(COVER PAGE FORMAT)

TITLE OF THE PROJECT

COMPARITIVE ANALYSIS OF RETAIL LOAN PRODUCTS V/S
PEERS

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

Master of Management Studies (Mumbai University)
2014-2016

ROLL NO. A-46

SUBMITTED TO:
DR. V. N. BEDEKAR INSTITUTE OF MANAGEMENT STUDIES,
THANE

DECLARATION BY THE CANDIDATE

This is to certify project report entitled which is submitted
by me in partial fulfillment of the requirement for the award of Master of
Management

Studies,(Mumbai

University)

Dr.

V.N.

Bedekar

Institute

of

Management Studies, comprises of my original work and due acknowledgment

has been made in the text to all other material used.
Wherever

references

have

been

made

to

intellectual properties of any

individual / Institution / Government / Private / Public Bodies / Universities,

research paper, text books, reference books, research monographs, archives of
newspapers, corporate, individuals, business / Government and any other source
of intellectual properties viz., speeches, quotations, conference proceedings,
extracts from the website, working paper, seminal work et al,

they have been

clearly indicated, duly acknowledged and included in the Bibliography.

____________________________________
Date & Signature

of

Candidate

CERTIFICATE BY THE GUIDE

This is to certify that project report entitled . which is submitted
by in partial fulfillment of the requirement for the award of
Master of Mangement Studies,(Mumbai University) Dr. V.N. Bedekar Institute of
Management Studies, is a record of the candidate's own work carried out by him
under my guidance. The matter embodied in this report is original and due
acknowledgment has been made in the text to all other material used.

Guide's Name:
Guide's Signature:
Date:

CERTIFICATE BY THE ORGANIZATION

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INDEX

INTRODUCTION
Finance is the life blood of trade, commerce and industry. Now-a-days, bank money acts as

the backbone of modern business. Development of any country mainly depends upon the
banking system. The term bank is derived from the French word Banco which means a Bench
or Money exchange table. In olden days, European money lenders or money changers used
to display (show) coins of different countries in big heaps (quantity) on benches or tables
for the purpose of lending or exchanging. A bank is a financial institution which deals with
deposits and advances and other related services. It receives money from those who want to
save in the form of deposits and it lends money to those who need it.
DEFINITION OF BANK
Oxford Dictionary defines a bank as "an establishment for custody of money, which it pays out
on customer's order."
BANKING SECTOR- AN OVERVIEW
Banking in India originated in the last decades of the 18th century. The oldest banking
existence in India is the State a government-owned bank that traces its origins back to June
1806 and that is the largest commercial bank in the country. Central banking is the
responsibility of the Reserve Bank of India, which in 1935 formally took over these
responsibilities from the then Imperial Bank of India, relegating it to commercial banking
functions. After India's independence in1947, the Reserve Bank was nationalized and given
broader powers. In 1969 the government nationalized the 14 largest commercial banks; the
government nationalized the six next largest in 1980.Currently, India has 88 scheduled
commercial banks (SCBs) - 27 public sector banks (that is with the India holding a stake), 31
private banks(these do not have government stake; they may be publicly listed and traded on
stock exchanges) and 38 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the
public sector banks hold over 75 percent of total assets of the banking industry, with the
private and foreign banks holding 18.2% and 6.5% res
The Indian banking sector comprises 26 state sector banks, besides a number of private as
well as co-operative sector players. The banking sector in India has made significant progress
in the last five years.
the growth is well reflected through parameters including profitability, annual credit growth,
and decline in non-performing assets (NPAs). In the last decade, the sector witnessed many

positive developments, as policy makers which comprise the Reserve Bank of India (RBI),
Ministry of Finance and associated government and financial sector regulatory entities, made
several distinguished efforts to improve regulation. Worth noting is the fact that Indias banking
sector has been one of the very few ones that have actually been able to maintain resilience
without much impacting the growth process. Growth in the sector has been favored by factors
including low defaulter ratio, strong economic growth, central banks regular intervention and
pre-emptive adjustment of monetary policy. India has the potential to become the third largest
banking sector by 2050 after China and US, according to a Price water house Coopers (PwC)
report titled Banking In 2050. The report states that India has particularly strong long -term
growth potential.

VISION STATEMENT
A bank of this nature will prove to be a beneficial agency for lending, transmission, and
deposit of money and will be a powerful factor in the development of art, industries and
commerce of the state and adjoining territories.

MISSION STATEMENT
To be a top ranking National Bank of International Standards committed to augmenting
stake holders' value through concern, care and competence.

Board Of Directors (As on 18.03.2015)

Shri Ranjan Dhawan

MD & CEO

Shri BhuvanchandraB. Joshi

Executive Director

Shri K Venkat Rama Murthy

Executive Director

Shri Mohammad Mustafa

Director - Govt. Nominee

Smt. Surekha Marandi

Director - RBI Nominee

Shri Prem Kumar Makkar

Director

Dr. R. Narayanswamy

Director

Shri B. D. Dangar

Director

LOGO -BARODA SUN

Bank introduced the existing logo Baroda Sun w.e.f 6th June, 2005.
It comprises double B letter forms that hold the rays of the rising Sun, we call

this as Baroda Sun. The sun is a representation of what our bank stands for. It is
a symbol of dynamism and optimism.
The sun is the single most powerful source of light and energy. Its far reaching
rays dispel darkness to illuminate everything they touch.
The single colour, compelling vermillion palette indicates hope and energy and
indicates that at Bank of Baroda, we seek to be the source that will help all our
stakeholders realize their goals.

 To our customer, we seek to be a one stop, reliable partner who will help them to
address different financial needs. To our employees, we offer rewarding careers
and to our investors and business partners, maximum return on their
investment.WH/JN
WHAT IS LOAN
in finance, a loan is a debt provided by one entity (organization or individual) to another entity
at an interest rate, and evidenced by a note which specifies, among other things, the principal
amount, interest rate, and date of repayment. A loan entails the reallocation of the subject
asset(s) for a period of 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.
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.

RETAIL LENDING:
In 1992-93 Economic reforms process started with submission of Narasimham
Committee Report on 16.11.1991. The phase of liberalization, privatization and
globalization started. RBI started reducing its interference and slashing of SLR
and CRR to bring at the minimum required level, disintermediation also started
empowering big corporate to access the market for their funds requirement,
non-banking finance companies were also encouraged to come in the market,
in-creasing competition for commercial banks. A number of foreign banks and
private sector banks also came in the fray.
In view of above Retail Lending is an area emerging for absorbing ample
amount of bank funds. The growth of retail lending, especially, in emerging
economies, is attributable to the rapid advances in information technology, the
evolving macroeconomic environment, financial market reform, and several
micro-level demand and supply side factors.
Target borrowers under this sector are the middle class people and middle class
people are low default area. Researchers have shown that high class and low
class people are more likely to default in repayment. Population of middle class
people is increasing and break down of joint family system has created the
scope of more requirements of household consumer durable goods. Opening of
doors for the imported goods under WTO has resulted in flush of good quality
consumer durables at reasonable prices, thereby increasing the demand from
the public. It has created a scope of credit absorption for the bank. This sector of
credit is subject to higher rate of interest providing ample yield to the bank along

with diversification of the risk because smaller loans are granted to a large
number of people.
From the above discussion, it is clear that Retail Lending is the need of the hour
and survival is very difficult, in its absence. Now question arises where to do
Retail Lending. These are the schemes having potential in every area of the
country. In case of rural/ semi urban areas, a good number of families are
emerging as the prospective borrowers with the increase in rural electrification,
education and connectivity with the cities. TV, Fridge and Scooter/ Motor cycle
are the articles of daily use for them. People from villages getting jobs in nearby
cities, usually commute daily for service and come to village in the evening,
school teachers and other staff of the school and dispensary in the village can
be prospective borrowers. Shop keepers and other small business people can
also avail the loans under Retail Lending schemes. Some progressive families
in the village can be tapped under the schemes for Baroda Housing Loans,
education loans and other consumer goods items.
Bank of Baroda offers a wide range of retail loans to meet diverse needs of
customers whether the need is for a new house, child's education, purchase of a
new car or home appliances, and our unique and need specific loans enable to
convert their dreams to realities.

RETAIL LOAN FACTORY:

As a part of various customer centric initiatives, our Bank established, Retail
Loan Factories (RLF) at various centers to augment Retail Business. The RLF
comprises of Sales and processing units and works on assembly line principles.
The basic functions are generation of loan leads and its conversion in to
sanction. Once sanction is accorded by RLF the entire file containing all papers/
documents are sent to the Branch of the choice of applicant for disbursement
and further servicing of account. However, zerox copies of papers/ documents
are maintained at RLF.
The primary objective of RLFs is To build quality retail assets portfolio.
To market /sell various retail products.

To assist Regional /Zonal authorities in gathering information

about builders functioning in the area for the purpose of
approving the builders and their projects.

To popularize the Banks products through participating in

various exhibitions ,fairs, confereneces.etc

To cross sell the banks various products.

RETAIL PRODUCTS OF BOB

Our Bank has wide range of retail products like;
1. Baroda Home Loan
2. Baroda Auto Loan
3. Baroda Education Loan
4. Baroda Mortgage Loan
5. Baroda Traders Loan
6. Baroda Loan to Doctors.
7. Baroda Personal Loan.
8. Baroda Ashray Loan(Reverse Mortgage Loan)
9. Loan against Future Rent Receivables.
10. Baroda Loan against securities.

Baroda Home Loan to individual (Resident Indian)

PURPOSE:
1. Construction of new dwelling units / flat
2. Purchase of old houses, generally not more than 25 years old (based on
structural soundness and residual life of the house).
3. Repayment of loan availed from other banks / institutions.
4. Purchase of plot to construct a house within a period of 3 years from the date
of purchase.
5. Houses/Flats purchased or constructed from own sources(period not
exceeding 2years)
6. Reimbursement of expenses incurred for houses / flats constructed /
purchased recently from own sources to subject to rating of HL-1,HL- 2,HL-3&
house must be purchased/constructed recently (not prior to 24 months).
ELIGIBILITY:
Individual in single OR joint names
Principal applicant must be employed minimum for last three years.
HUFs are not eligible for loan.

AGE:
Principal Borrower 21 years & Co borrower may be of 18 years.
Age of the borrower plus repayment period should not exceed 70 years
provided; Son/Daughter /Spouse who is a legal heir and preferably below 50
years of age, with sufficient income for servicing the loan repayment and should
join as Co-Borrower/Guarantor.
LIMIT / AMOUNT OF LOAN:
Maximum up to Rs. 300 lacs in Metro & Urban area & Rs.100lacs in Rural &
Semi urban Area (Subject to repaying capacity) although this is the upper ceiling
on the loan, quantum of loan amount should not exceed as under
Monthly Income

Eligible Amount of Loan

Up to Rs.20000/

36 times of monthly income

+Rs.20000/ & upto Rs.1 lac

48 times of monthly income

More than Rs.1 lac

Other Than Salaried

54 times of monthly income

5 times AAI(last 3 years)

Wherever income of the family members is clubbed, they should be made coborrowers.
In case of Agriculturists who are predominantly dependent on agriculture and
not filing income tax returns, their income may be assessed by obtaining income
certificate from the local competent revenue authority only. The income
mentioned in the certificate must be assessed properly taking in to consideration
land holding of the Agriculturist, area of land actually being cultivated by him,
cropping pattern and acreage under different crops together with number of
crops harvested in a year depending on availability of irrigation facility etc. The

assessment of income so arrived must be properly recorded with justification in

the appraisal note.
Payment of all type of Life Insurance Premia (except premia of Unit Linked
Insurance Plan -ULIP) irrespective of Insurance Company issuing the policy,
need not be considered for Deduction.
For persons other than Salaried if holding the status of sole proprietor ;
Depreciation may be added into their income for the purpose of calculation of
loan Limit; subject to average depreciation during the last -3- years or the
Depreciation during the current year whichever is lower and the latest Audited
Balance Sheet should not be older then -9- months.
RATE OF INTEREST:
Our bank has decided to reduce the applicable rate of interest on Home Loans
to Base rate i.e, @10.25% p.a. irrespective of amount and tenure w.e.f.
01.06.2013.
This reduction will be applicable to fresh sanctions as well as to existing
accounts under floating rate w.e.f. 01.06.2013.
LOAN REPAYMENT PERIOD:
1. Up to 30 Years (including moratorium period)
2. Moratorium period maximum 36 months (18 months for under construction
houses & building upto 7th floor and thereafter 6 months additional moratorium
per floor)
Age of the borrower plus repayment period should not be beyond 70 years max
subject to Son/Daughter /Spouse who is a legal heir and preferably below 50
years of age, with sufficient income for servicing the loan or If borrower pledges
FDRs / NSCs / Govt. Security etc. of adequate value to ensure continuity of

income for repayment of loan installment with interest if sanctioning authority is

satisfied about the same.
Maximum age can be considered up to 70 years, also in case of salaried
persons drawing pension, subject to the condition that 40% of the pension is
sufficient to pay EMI. In case EMI exceeds 40% of the pension, the borrower to
deposit adequate amount in the loan account so as to reduce the outstanding
amount of loan to the extent it can be serviced by 40% of the pension.
In case of absence of these particular conditions repayment cannot exceed
retirement age in case of salaried and 65 years in case of others.
REPAYMENT CAPACITY:
A. In case of Salaried Persons :
Income Bracket (Monthly)

Total deductions not to exceed

Up to Rs. 20000/-

(Including Proposed EMI)

40%

+20000/- and upto Rs.50000/

50%

Above Rs.50000/

60%

B. In case of Others :
Income Bracket (Monthly)
Upto Rs. 240000/-

Total deductions not to exceed

(Including Proposed EMI)
50%
60%

>240000/- and upto Rs.12 Lacs

Above Rs.12 Lacs

70%

MARGIN:
SR NO
1

AMOUNT OF LOAN
Up to Rs.20.00lacs

MARGIN
10%

>Rs.20.00lacs Rs.75.00lacs

20%

Above Rs.75.00lacs

25%

Branches should not include stamp duty, registration charges, other

documentation charges and other expenses like Life Insurance premium etc. in
the cost of house property to calculate Loan to Value (LTV)
Ratio
SECURITIES:
Equitable Mortgage of plot / house or
Collateral securities like NSCs, LIC policies, Shares etc.
Personal guarantees.
Copy of sanction letter duly acknowledged by the borrower / guarantor, is part
of the loan
documents.
Duly stamped and registered original agreement to sale executed by builder in
favour of
borrower.
Original receipt in respect of registration of Agreement to sell.
Copy of the map of the building duly approved by the appropriate authority

.
INSPECTION:
Pre sanction inspection is to be carried out as usual. At each stage of
disbursement of the loan, inspection of the dwelling unit must be carried out.
After completion of the house, post disbursement inspection is carried out at
least once in 3 years if the account is regular otherwise as per administrative
guidelines.
REPAYMENT EQUATED MONTHLY INSTALMENTS:
At the time of granting loan EMI to be calculated as per chart given in Banks
publication no. 138-Pages 21 to 30 (Chart No. 3 for lump sum annuity deposits
monthly repayment) EMI should be in figures rounded off to next higher rupee. It
can also be calculated through LAMOD command in finacle instantly.

Interest from the date of disbursement to the date of commencement of EMI

should be recovered separately on monthly compounded basis. Monthly
recovery under EMI shall be credited in full to the loan account. As regards
application of interest, the same should be calculated on daily products basis,
EMI would undergo modification, if Base Rate is changed. Similarly, if the
borrower remits any lump sum in-between, EMI will require being re-fixed.
Recovery of interest for the pre-EMI period:
a. Interest charged during the pre-EMI period is to be recovered as and when
debited, before commencement of recovery by EMI.
b. For any reason, if the borrower is not in a position to repay the interest as
and when charged in one lump sum, the same may be recovered within 2

months, by charging overdue interest as and where applicable, as per rules

/extant guidelines.
INSURANCE:
Free Personal accident Insurance. Life insurance cover for Natural death is
also available to borrower/Jt. Borrower on payment of appropriate Premium
under tie-up arrangement with Kotak Mahindra (wef 1.1.10) & India First Life
Insurance Co (wef 1.9.10). Premium amt for obtaining cover can be financed as
part of home loan at request of borrower & accordingly EMI is fixed. Free
Property Insurance has been withdrawn w.e.f 10.09.2012 (BCC:BR:104:317
dated 10.09.2012)
Unified Processing Charges:
For Loan up to Rs 30 lacs 0.50 % on loan amount Min Rs 5000.00 + Service
tax
For loan above Rs 30 lacs 0.40 % on loan amount (Min. Rs 15000.00 +
Service tax & Maximum Rs 50000.00 + ST)