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A Project Report ON A Comparartive Study
Mahayana Buddhist Studies (MA (MBS) 2016)
Acharya Nagarjuna University
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A PROJECT REPORT
ON
A COMPARARTIVE STUDY ON HOUSING LOAN OF PUBLIC SECTOR AND
PRIVATE SECTOR BANKS (KALYAN AREA).
A PROJECT SUBMITTED TO
UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE DEGREE OF
MASTER IN COMMERCE
UNDER THE FACULTY OF COMMERCE
BY
UNDER THE GUIDANCE OF
D.S.P’S K.V COLLEGE OF
ARTS, SCIENCE & COMMERCE
DOMBIVLI (EAST)
A COMPARATIVE STUDY ON HOUSING LOAN OF PUBLIC SECTOR AND
PRIVATE SECTOR BANKS (KALYAN AREA).
MS RENITA PHILIP DSOUZA
PROF. TEJASHREE GAWADE
DECEMBER 2017
To list who all have helped me is difficult because they are so numerous and
the dept is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank this University of Mumbai for giving me chance
to do this project.
I would like to thank my Principal, Dr. Anuradha Ranade for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator for
her moral support and guidance.
I would also like to express my sincere gratitude towards my project guide PROF.
Tejashree Gawade whose guidance and care made the project successful
.
I would like to thank my College Library, for having provided various reference
books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my parents and peers who
supported me throughout my project.
Acknowledgment
####### INDEX
####### CHAPTER NO TITLE OF THE CHAPTER PAGE NO
####### 1 INTRODUCTION
1 Introduction 1 History of banks 1 Functions of banks 1 Types of bank 1 Services offered by banks 1 History of loan 1 Types of loan 1 Types of home loan 1 Advantages of home loan 1 Dis-advantages of home loan 1 Security required for home loan 1 Charges of home loan 1 EMI 1 Types of interest rates 1 Steps involved in taking home loan 1 Determination of home loan 1 Tax benefits 1 Role of government 1 Government scheme of housing 1 Pradhan mantri awas yojana 1 Housing policies in India 2 RESEARCH METHODOLOGY 2 What is research methodology? 2 Objectives 2 Hypothesis 2 Scope of the study 2 Limitation of home loan 2 Importance of home loan 2 Sample size 2 Method of data collection 2 Technique 2 Tabulation of data 3 LITERARTURE REVIEW 3 Review of other researcher 3 References 4 DATA ANALYSIS , INTERPRETATION & PRESENTATION 5 CONCLUSIONS AND SUGGESTIONS 5 Conclusions 5 Suggestions 5 Bibliography
popular imagination a house is a building with a kitchen, a bathroom, bedroom and a lounge. It will be built sturdily enough to withstand natural elements, and it will have an address on the register of the post-office. Some of the housing in India’s largest cities fit this sort of description. But many city dwellers do not live in such places. Some of the poorest are housed in space on a pavement, near to their low-paid work. Others will have a roof, walls and a door, set in a wasteland along river banks, close to railway lines, or in any place where there is a patch of land available We have a many sided view of housing. It is a shelter, it is related to capital markets, it is within state roles, it has connection to urbanization in development as a whole, and it is somewhat tied to structural condition in the economy. It can be viewed as consumption but to see it as production yields insights into its structural and gender inequalities and its productivity in society. After discussing what a ‘home’ is and what ‘housing’ let is us now discuss ‘housing’ in a historical perspective.
Every citizen of the country dreams of having his own house. Home is a basic need of a human being; it is an important facet of economic development. The dream home is not very far away with home loan, which will fulfill the dream into reality. The demand for home loans has increased manifold in the last decade. There are number of housing finance companies and banks offering cheap home loans at a low interest rate. The home loan schemes offered by both public and private sector banks are very competitive. Our study aimed at comparative analysis of home loans schemes offered by public sector and private sector banks in Nagpur. The paper also examined the satisfaction level and problems faced by customers while availing home loan. For this purpose we have taken four commercial banks in Nagpur city namely SBI, BOI, HDFC Bank and ICICI Bank. It includes two public sector banks and two private sector banks. In the research methodology a sample size of 200 respondents has been taken through random sampling. For the study we have collected both primary data as well as secondary data. Finally the whole research was carried out in a systematic way to reach at exact result. The whole research and findings were based on the objectives.
A home loan is a long term commitment which is critical. The demand for home loans has increased manifold in the last decade. The reason for this growth is not hard to see, changing mindset with globalization and integration with the developed economies, where mortgages rule the roost, income tax sops in the Union Budgets and substantial rise in the income-generating capacity of Indian youth. So, the present scenario of home loans shows good amount of growth and is heading for a bright future. There are number of banks and housing finance companies offering cheap home loans at a low interest rate. The home loan schemes offered by both public and private sector banks are very competitive. Mostly people prefers public sector banks for home loans, especially because they believe that it is more secure bank and interest rate is lower. On the other hand the private sector banks are coming daily in our country and the preference of younger population is changing because of services & facilities provided by them. And the most important thing is that the customer should know about each and every term related with Home Loans before applying for a Loan. There are different types of home loans tailored to meet customer needs like Home Purchase Loans, Home Improvement Loans, Home Construction Loans, Home Extension Loans, Home Conversion Loans, Land Purchase Loans; Bridge Loans &Mortgage Loans offered by public and private sector banks.
1 History of banks: -
In India, the banking system is as old as early Vedic period. The bookof Manu contains reference regarding deposits advances, pledge policy ofloan, and rate of interest. From the beginning of 20th century banking has beenso developed that in fact, has come to be called “LIFE BLOOD” of trade andIn India, banking has developed from the primitive stage to the modernsystem of banking in a fashion that has no parallel in the world history the dawn of independence, changes of vast magnitude have takenplace in India. After independence India launched a process of plannedeconomic activity in order to overcome the multitude of problems it faced asan underdeveloped nation. The increasing tempo of economic activity lead to tremendous increase in the volume and complexity of banking activity, the role of banks has had to expand at a fast pace engines of development and vehicle of silent Socio-economicrevolution in the country, Indian banks have assumed new responsibilities inthe fields of geographical expansion, functionaldiversification and personalportfolio. Indian banking transformed itself from ‘Class banking to Mass banking’ The banking system, the most dominant segment of financial sector,accounts for over 80% of the funds flowing through the financial sector banking sector performs three Primary functions in an economy: Theoperation of the payment system, the mobilization of savings and theallocation of savings to investment projects. By allocating capital to thehighest value use while limiting the risk and cost involved, the banking sectorcan exert a positive influence on the overall economy, and thus of broad macroeconomic The origin of the Indian banking industry may be traced to theestablishment of bank of Bengal in Calcutta (now Kolkata) in 1786. Thegrowth of banking industry in India may be studied in terms of two broadphases. Pre-independence (1786-1947) and Post-independence (1947 tilldate). The Post-independence phase may be further divided into three subphases such as pre-nationalization period (1947-1969) Post nationalization period (1969 to 1991) and Post-liberalization period (1991 till date).
Pre-Independence Era:- At the end of late 18th Century, there were hardly any bank in India inthe modern sense of the term’ banks’. Some banks were opened at that timewhich functions as entities to finance industry, including speculative trade the large exposure to speculative ventures, most of the banks opened inIndia during that period could not survive and failed. The depositors lostmoney and lost interest in keeping deposits with the bank. Subsequently,banking in India remain the exclusive domain of Europeans for the nextseveral decades until the beginning of 20th Century the beginning of 20th Century, the Indian Economy was passingthrough a relative period of stability. Around five decades have elapsed sincethe India’s first war of Indianindependence and the social, industrial andother infrastructure have developed. At that time there were very small banksoperated by Indians and most of them were owned and operated by particularcommunity. The banking in India was controlled and dominated by thepresidency banks, namely, The bank of Bombay, The bank of Bengal and thebank of Madras-which later on merged to form the imperial bank of India objectives of banks in the colonial era were mainly helping thecolonial rulers in raising the resources for
- Mobilising savings:- Financial system mobilizes saving from many diverse individuals and invest in project which enables economic growth.
- Facilitating the exchange of goods and service: - A financial system facilitates transaction in the economy, by providing the mechanism to make and receive payment.
- Facilitating trading diversification and management of risks: - Financial system helps to manage risk with individual firm by investing in a diversified portfolio of innovative projects.
- Giving Loans:- But receiving of deposits is not the whole story about a bank’s functions. If that were so, how could a bank pay interest? Hence, after collecting money by way of deposits, a bank invests it or lends it out. Money is lent to businessmen and traders usually for short periods only. This is so because the bank must keep itself ready to meet the demands of the depositors, who have deposited money for short
periods.
- By Creating a Deposit:-
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Cash credit is another way of lending by the banks. When a person wants a loan from a bank, he has to satisfy the .manager about his ability to repay, the soundness of the venture and his honesty of purpose. In addition, the bank may require a tangible security, or it may be satisfied with the borrower’s personal security. Usually such security is accepted as can be easily disposed of in the market, e., government securities or shares of approved concerns. Then details about time and rate of interest are settled and the loan is advanced. A borrower rarely wants to draw the whole amount of his loan in cash. Usually he opens a current account with that amount the bank, if he already has not got an account with this bank. Now it is exactly as if that sum had been deposited by him. This is how a deposit is ‘created’ by a bank. That is why it is said “every loan creates a deposit.” A cheque book is given to the borrower with the right to draw cheques up to the full amount of the loan, but interest is charged on the whole sum even though only a part is withdrawn. After the period, for which the money has been borrowed, is over, the borrower returns the amount with interest to the bank. Banks make most of their profits thus by giving loans.
- Remitting Funds: Banks remit funds-for their customers through bank draft to any place where they have branches or agencies. This is the cheapest way of sending money. It is also quite safe. Funds can also
be remitted to foreign countries.
- Providing Locker Facilities:
Implies that commercial banks provide locker facilities to its customers for safe keeping of jewellery, shares, debentures, and other valuable items. This minimizes the risk of loss due to
theft at homes.
- Discounting of Bill: Discounting of bill is a process of settling the bill of exchange by the bank at a value less than the face value before maturity date. According to Sec. 126 of Negotiable Instruments, “a bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer.”
The facility of discounting of bill is used by the organizations to meet their immediate need of cash for settling down current liabilities.
Private sector banks are owned by the private lenders. The private banks are also managed and controlled by private promoters and these promoters are free to operate according to the market forces. The interest rates of private banks are costly as compared to public sector banks. Banking has been originated in the form of private banking an individual or in partnership. The second type includes incorporated banks that are specialized in wealth management especially for high net-worth individuals and are supposed to be the first banks that were formed to manage the finances of the wealthy families. Generally, the private banks are looked as a large organization with global operations. These banks are not incorporated. In U. and Switzerland, these banks have been existing since a long time. A private bank can also refer to a private sector bank or a bank that is not owned by the government.
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1 Services offered by banks:-
Both the Private and Public banks offers different types of services to the customers they are as follows.
- Bank Draft:
Bank draft is a facility allowed to customers for sending money to other places. Generally, banks allow this facility to the account holders only. When a customer wants to send money to other places then he will have to fill a specific proforma for this purpose. The name of the person/party to whom the amount is to be sent, the amount for which the draft is required, the place for which the draft is required, bank charges are mentioned in the proforma. The bank will issue a draft to the customer after debiting his account with the said amount.
The customer will send the draft to the person/party to whom the money is to be paid. The recipient of the draft will deposit the draft with his bank and the bank will credit the amount to his account. The bank also sends an intimation to the branch where the draft is payable. It is time-consuming process of transferring money and bank charges are also high on the drafts.
- Banker's Cheque:
Banker's cheque means pay order issued by bank itself withdrawing the amount from payer's account. It will be safe for payee because it cannot bounce. It is also a method of sending money by a bank. It is similar to that of draft. The banker issues a cheque in the name of the party to whom the customer wants to make
(ii) RTGS completes transactions in real-time while NEFT completes transactions in cycles.
(iii)The transfer in RTGS is completed on a one to one basis, while NEFT is on a deferred net basis, where transfers are bundled and deferred for a specific time.
(iv) RTGS is a high value transfer system, handling funds worth Rs, 1, 00,000 and above, while NEFT transfers smaller amounts below Rs. 10,000.
- Bank Overdraft:
An overdraft is an advance given by the bank allowing a customer to overdraw his current account up to an agreed amount. An overdraft account is operated in the same way as a current account. In overdraft the interest is charged on the credit actually utilised, i. to the extent amount is overdrawn facility is widely used by the businessmen. They can use more money than the credit amount in their account, and secondly, interest is paid only on the amount actually withdrawn from the bank and not to the overdraft limit allowed by the bank.
- Cash-credit:
Under cash-credit a bank advances loans to the customer on the basis of his current assets, receivables or fixed assets by hypothecating them in favour of the banker.
Basically, cash-credit differs from overdraft in two respects(1) security (2) duration
Generally, cash-credit is advanced against current assets and receivables, while overdraft is allowed against negotiable security. Further, overdraft is, usually, a temporary facility, while cash credit is relatively a long term facility. The rate of interest charged on overdraft may be lower because of lesser risk and service cost.
Individual Banking—Banks typically offer a variety of services to assist individuals in managing their finances, including:
Checking accounts, Savings accounts, Debit & credit cards, Insurance, Wealth management. Business Banking—Most banks offer financialservicesforbusinessowners who need to differentiate professional and personal finances. Different types of business banking services include: Business loans, Checking accounts, Savings accounts, Debit and credit cards Merchant services (credit card processing, reconciliation and reporting, check collection), Cash management (payroll services, deposit services, etc.) Digital Banking—The ability to manage your finances online from your computer, tablet, or smartphone is becoming more and more important to consumers. Banks will typically offer digital banking services that include: Online, mobile, and tablet banking, Mobile check deposit, Text alerts, E Statements, Online bill pay.
1 History of loan
The term 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 an amount of money called the principal amount. The amount of money is paid back in regular instalments or partial repayment on an annual basis each instalment being of the same amount. There is no certainty about how the loans started, but one can easily assume that ever since the concept of ownership came into existence people have been practicing lending and borrowing. Various forms of lending are found to be existing in ancient Greek and Roman times and even the bible mentioned monetary loan. However the modern history of loan started much later. In the history of loans the “Indentured loan” was one of the earliest forms of lending which was practiced in the middle ages till the 19 th century by the land owners and rich people who allowed poor people in need of money to borrow in exchange of indentured servitude. The borrower had to work for several years to clear their debt. They had no rights and were considered by many rich people as “Slave labour”. However money lenders played an important part in the history of loans and both the English word “Bank “ and “Bankrupt” have origin in the Italian money lenders.
1 Types of loan:-
Both the private and public sector banks offer different types of loan some of them are as follow:-
1 Types of home loan:-
- Home loan for improvement: - These loans are given for implementing repair work and renovation in a home that has already been purchased by the customer. It may be requested for external works like structural repairs, waterproofing or internal works like tiling and flooring, plumbing, electrical work and painting etc
- Home extension loan: - Home extension loans are given for expanding or extending an existing home. For example addition of an extra room. For this kind of loan, customer needs to have requisite approvals from the relevant municipal corporations.
- Home purchase loan:- These are the basic home loans for the purchase of a new house. These loans are given for purchase of a new or already built flat / bungalow / row-house.
- Stamp duty: -These loans are sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property.
- NRI home loan: -This is a special home scheme for the non-resident Indians (NRI) who wishes to build or buys a home or land property in India. They are offered attractive housing finance plans with suitable reimbursement option by many banks in the country.
- Land purchase loan: - Land purchase loans are available for purchase of land for both home construction or investment purposes. Therefore, customers can grant this loan even if customer is not planning to construct any building on it in the near future. However, customer has to complete construction within tenure of three years on the same land.
- Home construction loan: - These loans are available for the construction of a new home. These documents required by the banks or banks granting customer a home construction loan is slightly different from the home purchase loans.
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1 Advantages of home loan
The various benefits of home loans arising to the customers are:-
(1) Attractive interest rate:-
The various banks over attractive interest rates to boost and help their customers. Many banks provide loans on fixed or fluctuating rate to facilitate customers as per their needs.
(2) Help in owing a home:-
The home availed by a person with the help of bank because,they provide technical and financial assistance to customer for owing their dream house.
(3) Capital Appreciation:- For each one of us who has seen property prices boom over the last five years, the prospect of mouth-watering capital appreciation is the biggest argument for buying a home. Construction costs alone, which account for more than 70 per cent of the flat's cost, have risen at 15 per cent annually in the past decade. Rents too seem to keep up with inflation; making a home one of the few investments can shield you from inflation for the long term.
(4) Tax benefit on home loan:-
Your home loan principal and interest repayment fetch you attractive tax breaks. And remember, renting actually is more expensive than just the rent you pay. Your cost is higher since you are not earning any interest on the deposit amount paid to the landlord (which is quite high in premium locations) throughout the lease term.
(5) Loan period:-
There are many banks which provide maximum loan tenure of 15-20 years based on the loan amount and creditability of the customers .This relives the customers to repay loan amount till a long period.
(6) For accidental death insurance:-
Some banks provide free accidental death insurance with housing loan which is also beneficial to the customers.
These benefits or advantages of home loan are responsible for making so popular among customers that a person who don’t have home of their home would like to buy and they do it with home loan.
A Project Report ON A Comparartive Study
Course: Mahayana Buddhist Studies (MA (MBS) 2016)
University: Acharya Nagarjuna University
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