CHAPTER - 4 PROFILE OF SELECTED FINANCIAL INSTITUTIONS 4.1 PROFILE OF DEWAN HOUSING FINANCE CORPORATION LTD. (DHFL)

Transcription

1 CHAPTER - 4 PROFILE OF SELECTED FINANCIAL INSTITUTIONS 4.1 PROFILE OF DEWAN HOUSING FINANCE CORPORATION LTD. (DHFL) 4.2 PROFILE OF HOUSING DEVELOPMENT FINANCE CORPORATION(HDFC) 4.3 PROFILE OF LIC HOUSING FINANCE LTD. (LICHFL) 4.4 PROFILE OF STATE BANK OF MYSORE (SBM) 104

2 CHAPTER 4 PROFILE OF SELECTED FINANCIAL INSTITUTIONS 4.1 PROFILE OF DEWAN HOUSING FINANCE CORPORATION LTD. (DHFL) Introduction DHFL was established by Late Shri. Rajesh Kumar Wadhawan, a visionary Indian businessman. Being India s third largest housing finance company and second largest private housing finance company, DHFL has become one of the largest financial institutions in India. DHFL was the second housing finance company to be set up in private sector in India and its stated business objective was to enable access to affordable housing finance to the lower and middle income groups in India. The Founder Chairman, Mr. Rajesh Kumar Wadhawan was quite aware of the fact that owning a home is a critical element to the building of an identity for and confidence in every individual (Indian), but at the same time he knew well the sad truth that most Indians could not get a housing loan on fair terms. Therefore, he decided to set up a housing finance company and DHFL came in to existence on April 11, DHFL has encouraged thousands of people to make their upward journey by simplifying financial access for them by providing these individuals with the privilege of home loan products, insurance services and unique fixed deposit schemes tailor made to suit their needs. Today, DHFL with its corporate office at Mumbai strives continually to reach out to its customers through its extensive network of 365 offices which include over 140 branches, 72 service centers, 32 camps and 8 regional processing offices spread across the length and breadth of the country. DHFL also has tie ups with leading public and private sector banks, viz. Punjab & Sind Bank, United Bank of India and Central Bank of India and YES Bank to provide home loans to customers through joint ventures. DHFL has also set up its representative offices in London and Dubai to serve the ever increasing NRI population in these regions. It has also tied up with UAE Exchange to offer its home loan products through the various UAE Exchange centers in the GEC countries. DHFL is listed in the BSE & NSE and has been rated CARE AAA (Triple A) by CARE; AAA by Brickworks & CRISIL A+ by CRISIL, indicating high standards of 105

3 business management. DHFL has always been customer driven. In doing so, it has continually endeavored to innovate and reach out to the vast majority of the low and middle income groups. DHFL has been continuously introducing new products and variants for its customers. The company introduced a Non-income proof scheme called Samarth for selfemployed individuals. Along with housing finance, the company provides a free triple protection plan to secure the interest of its customers in case of damages due to natural causes and personal accident. DHFL, in association with leading Financial Insures in India, offers unique home loan linked insurance plans that come at a premium. Such plans provide security to the family of the borrower in the unfortunate event of the death of the borrower. DHFL believes that financial access on fair terms is everyone s birth right. DHFL knows well that borrower always expects fair terms, total transparency and flexibility Vision of DHFL To transform the lives of Indian household by enabling access to home ownership Mission of DHFL Be easily accessible to every Indian who desire to own a home Understand the customers inner needs and speak their language Go to any length to make sure that customers do not feel intimidated Continuously configure the credit policy to make sure that maximum number of people are eligible for loans Find ways to help the customers tide over difficult times Spread the network to every corner of India Respond promptly and courteously to all enquires Values Treat all customers with dignity and respect Be totally transparent in all dealings Strive to be a learning organization 106

4 Committed to team excellence and employee happiness Be single mindedly committed to the betterment of society DHFL s Home Loan Process The focus of DHFL is to simply abridge and shorten the process of acquiring customer s Dream Home. The customers have to submit the duly filled in home loan application form to DHFL along with the essential documents and a cheque for the initial processing fees. The following four major steps are followed in a home loan approval process- Step 1 Assessment: At this stage, the credit team of DHFL will conduct income verification and validate the accuracy of the information provided by the customer in order to determine the loan repayment capacity. A credit check will then be carried out to reveal the credit history of the customer. For this, DHFL obtains a credit report showing the following details: a) Personal details such as name, residential address, date of birth and PAN card number b) Records of some recent credit accounts c) Overdue accounts (defaults), if any, including the proof of clearance of such default amount. Step 2 Conditional Home Loan Sanction: If there are no major issues with the customer s income verification and credit checks, DHFL will provide conditional sanction for the loan. For, this DHFL will issue a formal letter of offer-cum acceptance to the applicant. This document includes all the terms and conditions which shall be read and understood by the applicant and the same is to be duly signed and returned to DHFL. Step 3 Security Assessment: a) Technical Assessment: A qualified technical officer will conduct a valuation on the property which the customer intends to purchase and any other property that will be used as security. 107

5 b) Legal Assessment: A qualified lawyer will examine the property documents i.e. chain of agreements/title, etc. to determine whether the property documents provided by the customer are conducive for lending. Based on the technical and legal assessment report, DHFL will determine whether the property is suitable for mortgage lending purposes. Step 4 Home Loan Disbursement: A thorough scrutiny of all the above steps is conducted by the operations team of DHFL to ensure accuracy of the entire process. Once the final check is completed, the customer shall submit the final processing fees cheque to DHFL. After its clearance, the disbursement cheque for the approval amount is prepared by the operations manager and then the same is handed over to the customer. Upon receiving the funds, the customer shall start paying the first home loan repayment, usually one month after the disbursement date. With these four steps, the customer becomes a proud owner of his/her Dream Home Home Loan Products of DHFL: 1) Home Purchase Loan: Loan for purchase of ready built-up or under-construction house/flat purchase. a. Home Loan Eligibility: 85% of the cost of property (including stamp duty and registration fees) or 80% of market value, whichever is lower. The loan amount can be further enhanced by including an earning co-applicant. The actual home loan amount is determined taking into account various factors such as repayment capacity,age, educational qualification, stability and continuity of income, number of dependents, co-applicant s income, assets & liabilities, saving habits, etc. b. Tenure of home loan: The tenure of home loan ranges from 1 to 20 years. The term, however, does not extend beyond the retirement age or 60 years whichever is earlier (65 years for self employed individuals). c. Interest Rate: DHFL offers one of the most competitive rates in the market. It is based on the DHFL s Retail Prime Lending Rate (RPLR), which fluctuates from time to time based on the money market conditions. d. Processing Fees: This is charged as the fee towards processing home loan application. In case of salaried employees, it is 1% of the loan amount, 108

6 whereas for self-employed professionals, it is charged at 1.5% of the loan amount plus service tax & cess as applicable. e. Easy Repayment: Payment can be made by way of equated monthly installments (EMIs) either through Electronic Clearing System (ECS) based on the standing instruction to the bank of customer or through post-dated cheques drawn on customer s savings account. f. Easy Documentation: For processing of loan application, the following are required: i) Know Your Customer (KYC) documents ii) Proof of income documents and bank statements iii) Property related documents g. Pre-payments: A fee of 2% is charged on the amount being pre-paid in part or in full, in case of fixed interest home loan, if paid out of borrowed source. No pre-payment charges shall be payable in case of variable interest rate home loan. h. Security: As a security, the property is to be mortgaged by depositing the registered title deed of the property in favour of DHFL. 2) Home Construction Loan: This loan can be availed, if the customer is selfconstructing the house on a plot of land owned by him 3) Home Improvement Loan: Customer can avail of a House Improvement Loan to renovate or paint the house/flat he/she owns. 4) Home Extension Loan: DHFL offers exclusive Home Extension Loans to extend customer s existing home, by adding a bedroom, enclosing an open balcony or building an extra room in the terrace, etc. 5) Home Loan for Self-employed: In India, only 7% of our labor force is in the organized sector and the rest are in the unorganized sector. Most of the Indian labor force is self-employed, with a majority running small shops, cottage industries, etc. Because of their irregular financial transactions, many financial institutions hesitate to serve these people. Thus, getting a home loan is a very difficult proposition for self-employed people. To overcome this, DHFL has come up with home loans 109

7 exclusively tailored for the needs of self employed people, both professionals and non-professionals. Thus, under this scheme, home loans are offered to selfemployed professionals and non-professionals such as Doctors, Architects, Chartered Accountants, Retailers and Small Scale Businessmen, etc. One can avail a home loan not exceeding 60% of the cost of property (including stamp duty and registration fees) or 60% of market value, whichever is lower, up to 15 years, but the term does not extend beyond the age of 65 years. 6) Plot Loan/ Land Loan: This loan is granted to purchase a plot of non-agricultural land situated within municipal/ local development authority limits. 7) Plot + Construction Composite Loan: This loan is granted to purchase nonagricultural land situated within municipal/ local development authority limits and then construct house on it. 8) Home Loan Transfer (Take over) : The balance of existing home loan borrowed from another lending institution may be transferred to DHFL. Over & above such balance transferred, a top up loan may also be opted by the customer. 9) Security: Balance transferred + top up loans are secured loans. As a security, the property is mortgaged by depositing the registered sale deed of the property in question. Only DHFL will have first charge on the property. 10) Loan against Property: Loan against property is granted to the owner, which he can use for any purpose or need: acquiring an asset, business needs, etc. 11) Non-Residential Property Loan: DHFL has brought a unique loan product catering to present day professional: doctors, chartered accountants, architects and solicitors, etc. They can purchase or construct non-residential property and carry on their professional activities. 12) NRI Home Loan (To own a property in India): NRI home loan can be availed by an applicant who is having NRI/ PIO status as per RBI guidelines for the purposes such as purchase of a new home or a house on resale; construction of a house; extension/renovation of an existing house; purchase of a plot of land; etc. 110

8 4.1.7 Home Loan Documents List of documents required for salaried individuals: i. KYC documents ii. Salary slips for the last 3 months/ salary certificate. If variable components like over time and incentives are reflected, then salary slips for the past 6 months are required. iii. Latest Form 16 iv. Copy of all bank pass books/ bank statements for the past 6 months including front page List of documents required for self-employed businessmen: i. KYC documents ii. iii. iv. Copy of last 3 years income tax returns of the applicant along with computation of income duly attested by a chartered accountant Copy of last 3 years balance sheet and profit & loss account form duly attested by a chartered accountant Brief business profile on the letterhead of the firm by the applicant v. Bank statement for the last 1 year of the savings account and current account vi. Copy of either shop or establishment license/vat registration or any other mandatory license/ registration List of documents required for self-employed professionals: i. KYC documents ii. iii. iv. Copy of last 3 years income tax returns of the applicant along with computation of income duly attested by a chartered accountant Copy of last 3 years balance sheet and profit & loss account, duly attested by a Chartered Accountant Bank statement for the last 1 year of the savings account and current account v. Copy of either shop or establishment license/vat registration or any other mandatory license/ registration vi. vii. Copy of educational qualification certificate Copy of professional practice certificate 111

9 List of documents required for NRIs Home Loans: i. KYC documents ii. iii. iv. Salary certificate from the employer mentioning name as in passport, date of joining, passport number, designation and latest salary and perquisites in English Salary slips for the last 3 months/salary certificate (if variable components like overtime and incentives are reflected, then 6 months salary slip are required). Latest income tax returns (if applicant files IT returns in India) v. Passport copy with valid residence visa page vi. vii. viii. Work permit/labor contract copy/photocopy of identity card or any other proof of work/ employment issued by concerned government authorities Property related documents detailed cost estimates from an architect/ engineer (from India) Copy of all overseas bank statements for the last 6 months, if any List of documents needed for KYC compliance: National Housing Bank (NBH) has introduced Know Your Customer (KYC) guidelines for Housing Finance Companies: a) Photo Id Proof (any one): PAN card, Passport, Voters Id card, Driving License b) Residence Proof (any one): Electricity bill, Telephone bill, Ration card, Letter from employer, Bank statement/ Pass book with address EMI, Total Interest and Total amount payable for various loan terms It should be noted that with the change in the loan tenure, both, EMI and total interest payable will change. With the increase in the loan tenure, EMI decreases; whereas, the total interest payable increases and vice versa. Therefore, borrowers will have to be very careful while choosing the loan term. They may opt a term which will ensure them a convenient size of EMI and at the same time, minimize the total interest burden. In table below, assuming a loan amount of Rs. 10 lakh and interest rate of 10.5%, EMI, total interest payable and total amount payable at the end of the loan term have been shown for various terms, viz. five year, ten year, fifteen, twenty, twenty five and thirty year terms. It is observed in the table that with the increase in the loan tenure, EMI goes on decreasing, but the total interest payable goes on increasing. 112

10 Table EMI, Total Interest and Total amount payable for various loan terms Sl. No. Loan Amount (Rs.) Interest Rate (%) Tenure (Years) EMI Payable (Rs.) Total Interest Payable (Rs.) Total Amount Payable (Rs.) Source: Amortization calculator of DHFL The table exhibits the amortization of loan over a period of 12 months (i.e. one year loan term), when the housing loan granted is Rs. 1, 00,000/- and applicable interest rate is 10.5%. The borrower is supposed to pay Rs. 8815/- as EMI every month for 12 months. The total amount payable by him at the end of 12 months will be Rs.1, 05,780/-; Rs. 1, 00,000/- towards principal and Rs. 5,780/- towards interest. Month Table 4.1.2: Amortization of Housing Loan Balance Amount (Rs.) EMI (Rs.) Interest Paid (Rs.) Principal Paid (Rs.) Total - 1,05,780 5,780 1,00,000 Source: 113

11 4.2 PROFILE OF HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC) Introduction Housing Development Finance Corporation (HDFC) is the premier housing finance institution in the country and India s largest mortgage company based in Mumbai. It was founded by Hasmukhbhai Parekh in 1977 with the primary objective of meeting a social need of encouraging home ownership by providing long-term finance to households. I.e. primary objective of HDFC was to enhance the residential housing stock in the country through the provision of housing finance in a systematic and professional manner and to promote home ownership. The aim was to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. Over the last three and a half decades, HDFC has turned the concept of housing finance for growing middle class in India in to a world-class enterprise with excellent reputation for professionalism, integrity and impeccable service. As a pioneer and leader in housing finance in India, since inception, HDFC has assisted more than 5 million customers to own a home through cumulative housing loan approvals of over Rs trillion and disbursements of over Rs trillion as at March 31, HDFC has a wide network of 378 interconnected offices (which include 103 offices of HDFC s wholly owned distributing company, HDFC Sales Private Ltd.) catering to over 2400 towns and cities spread across the country. It also has 3 representative offices in Dubai, London and Singapore and service associates in the Middle East region, to provide housing loans and property advisory services to Non-resident Indians (NRIs) and persons of Indian origin. HDFC s unrelenting focus on corporate governance, high standards of ethics and clarity of vision, trust, integrity, transparency and professional service are the important pillars of the brand HDFC and employees and customers are its brand ambassadors. Customer satisfaction is the hallmark of all HDFC offerings. HDFC is an organization that strives for excellence with the twin objectives of enhancing customer satisfaction and shareholders value. The first touch of HDFC s personalized service begins as soon as a customer approaches HDFC, and over time, it progresses into a long and meaningful relationship. State-of-the-art information systems supports by strong in-house 114

12 training programmes conducted at its specialized training centre in Lonavla, have equipped HDFC to respond swiftly to the ever-changing needs and thereby empower customers in making the right home buying decision. This is what sets apart HDFC s customer service philosophy With You, Right Through. HDFC s specialist team of over 1833 as on 31 st March, 2013 trained and experienced professionals follows a single window concept for providing smooth and value added services at all stages. The team guides the customers right through the entire process of property purchase-be it property search assistance, technical support prior to finalizing the property, legal advice on property related documentation, personalized home loan counseling or providing tailor-made repayment options to suit the customer s specific requirements. HDFC s wide product range includes loans for purchase and construction of a residential unit, purchase of plot, home improvement loans, house extension loans, nonresidential premises loans for professionals and loan against property, while its flexible repayment options include Step-up Repayment Facility (SURF) and Flexible Loan Installment Plan (FLIP). HDFC also has a robust deposits mobilization programme. HDFC has been able to mobilize deposits from over 15 lakh depositors. Outstanding deposit grew from Rs crore in March 1994 to Rs crore in March In addition, HDFC has received AAA rating for its deposit products for highest safety from both CRISIL and ICRA for nineteenth consecutive years. Over the years, HDFC has emerged as a financial conglomerate with its presence in the entire gamut of financial services including banking, insurance (life and non-life), asset management, real estate venture capital and more recently education loans. Today, HDFC is recognized as one of the Best Managed Companies in India and is a model housing finance company for developing countries with nascent housing finance markets. HDFC has undertaken several consultancy assignments in various countries across Asia, Africa & East Europe to support and establish their housing finance institutions. At HDFC, Corporate Social Responsibility has always been an evolving concept, akin to its learning by doing philosophy. As part of its social objectives, HDFC has always endeavored to contribute to economic development and social upliftment of the weaker 115

13 sections of the society and has professionally nurtured each of its social initiative as an investment. HDFC has undertaken development oriented work and supported several social initiatives in the area of education, child welfare, medical research, welfare for the elderly and handicapped among several others Advantages of HDFC home loans HDFC is how millions of Indian families spell the word Home as the brand not only offers housing finance but also total housing solutions. The HDFC home loans offer following advantages: 1) Pioneer of housing finance in India with over 35 years of lending experience 2) Widest range of home loan and deposit products 3) Vast network of 378 interconnected offices including 3 international offices 4) Most experienced and empowered personnel to ensure smooth and easy processing 5) Online loan application facility at and across-the-counter services for new deposits, renewals and repayments 6) Counseling and advisory services for acquiring a property 7) Flexible loan repayment options like step-up repayment facility, flexible loan installment plan, tranche based EMI, accelerated repayment scheme and telescopic repayment option. 8) Instant home loan approval 9) Loan from any office for purchase of home anywhere in India 10) Loan approval even before a property is selected Types of Home Loans The following home loan products are offered by HDFC- 1) Home Loan: Loans availed to acquire a ready or an under-construction residential property is classified as Home Loans. It also includes plot. HDFC also provides loans to refinance home loan availed by the customer from other banks/ HFCs. 116

14 2) Home Improvement Loans & Home Extension Loans: Loan availed for renovation or extension of an existing home is categorized as Home Improvement Loan and Home Extension Loan respectively. 3) Home Equity Loan (LAP)/ Top -up Loans: The product offers a resident Indian customer a loan against the existing property on the basis of its market valuation. It helps in encashing the investment in a house without having to dispose it off to fund various needs related to higher education, purchase of furniture, business requirements, etc. 4) Plot Loans: HDFC provides plot loans to enable the direct purchase/ resale purchase/ refinance (balance transfer) of a plot for the construction of residential or non-residential premises. Customer has to commence construction on the said plot within 5 years from the date of first disbursement. In case of this condition not being met, HDFC will have the right to increase the rate by 200 bps over &above the applicable rate of interest. 5) Non-residential Premises Loan: HDFC offers loans to doctors, chartered accountants, lawyer and other self-employed individuals for construction, purchase, extension or renovation of house at their place of work. 6) Rural Housing Loans: HDFC offers home loans in rural areas for purchase of a ready or an under-construction property or for construction of a residential property. Funding is also available for construction of a residential property where the customer already owns a plot, the renovation of existing home & extension Maximum Loan amount that can be availed For loan amount less than and equal to Rs.20 lakhs, up to 90% of the cost of the property, including the cost of the land can be availed as a loan. This is however subject to the value of the property as assessed by HDFC. For loan amount greater than Rs. 20 lakhs, up to 80% of the cost of the property, including the cost of the land can be availed as a loan. This is, however, subject to the value of the property as assessed by HDFC. 117

15 4.2.5 Rate of Interest A customer can choose between two interest rate options, viz. Adjustable Rate Home Loan (ARHL) and Fixed Rate Home Loan (FRHL). Customer can also avail part of the loan under FRHL and part under ARHL. 1) Adjustable Rate of Interest (ARHL) (also called Floating Rate of Interest): In this option, the applicable rate of interest is linked to HDFC s Retail Prime Lending Rate (RPLR). The applicable rate of interest on the loan will be revised/reset every three months from the date of first disbursement with change in RPLR i.e. the interest rate on the loan may change. However, in the event of an increase in the interest rate, the equated monthly installment (EMIs) on home loan disbursed will not change. The interest rate component in the EMI will increase and consequently, the principal component will reduce, resulting in an extension of the loan term & vice versa when interest rate decreases. 2) Fixed Rate of Interest: Interest on the loan is charged at the prevailing fixed rate of interest. 3) Computation of Interest: EMI comprises of principal and interest calculated on the basis of monthly rest at the applicable interest rate and is rounded off to the next rupee. Interest and any other charges shall be computed on the basis of year of 365 days Repayment The loan is repaid by way of equated monthly installments (EMIs), which comprises of both principal and interest component. Repayment commences from the month following the month in which final disbursement of the loan is availed. Pending final disbursement, simple interest is applicable on the loan disbursed. The interest on amount disbursed is called Pre-EMI. Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI. HDFC also offers a unique Tranching facility for repayment of loan disbursed. Instead of paying Pre-EMI on amount disbursed, the customer can choose to pay interim EMI of an amount lesser than or equal to EMI on the total loan amount, convenient to him, thus, commencing the repayment of the loan even before the loan is fully disbursed. 118

16 4.2.7 Maximum Loan Repayment Tenure The loan can be repaid over a maximum period of a) 30 years in case of Resident Indian Home Loans b) 20 years in case of Home Extension Loans c) 15 years in case of Other Loans The tenure of the loan is dependent on the customer s risk profile, age of customer at maturing of loan, age of property at loan maturity, depending upon the specific repayment scheme as may be opted and any other terms which may be applicable based on prevalent norms of HDFC Effect of Increase/Decrease in Rate of Interest If the interest rate increases, the interest component in the loan amount increases, resulting in increase in term & vice versa when interest rate decreases. However, EMI is not altered; it remains the same. But, if the EMI is not sufficient to service interest payment on the outstanding loan amount, HDFC has a right to increase EMI in such cases Information of change in Interest Rate The customer shall be deemed to have noticed changes in the rate of interest whenever there are changes in RPLR. Such changes are published in leading newspapers or notified on its website and once such notification is issued, the customers shall be liable to pay interest at such revised interest rate Fees and Charges 1) Processing Fees: A onetime non-refundable fee of 0.50% of the loan amount plus applicable taxes is payable for products other than LAP and NRP. For Lap & NRP, a non-refundable fee of 1% of the loan amount plus applicable taxes is payable. 2) Penal Interest for delayed payment of EMIs/ Pre-EMIs: the delay in payment of EMI and Pre-EMI shall render the customer liable to pay additional interest of 18% per annum or at such higher rates as per the rules of HDFC in that behalf as in force from time to time. Also, the customer would be liable to pay incidental/legal charges that may be incurred in recovering the dues, in case of delayed payments. 119

17 3) Bounced Cheque/ECs or Standing Instructions Dishonors: HDFC has a right to charge a penalty of Rs.200 for every bounced cheque/ecs or SI dishonors. 4) Incidental Charges: Incidental charges and expenses are levied to cover the costs, charges, expenses and other monies that may have been expended in connection with recovery of dues from a defaulting customer. 5) Stamp Duty/Cersai Charges: The customer will be required to bear and pay applicable stamp duty, all charges levied by the Central Registry of Securitization Asset, Reconstruction and Security Interest of India (CERSAI) and all statutory/ regulatory charges/ taxes on account of the loan or the security that are presently applicable as may be made applicable from time to time during the pendency of the loan. These charges are non-refundable in nature and payable at the point of disbursement/ applicability and thereafter as and when due and payable at the rate as applicable on such date of disbursement/ applicability. The current charges stipulated by CERSAI are as under: a) b) c) For loan up to Rs. 5 lakh (for an original filing & for modification For loan above Rs. 5 lakh (for an original filing & for modification For any satisfaction of the original filing with CERSAI Rs. 250 per filing/ modification Rs. 500 per filing/ modification Rs ) Fees on account of External Opinion: For advocates/ technical experts, as the case may be, fees will be charged as per actual applicable to a case. These charges are not payable to HDFC and are payable directly to concerned expert for the nature of assistance so rendered. 7) Conversion Fee: Customer can opt to switch between schemes for a nominal conversion fee which is notified in the website. 8) Pre-payment charges: a) Adjustable Rate Home Loans (ARHL): No prepayment charges shall be payable for partial or full prepayments irrespective of the source. However, in cases where home loans are fore-closed before three years from the date of final disbursement for any reasons, HDFC has the right to recover valuation charges paid to external 120

18 agency for valuation of property, concession offered in rate of interest, processing charges, if any, at the time of sanction/ disbursement of the loan. b) Fixed Rate Home Loans (FRHL): No prepayment charges shall be payable for partial or full payment made from own sources. The expression own sources for this purpose means any source other than borrowing from a bank/ HFC/ NBFC or financial institution. But, cases where home loans are fore-closed before 3 years from the date of first disbursement of loan, valuation charges paid to external agency for valuation of property, concession offered in rate of interest, processing charges, if any, at the time of sanction/ disbursement shall be recovered in full. The prepayment charge shall be 2% plus applicable service tax and surcharge, of the outstanding amounts being so prepaid through refinance from any bank/hfc/nbfc or financial institution. c) Prepayment Charges for NRP loans/home Equity Loans/Top up loans/home loans with company as a co-applicant: Prepayment charges of 2%, plus applicable taxes of the amount being prepaid are payable if the amount being repaid is more than 25 % of the opening principal in a financial year. The customer will be required to submit such documents that HDFC may deem fit and proper to ascertain the source of funds. Note: HDFC retains the right to alter any charges or fees from time to time or to introduce any new charges or fees as it may deem appropriate with due intimation to the customers Conditions for Disbursement 1) Home Loan/Plot Loan/ Home Improvement Loans/ Rural Housing/ Non- Residential Premises Loans: HDFC shall disburse the loan to the customer a) Subjected to legal and technical assessment of the property b) After the customer has compiled with requirement of creation of security interest of such manner as required by HDFC and c) After customer has paid/invested his/her own contribution in full. Own contribution means cost of property minus loan approved by HDFC 2) Home Equity Loans (LAP)/Top-up Loans: HDFC shall disburse the loan to the customer a) Subject to legal and technical assessment of the property and 121

19 b) After the customer has compiled with the requirement of creation of security interest of such manner as required by HDFC Security Security of the loan would normally be first mortgage of the property being financed and/or any other collateral security as may be required by HDFC. Interim security may be asked if the property is under construction. Collateral or interim security could be assignment in favour of HDFC of Life Insurance Policies, the surrender value of which is least equivalent to loan amount; guarantees from sound and solvent individuals; pledge of shares and/or any other such investment that may be acceptable to HDFC Approval of Plans Customer must ensure that a) Required approvals are taken and construction is being done as per the approved plans in case the loan is availed for construction of house b) In case the property is being purchased in developer s project, customer must satisfy himself/herself that required approvals for the project have been obtained by the developer c) In case the property is being purchased in resale, all required approvals for the property have been obtained and are available with the seller Insurance The customer shall ensure that the property is duly and properly insured for fire and other appropriate hazards during the pendency of the loan and to produce evidence thereof to HDFC each year/or whenever called upon to do so. HDFC should be the beneficiary to the insurance policy during the pendency of the loan Procedure for Recovery of Overdue In the event of a default in terms of the loan agreement, HDFC shall send reminders to its customers through s, SMS, letters, facsimile transmission and visits, as the case may be and then, if the need so arises follow up with a notice to such effect before proceeding as per the applicable laws and procedures prescribed therein. 122

20 Customer Grievance Redressal Procedure There can be instances where the customer is not satisfied with the services provided. To highlight such instances and register a complaint, the customer may follow the following process: a) Customers can complaint to customer care on website. b) Alternately the customer can meet or write to the Business Head for the respective dealing branch or c) The customer may escalate to the Managing Director, at: The Managing Director, HDFC Ltd., Raman House, HT Parekh Marg, 169, Backbay Reclamation, Mumbai d) In case the customer is still not satisfied with the response, he may write to: Complaint Cell, National Housing Bank, 4 th Floor, Core 5A, India Habitat Centre, Lodhi Road, New Delhi Disclosure HDFC is authorized to disclose from time to time any information relating to the loan to any credit bureau (existing or future) approved by Government of India or any other authority as may be required from time to time without any notice to the customer. The terms and conditions are described in loan agreement under relevant sections/schedules. 4.3 PROFILE OF LIC HOUSING FINANCE LTD. (LICHFL) Introduction LIC HFL is one of the largest housing finance companies in India. It was incorporated on 19 th June 1989 under the Companies Act, The company was promoted by LIC of India and went public in the year The company launched its maiden GDR issue in The authorized capital of the company is Rs million (Rs. 150 crores) and its paid up capital is Rs million (Rs crores). The company is recognized by National Housing Bank and listed on the National Stock Exchange (NSE) and Bombay Stock Exchange Ltd. (BSE) and its shares are traded only in Demat format. The GDRs are listed on the Luxembourg Stock Exchange. 123

21 The main objective of the company is providing long term finance to individuals for purchase/construction of house for residential purpose/repair and renovation of existing flat/ houses. The company also provides finance on existing property for business/ personal needs and gives loans to professionals for purchase/construction of clinics/ nursing homes/ diagnostic centers/office space and also for purchase of equipments. The company also provides long term finance to persons engaged in the business of construction of houses or flats for residential purpose and to be sold by them. Thus, it provides loans to individuals, professionals, corporate bodies, builders, cooperative housing societies. Around 94.92% of its loan portfolio is derived from the retail segment and the rest from corporate clients. The company possesses one of the industry s most extensive marketing networks in India: Registered and Corporate office at Mumbai; 7 Regional offices; 16 Back offices and 209 marketing units across India. In addition, the company has appointed over 1241 Direct Sales Agents (DSAs), 6535 Home Loan Agents (HLAs) and 782 Customer Relationship Associates (CRAs) to extend its marketing reach. Back Offices spread across the country conduct the credit appraisal and administrative functions. The company has set up a Representative office in Dubai and Kuwait to cater to the Non-residential Indians in the GLCC countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. Today, the company has a proud group of over lakh prudent house owners who have enjoyed the company s financial assistance Vision To be the best Housing Finance Company in the country Mission a) To provide secured housing finance at affordable cost b) To maximize shareholders value with higher customer sensitivity Values a) Fair and transparent business practice b) Transformation to a knowledge organization c) Higher autonomy in operations d) Instilling a sense of ownership amongst employees 124

22 4.3.5 Benefits of LICHFL-Home Loan 1) Attractive interest rates 2) Hassle free procedures 3) Easy documentation 4) No hidden costs 5) Customized products to suit customer s need 6) 209 offices across India and 2 offices in Middle East 7) Well trained professionals providing doorstep services Subsidiary Companies of LICHFL 1) LICHFL Care Homes Ltd. 2) LICHFL Financial Services Ltd. 3) LICHFL Trustee Company Pvt. Ltd. 4) LICHFL Asset Management Company Pvt. Ltd Loan Products of LICHFL Different loan schemes to suit the needs of customers are offered by LICHFL. They are: a) Loan for construction/purchase of a new house/flat b) Loan for purchase of an existing house or flat not more than 35 years old c) Loan for extension of an existing house. d) Loan for renovation/repair of an existing house/flat. e) Loan for Plot purchase f) Loan against Property: loan against mortgage of residential house /flat for children s education/marriage; purchase of another property; business expansion; loan against property for companies g) Loan against securities, Loan to Professionals Floating Rate & Fixed Rate home loans Where the loan is under Floating Rate of Interest, the rates of interest are at present reviewed every three months ( January, April, July, October ) based on the prevailing market conditions as judged by the Company and LHPLR. The revised Floating Rate of Interest could increase, decrease or remain the same. 125

23 However, the Rate of interest will be reviewed every 6 months (January, July) for old customers as per their loan agreements Eligibility for home loans The applicant must be in permanent service or engaged in a profession or business to be eligible for a loan. He/she should have a stable job and a regular income Co-Applicant The Co-owners of the property in respect of which financial assistance is sought, must be co-applicants. Usually joint applications are from husband-wife, father-son or mother-son. The co-applicants must be blood relatives Loan amount Loan amount is determined on the basis of the repayment capacity of the applicant/s. Repayment capacity takes into consideration factors such as age, income, dependents, assets, liabilities, stability of occupation and continuity of income, savings etc. The maximum loan would be Rs.150 lakhs per unit to any individual applicant. Loan up to 85 % of the cost of property value (including stamp duty & registration charges) will be extended. Beyond Rs. 150 lakhs, individual cases would be decided based on merits Period of Loan Term up to a maximum of 30 years for salaried and 20 years for self-employed (maximum 15 years under Griha Shobha for NRIs) is granted. The term for the loan will under no circumstances exceed the age of retirement or completion of 70 yrs of age whichever is earlier Mode of Repayment Repayment is made through Equated Monthly Installment (EMI). It means a uniform lump sum amount, which includes repayment of a part of the principal amount and payment of interest, calculated on monthly rest basis. The amount is payable monthly. EMI will commence immediately after full disbursement; or after the loan is fully disbursed or until 12 months from the date of first disbursement whichever is earlier. Until EMI starts, interest is payable on the amount disbursed on monthly basis. 126

24 Security for the Loan The security for the loan is the first mortgage of the property to be financed by way of deposit of the title deeds, subject to local laws Loan sanctioning time In case of re-sale, the loan will be disbursed in a single installment, with least timelag, provided, all the requirements are complied with expeditiously. In case of construction, loan will be disbursed in installments depending upon the progress of construction and on the requirements being complied with Supporting Documents required while applying for the loans: Common requirements for all applicants: Application form duly filled in Identity Proof such as PAN Card, Voter s ID Card or Passport. Address Proof such as Ration Card, Electricity Bill, Telephone Bill, etc. Bank Pass-book or statements for the last two years. Power of Attorney, wherever applicable Additional Requirements: For salaried persons: Salary slips for last 6 months and Form 16. For Businessmen/Self-employed: Three years' income tax returns/assessment orders along with computation of income and statements of accounts certified by C.A. Three years financials Profit and Loss account, Balance Sheet, Audit Reports, etc. Purchase from builder: Copy of Agreement for sale. Copy of registration receipt Copies of receipts of payment already made. NOC from builders Copy of Sanctioned plan and sanction letter. Copy of NA permission / ULC clearance, wherever applicable. 127

25 Stages Involved from Application to Disbursement 1.Submission of application with supporting documents. 2.KYC and other verifications and CIBIL report. 3.After scrutiny of application personal interview by a company official. 4.Issue of Loan offer Letter by the Company 5.Title clearance through panel advocate. 6. Valuation of property by Panel Valuer and inspection of property by company official 7. If the above reports are O.K., collection of documents for stamping and deposit of original title deeds. 8.Stamping of documents, execution of documents and disbursement Prepayment charges Prepayment charges are 2% on the Principal repaid. Prepayment charges are not applicable on floating rate scheme Public Deposit Scheme LICHFL, being one of the largest housing finance companies in India providing financial assistance in the construction and purchase of house/ flat since 1989, has started the public deposit scheme from 10 th May, 2007 onwards. The deposits are accepted under cumulative option and non-cumulative option. The terms of the deposits are 1 year, 18 months, 2 years, 3 years & 5 years in both the schemes. The payment of interest under cumulative option will be compounded with half-yearly rest. Under non-cumulative option, interest will be paid half-yearly, i.e., on 30 th September and 31 st March. For senior citizens, additional interest of 0.10% per annum will be more on deposits up to Rs and 0.25% will be more on deposits above Rs , payable for all the terms. Its Sanchay Public Deposit Scheme is popular Grievance Redressal Mechanism is also there. 128

26 4.4 PROFILE OF STATE BANK OF MYSORE (SBM) Introduction State Bank of Mysore was established in the year 1913 as Bank of Mysore Ltd. under the patronage of the erstwhile Government of Mysore, at the instance of the banking committee headed by the great Engineer-statesman, Dr. Sir M. Visveswaraya. Subsequently, in March 1960, the bank became an Associate of State Bank of India (SBI) History In 1913, at the instance of Sir M. Visveswaraya, the Engineer Statesman, a state aided bank was established under the Patronage of His Highness The Maharaja of Mysore, Sri Krishnaraja Wodeyar IV. This was MYSORE BANK LTD.. During 1953, Mysore Bank was appointed as an agent of RBI to undertake government business, a subsidiary of the SBI under the State Bank of India (subsidiary banks) Act Now, the bank is an associate bank under State Bank Group. State bank of India, presently, holds 90% of shares of SBM. The Bank s shares are listed in Bangalore, Chennai & Mumbai stock exchanges. Mysore Bank, as it is popularly known, is constantly committed to serve its customers. The dedicated service to clientele has brought recognition/laurels to Mysore Bank Branch Network The Bank has widespread network of 1015 Branches (as on ) and 9 Extension Counters spread all over India including 20 Small and Medium Enterprise branches, 6 Industrial Finance branches, 3 Corporate Accounts branches, 7 Specialized Personal & Service Banking branches, 9 Agricultural Development branches, 3 Government Business branches, 2 Specialized NRI branches offering wide range of services to the customers, besides 5 service branches and 1 Asset Recovery branch rendering backup support to the Bank Financial Profile The Paid-up capital of the Bank as on is Rs crores of which SBI holds 90% share. The Bank has over esteemed shareholders and investors on its records. The bank has achieved a Capital Adequacy Ratio (CAR) of 11.42% under Basel III 129

27 guidelines. The bank has an enviable track record of continuously earning profits and payment of uninterrupted dividend since its inception in The bank has earned a net profit of Rs. 409 crores during the financial year ended March Business Profile The total deposit of the Bank as at the end of March 2015 stood at Rs. 66,064 crores and the total advances stood at Rs. 53,296 crores including an export credit of Rs. 1,617 crores. The bank is a major player in Foreign Exchange dealings also and has recorded a merchant turnover of over Rs. 51,904 crores and a trading turnover of over Rs 3,51,198 crores during the financial year ended March Human Resources The bank has a dedicated workforce of 10,193 employees consisting of 3,471 supervisory staff and 6,722 non-supervisory staff (as on ). The skill and competence of the employees have been kept updated to meet the requirement of the customers keeping in view the changes in the business environment Organizational Setup While the Chairman of SBI is also the Chairman of the Bank, the Managing Director is assisted by two Chief General Managers and 13 General Managers KYC Know Your Customer KYC norms were introduced in 2002 by Reserve Bank of India (RBI) with the objective of preventing money laundering, terrorist financing, theft and so on. The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. Know Your Customer (KYC) procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risk prudently. Certain documents such as PAN card, DL, voter s identity card, passport, etc. are accepted as proof of identity and ration card, electricity bill, water bill, bank account statement, voter ID card, etc. are accepted as proof of residence. In other words, they are accepted as KYC documents. 130