic is comparative
study between HDFC Ltd and SBI, the
sampling frame was all the customers
attended by me and within them
sampling unit was the customers who
visited the branch for doing a balance
transfer from HDFC Ltd to SBI or from
SBI to HDFC
 RESEARCH METHODOLOGY
• NATURE OF RESEARCH – Descriptive Research
• DATA COLLECTION SOURCE –
 Primary Data includes information collected from questionnaire based on perception of
customers towards services of HDFC Ltd and SBI. Also includes in-depth interview of
employees and branch manager of HDFC ltd to understand the credit appraisal system
 Secondary Data collected from various portals, company websites, journals, magazines
and also from in-house sources.
• DATA COLLECTION METHOD –
 Quantitative (Questionnaire)
 Qualitative (In- depth interview)
• DATA COLLECTION TOOL –
 Structured questionnaire
 Discussion guide for In-depth interview
• POPULATION UNDER STUDY –
 Age – 20 years and above
• SAMPLING FRAME - Customers visiting HDFC Ltd (Andheri West Branch)
• SAMPLE SIZE – 105
• METHOD OF SAMPLING – Convenience sampling
 DATA ANALYSIS

AGE
• Out of 105 Respondents, 53% were between the age
group of 31-50, this is because the younger the age,
Below 30 20% higher is the tenure available to a home borrower.
27%
31-50
Above 51 • Only 20% were above 51 years of age since most
institutions offer home loan only till the age of 65.
53%

OCCUPATION
• Out of 105 respondents, 36% are salaried, since
Salariad
employment is a crucial aspect for home loan
29%
consideration Self Employed 36%
• There are only 10% respondents which are professional
home makers since they can not be the Home maker
10%

applicants but only the co- applicant 25%

Self employed business
 FIRST HOME LOAN

• The analysis depicts that, 25% of the respondents

25% have already taken a loan before with HDFC Ltd or
Yes No a different institution earlier.
• Whereas, 75% of the respondents are taking a loan
75%
for the first time.

• Out of the 25% of respondents, 27% had taken a NAME OF THE PREVIOUS INSTITUTION/BANK
loan previously with HDFC Ltd. These are the
customers who were probably satisfied with the
service provided and hence got back to the same
15%
institution for taking a home loan. SBI ICICI 23%

• Remaining are those which shifted from other 15%

HDFC PNB 8%
institutions to HDFC. 12%
• Most of the current customers had taken a loan LIC Others 27%

initially with SBI which is HDFC’s biggest

competitor.
 FACTORS CONSIDERED BEFORE TAKING A LOAN • 31% of respondents out of 105 consider the
Rate of interest to be the most important
factor before choosing an Institution or
bank.
Rate Of Interest
9% • 23% respondents are concerned with the
Loan Amount 14% 31% loan amount sanctioned to them, some
Loan Tenure
10%
home loan providers approve higher
Loan Processing Time
amount while some do not.
PF And Other charges 12%
23%
• Loan processing time and fees are other
Customer service
factors which are important for choosing a
home loan provider.

TYPE OF PURCHASE
• The most popular type of home loans are the ones for
purchase of a new/under construction flat or a pre-
owned home. 31% of the respondents have bought under construction
pre-owned homes since these are ready to move in. 24% 29%
resale
• 24% respondents have transferred their loan from a
different bank/company to HDFC Ltd renovation 16%
• And 16% respondents have taken a top up or a 31%
balance transfer
separate loan for renovation of house.
N U M BER OF R ESPON SES
PLEASE RATE THE FOLLOWING HOUSING FINANCE COMPANY/ BANK ON THE BASIS OF
YOUR LEVEL OF SATISFACTION WRT THE FOLLOWING FACTORS
• Out of 105 respondents, 39 are Highly Satisfied
with SBI’s Rate of Interest which is more than
that of HDFC (24)
• Also, 0 respondents were highly dissatisfied
120
RATE OF INTEREST
with SBI’s Rate of Interest whereas, 2
100
80
respondents were highly dissatisfied with HDFC
60
40
Ltd’s ROI.
20
0
• Thus the analysis depicts that, according to the
HDFC SBI
respondents SBI’s interest rate is better than that
Highly Dissatisfied Not Satisfied Neutral

N U M BER OF R ESPON SES

Satisfied Highly Satisfied of HDFC Ltd

• Out of 105 respondents, 9 were highly dissatisfied

with SBI’s Customer service. Majorly because the
time taken to solve grievances is longer. 120
CUSTOMER SERVICE

• Whereas, 24 respondents are highly satisfied with 100

80
HDFC Ltd’s Customer service viz-a-viz 11 of SBI 60

• Huge number of respondents i.e. 57 are satisfied with 40

20
HDFC Ltd’s customer service. 0
HDFC LTD SBI
Highly Satisfied Satisfied Neutral Not Satisfied Highly Dissatisfied
N U M BER OF R ESP

• Out of 105 respondents, 19 were highly dissatisfied

LOAN SANCTION TIME with SBI’s Loan sanction time. This is because of
120
100
long processes.
80 • Comparatively, respondents are more satisfied with
60
40 HDFC Ltd’s loan sanction time.
20
0
HDFC LTD SBI
Highly Dissatisfied Not Satisfied Neutral
Satisfied Highly Satisfied

N U M BER OF R ESPON SES

• The disbursement process of HDFC Ltd is better
than that of SBI.
• Disbursement process means the main process DISBURSEMENT PROCESS
where the loan amount in full or parts is disbursed 120
100
as per the terms of the loan. 80

• 16 respondents are in favour of HDFC’s 60

disbursement process as compared to 11 with 40

20
SBI 0
HDFC LTD SBI

Highly Satisfied Satisfied Neutral Not Satisfied Highly Dissatisfied

N U M BER OF R ESPO

• Out of 105 respondents, 6 are highly dissatisfied

with HDFC Ltd’s processing fees and charges,
whereas only 2 respondents are highly disappointed
120
PROCESSING FEES AND OTHER CHARGES
with SBI’s charges.
100 • Also, 33 respondents are highly satisfied with SBI’s
80
60
PF and charges which is supposed to be lesser than
40 that of HDFC Ltd.
20
0
• Other charges includes Part payment or full
HDFC LTD SBI
repayment charges or any other hidden charges
Highly Dissatisfied Not Satisfied Neutral
Satisfied Highly Satisfied

N U M BER OF R ESPON SES

• Out of 105 respondents, 23 respondents are highly
dissatisfied with SBI’s Branch service, which is a
huge number of respondents. Whereas only 9 are
highly dissatisfied with HDFC branch service BRANCH SERVICE

• All the services and processes that can not be carried 120
100

out online or through calls/mails are executed in the 80

60
branch. 40

• HDFC Ltd is better than SBI when it comes to 20

0
HDFC LTD SBI
branch service offered.
Highly Satisfied Satisfied Neutral Not Satisfied Highly Dissatisfied
 DISCUSSION GUIDE – IN-DEPTH INTERVIEW
• For the purpose of understanding the credit appraisal system of HDFC Ltd, an in-depth discussion with experts was carried
out.
• The discussion guide would cover 3 main topics : (a) How does HDFC ltd evaluate the eligibility of a borrower? (b) Eligibility
rules (c) The importance of Credit appraisal in home loans

KEY LEARNINGS

Parameter DOCUMENTS Technical Feasibility What bank is looking for

Technical Field Investigation, Market value of asset Living standard Decent living standard with some tangibles like T.V. & fridge will
provide assurance to bank regarding your residential status.
feasibility
Locality Presence of some undesirable elements like local goons or
Economic LTV(Loan to Value), IIR
controversial areas adversely affects your loan appraisal process.
viability
Telephonic Verification At least one response is need from person to establish the identity
Bankability Past month bank statements, Asset and liabilities
of the person from contact point of view.
of the applicant
Educational Not an essential barrier but essential to understand the complex
Qualification terms & conditions of bank loan.

 HDFC Ltd takes a look at certain ratios in order to check your loan
eligibility. These are some of the ratios that are useful in the credit
appraisal process: Fixed obligation to income ratio (FOIR) Installment
to income ratio (IIR), Loan to cost ratio (LTR)
 CONCLUSION
HDFC LTD (HOME LOANS) STATE BANK OF INDIA
CATEGORY (HOME LOANS)

7.30% - 9.80% 8.00% onwards

RATE OF INTEREST Depends on the loan amount Depends on the loan amount

Applicant must be at least 18 years of age and not more Applicant must be atleast 18 years of age and
than 70 years not more than 65 years
ELIGIBILITY
• No prepayment charges for individual
applicants with variable interest rate
loans.
PREPAYMENT NIL • 2% prepayment charges for fixed rate
CHARGES loans and non-individual borrowers.

(1) More transparent loan conversion process (2) Better
customer service (3) Less loan sanction time as
compared to SBI (4) Documents requirement is less (5)
PROS Better service provided in branch (6) fast and
convenient disbursement process
(1) Lower interest rate (2) No prepayment
charges (3) No processing fees until the
disbursement is done (4) SBI has overdraft
facility which is not provided by HDFC ltd
 HDFC LTD (HOME LOANS) STATE BANK OF INDIA
CATEGORY (HOME LOANS)

(1) High interest charge as compared to SBI
(2) No refund of processing fees if loan is
cancelled
(3) There are prepayment charges for non-
individuals
(4) part payment option is not available
online
CONS
(1) Maximum loan amount is lower
when compared to HDFC Ltd
(2) Slow processing and huge
documentation required
(3) unsatisfactory customer service
(4) For basic transactions like IT
certificate, account statement
the customer has to go through
long process, these options are
not available online whereas
HDFC Ltd has these facilities
online
 RECOMMENDATIONS

HDFC LTD should work on building more complex loan products. They should work on product
demand forecasting and make available the overdraft facility which is available with its biggest
competitor i.e. SBI
Most of the delay in the process is due to the delay in collection of documents from the customer
end. Although there is a check list system, but for the convenience of the customers the
DST/DSAs have to forward the file to the hub and then later on they ask the applicant for the
remaining documents. This causes delay in the entire process. Customers should be made aware of
the documents required for the purpose of taking loan and all the documents should be collected at
once from the customer so that the entire process of sanctioning of loan can speed up. There
should be a strong check on the check list system before the file is forwarded to the hub.
 The most common concern/expectation of the customers of HDFC LTD was that they should
offer special offers like processing fee waiver to their existing customers for their loyalty
towards HDFC , hence some waiver should be provided to existing customers
The Rate of Interest is a huge concern for most of the customers and this should be lowered
for customers having a better CIBIL score, and latest CIBIL score reports for conversion
should be taken in consideration. This would stop the balance transfer of loan from HDFC to
another institution/bank.
HDFC Ltd should provide SMS alerts to customers from time to time when there is a conversion
facility available for lowering the rate of interest. Most of the customers are not aware of this
facility and they start looking out for banks providing lower ROI

Better marketing strategies specially on social media should be done in order to target the
younger generation. These SMM strategies should focus on highlighting the new features of
loan products and ease of online loan application

Considering the current situation of Covid – 19, the housing finance sector is hit by this.
NPAs are set to rise, even the housing sector growth will be impacted. In order to avoid
future NPAs, the credit checks made by HDFC should become more strong, since
unemployment will rise, proper employment checks should be done before loan is approved.