Study on housing loan offered by public sector banks in Harur Taluk

Transcription

1 International Journal of Science, Technology and Humanities 1 (2014) Available online at International Journal of Science, Technology and Humanities Study on housing loan offered by public sector banks in Harur Taluk C.Gomathi Department of Commerce, Sri Vidya Mandir Arts and Science College, Uthangarai, India Received: 10 September 2014: Received in revised form 9 October 2014; Accepted 16 October 2014 Abstract Housing is a primary human need next in importance only to food and clothing. A first priority for a youngster who beings life is therefore to plan for a house. This takes precedence over other household expenditure and creature needs. Housing, however, is a major expenditure and cannot be funded out of a families normal monthly income or savings. The prospective homeowner must look for a loan substantial in size and so structured that he can repay it over a longer period of time, in many cases almost ones entire working life. Loan is offered to a borrower to purchase or build a new house on the basis of his/her eligibility and the banks lending rules. One of the important basic human needs is shelter. House is the ultimate dream of every middle class family. Government gave encouragement for house finance subsidiaries by offering number of tax concessions to individuals with the overall encouragement given to this sector, a number of players entered in housing finance. One of the most important benefits of taking a home loan is the interest rate that is allowed on the home loan. Fixed and variable interest rate options are also available for home loans. Many financiers also offer home improvement loans at the same interest rate as they offer the home loans. Keywords: Housing loan; Types of housing loan; Attitude of housing loan borrowers Sri Vidya Mandir Arts & Science College, Uthangarai 1. Introduction The basic needs of mankind are food, clothing and shelter. Of these, housing is not only a basic need but it also provides a sustainable base for the up gradation of the economic status and quality of the life of people. The arithmetic progression of population and also the migration of people from rural areas to urban for employment have increased the housing demand day by day. Against the milieu of rapid urbanization and a changing socio- economic scenario, the demand for housing has grown explosively, due to change in economic and social status, people now have a desire to own a house. A house is generally the single largest investment an individual makes in his life time. Moreover, the emotional dimension of a house makes it intrinsically safer for lender. Another factor that adds to the safety of the loan is that most borrowers have a significant level of personal money invested in a house. *Corresponding author.tel: address: gomathimarans@gmail.com 2014 Sri Vidya Mandir Arts & Science College, Uthangarai 111

2 Suppose they lose possession of a house, it would mean a lot of personal wealth slipping out from them, in order to achieve the ambition of Government of India for providing A house for each family, housing finance institutions are implementing various schemes according to the affordability of different income groups of people. Housing financing helps to provide employment opportunities to a large number of people who are skilled, semi- skilled and unskilled in the construction industry of unorganized sector. It also provides a very good fillip to the business opportunities of people who supply construction materials of all kinds. The repayment of housing loans is satisfactory when compared to all other types of lending. Almost all the commercial banks, development banks provide wide range of funds to the needy people according to their repayment capacity. Our country witnesses spectacular growth in this field, which acts as a catalyst in the growth and development of economy. Housing financing has become a powerful mechanism of economic development. 2. Public sector banks Banks which are owned by government are as public sector banks. Banks which are owned by government are known as public sector banks. At present in India, there are 26 largest public sector banks. Under this study only deals with two kinds of public sector banks. That is y SBI y Canara Bank State Bank Of India (SBI) The state bank of India was established on 18th July 1955, under the state bank of India act to take over the business of the imperial bank of India. SBI is owned by the government of India and is the largest bank in the India sub continent. SBI is the second largest bank in the world. SBI has been awarded The Most Preferred Home Loan Provider by AWAAZ Consumer Awards. SBI home loans give concession on interest rates on GREEN HOMES under its environment protection program. SBI offers SBI-optimal additional home loans and SBI-Home line special personal loans for existing home loan borrowers who have a repayment record of 3years, etc. 112 Highlights Interest Rate % Loan amount Minimum 5,00,000 Maximum- 25,00,000 Tenure Minimum 5 years Maximum- 25 years Time of processing loan 7 days Interest Rate Tenure Interest Type Interest Rate offer 1-25 years Floating 10.50% Upto 23,00,000 Above 25,00,000 Canara Bank (CB) The canara bank is a government of India undertaking, and carries on all banking business. The bank was brought into existence by an ordinance passed on the 19th July 1969 by the Central Government. In terms of the ordinance the undertaking of the Canara bank was rested to and transferred to the new bank. This ordinance was replaced by the banking companies (Acquisition and Transfer of Undertaking) Act, This act was declared null & void by the Supreme Court on the 10th of February 1970 and subsequently the ordinance was promulgated. Then the banking companies act, 1970 was passed and it was made effective retrospectively from 19th July Highlights Interest Rate 10.50% Loan amount Minimum 1,00,000 Maximum- 10,00,000 Tenure Minimum 5 years Maximum- 25 years Time of processing loan 7 days Interest Rate Tenure years Interest Type Interest Rate offer 1-25 Floating 10.50% Regular (up to 30 Lakhs % >75 Lakhs %)

3 3. Statement of the problem Housing financing stands top in the financial sector today. Housing finance companies play an important role in the national economy. Though the housing finance banks are fast flourishing, they face problems due to various reasons. Normally the local bodies make inordinate delay to approve the sites and plots. So house builders find it difficult to get approval of their sites, without which they can t borrow loans. The growth of population results in the shortage of housing continuously. The Government s initiative for the development of housing is not up to the mark and is not in support of the successful implementation of this scheme The cost of construction goes on increasing as the cost of land is skyrocketing and also the labour and material cost increase continuously. The lending banks too have enhanced their rates of interest. The majority of poor people dwell in rural areas. They don t have regular monthly income as employment opportunities are less in rural areas. With no or less savings village people are unable to think of their own houses. Many banks advertise low rates of interest for housing. But in reality interest rates are high as they add them with the principal every quarter in a year. They also include processing fee and other hidden charges. These are quite contrary to their advertisements. Moreover, the housing finance banks advance loans mainly to the salaried class in india. The village people, unorganized non-regular income groups find it difficult to avail the housing loan facility. Hence an attempt is made to study the problems faced by the customers in availing the housing finance. 4. Scope of the study This study is undertaken to measure the customer service rendered by housing finance of commercial banks in Harur taluk. The study will provide details of customer services rendered by housing finance and the factors that contribute to the utilization of housing loans. It is hoped that the results of this study will propose policy measures for the betterments of the housing finance sector to achieve the aim of Housing for all. Review of previous studies K.L. Srinivasan (2000)1 in his thesis entitled A project on Housing Finance How SBI can establish leadership has concluded that simplification of the documentation process, careful and friendly approach systems and procedures, good customer service and non insistence in collateral securities are the most important variable in the marketing of housing loan schemes by banks. DePaul Singh (2001)2 in his study entitled consumer Behavior and Bank Retail products an Analysis Stresses that the borrower s attitude is an important factor for the improvement of housing loan schemes. R.R.Krishna and V.S.Krishna Mouthy (1999)3 stress in their article entitled Trend and policy Issues of Housing finance in India, that simplified procedures and speedy sanction of housing loans will give a boost to the constructing houses. Maheswari and Govindarajan.k5 in their article entitled, housing loan borrower in banks : A Micro Study. They concluded that adoption of modern banking technology as a means to improve housing loan borrowers. Uma Shankar Mishra6 in her article entitled Housing Loan Quality Attributes Affection Borrowers Satisfaction In Banking Sector Of India, explored structural equation model is formulated to indicate the impact of the relationship between borrowers satisfaction and loan attributes. G.Visalatchi in her article entitled A comparative study on the housing loan borrowers of public sector banks in Harur taluk. Explored that three component service quality model and concluded that the survival and growth of a bank does not depend on the size of funds, rather it depends on its ability to provide qualitative to its borrowers on sustained basics. 5. Objectives of the study 1. To study the customer services rendered by the various housing loan in public sector banks 113

4 2. To ascertain the factors that contributes to the utilization of the housing loans of various public sector banks. 3. To measure and analyze the level of customer satisfaction in housing loans in various Public sector banks. Data collection The study comprises both primary and secondary data. The primary data were collected directly from the respondents with the help of interview schedule. Secondary were collected from the books, journals and websites. Methodology and tool This section describes the methodology which includes the collection of data, the construction of interview schedule, ANOVA table field work and data collection, frame work of analysis. Sampling design The study relates to the customer satisfaction towards housing finance in Harur taluk. In this taluk two commercial banks are providing housing finance. Area of study The area of study for the present study is Harur Taluk, Dharmapuri District of Tamilnadu. Limitations The study suffers from the following limitations. 1. The market survey was conducted only in Harur taluk of Tamilnadu. Hence, the results arrived at from the study may or may not be applicable to other taluk. Further, the survey method which was adopted for collecting the data in this study has its own limitations. 2. Out of the total population, only five hundred utilizes of housing loan were selected for eliciting first hand information. In view of the time and monetary constraints, it was not possible to contact more than the selected number of respondents. 3. Some respondents gave information about their economic back grounds like annual income, wealth details; from their memory as they had no account of them. Necessary cross verifications were made to reduce the biased information, wherever doubts arose. 6. Analyses and interpretations Level of perception Table 1 Clearly shows the level of perception of the respondents. Level of perception Source: Primary data From the above Table 1 it was clear that out of 100 respondents from public banks, 35 (35) percent) respondents were in the category of high level perception, 45 (45 percent) respondents were in the category of medium level perception, 20 (20 percent) respondents were in the category of low level perception towards the housing loan borrowers. Relationship between the Gender and Level of Perception The Gender wise classification of the respondents on the basis of their level of perception towards housing loan is shown in Table- 1.1 Table 1.1 Gender and level of perception Gender Level of perception High Medium Low Total Male 20 (57) 25 (56) 10 (50) 55 Female 15 (42) 20 (44) 10( 50) 45 Total Source: Primary Data Public banks No. of respondents Percentage of total High Medium Low Total From the above Table-1.1, it was clear that out of100 respondents from public banks, 35 respondents have perceived high level perception in which 20 (57 percent) respondents were male and the remaining 15 (42 percent) respondents were female. 45 respondents 114

5 have perceived medium level perception in which 25 (56 percent) respondents were male and the remaining 20 (44 percent) respondents were female.20 respondents have perceived low level perception in which10 (50 percent) respondents were male and remaining 10 (50 percent) respondents were female. Ho - There is no significant relationship between the gender and the level of perception. The results of ANOVA are given in Table 1.1 Table 1.1 Gender of the respondents and their level of perception results of anova Source of Variation Sum of Degrees of Mean sum of Ratio of F Table value squares freedom Squares Between level of perception Between gender Error It could be seen from the public banks table.1.1 that, they obtained F values 5.14 and 6.61 were less than the table values (18 and 19) at 5% level of significance. Hence, the null hypothesis There is no significant association between gender of the respondents and their level of perception was accepted. As such, it is concluded that the level of perception of different gender of the respondents do not differ significantly. Relationship between the Age and Level of Perception The age wise classification of the respondents on the basis of their level of perception towards housing loan is shown in Table 1.2. Age Level of perception High Medium Low Total Below 25 yrs 5(14) 5(11) 5(25) yrs 15(42) 10(22) 5(25) yrs 10(29) 15(33) 5(25) 30 Above 45 yrs 5(14) 15(33) 5(25) 25 Total high level perception in which 5(14 percent) respondents were in the age group of below 25 years, 15 (42 percent) respondents were in the age group between years, 10(29 percent) respondents were in the age group of in the age group between years and the remaining 5(14 percent) respondents were in the age group of above 45years. 45 respondents have medium level perception in which 5(11 percent) respondents were in the age group of below 25 years, 10 (22 percent) respondents were in the age group between years, 15 (33 percent) respondents were in the age group between years and the remaining 15 (33 percent) respondents were in the age group of above 45 years. 5 respondents have low level perception in which 5(25 percent) respondents were in the age group of below 25 years, 5 (25 percent) respondent was in the age group between years, 5(25 percent) respondent was in the age group between years and the remaining 5(25 percent) respondent was in the age group between above 45 years. From the above Table 1.2, it was clear that out of 100 respondents from public banks, 35 respondents have 115

6 Table 1.2 Age of the respondents and their level of perception results of anova Source of Variation Sum of squares Degrees of freedom Between level of perception Mean sum of Squares Ratio of F Between age Error Table value It could be seen from public banks, the table 1.2. that, the obtained, F values 0.02 and 0.01 were less than the table values ( 3.83 and 4.45) at 5% level of significance. Hence, the null hypothesis There is no significant association between age and level of perception was accepted. As such, it is concluded that the level of perception of different age group of the respondents do not differ significantly. Findings of the study From the analysis carried out the above said objectives and hypothesis the following are the major findings of the study. 1. From public banks majority of the respondents were male and in the case of - 42 percent of the respondents were in the age group between years and 47 percent of the respondents were in the age group of below 25 years percent of the respondents were graduates from public banks 28 percent of the respondents were post graduates. 3. By the application of anova table it was clear that incase of public sector banks level of perception regarding the housing loan of gender, age were dependent. 4. In case of private banks level of perception regarding the housing loan, gender, age, were dependent. 7. Suggestions 1. Peoples who are opt home loans for courtesy as the main feature Traditionally bankers and financiers have been too proud of their position as lenders. So the field staff helps the borrowers in filling up the application form and which other matters. All the advertisements should be focused on the place of execution in addition to the courteous behavior evinced by the employees of the service provider. 2. The bank should review the housing loan portfolio at periodical intervals for capturing the new market to avoid risk and for updating their schemes. 3. Branches can obtain suitable banners and print the banners in an attractive way and display them in the banking hall for the benefit of the customers. 4. Branches can arrange customers meeting to popularize these lend schemes. 5. The banks can think of opportunities marketing agents for housing loans as is being done by financial institutions. At the apex level a lot of publicity can be given on the advantages of bank loans. 6. Opening a special housing branch and posting field officers for housing finance in intensive areas with a view to tap the business potential and to serve the clientele on a Continuous basis may be helpful. 8. Conclusion The home loan market in India has grown at a rapid and alarming rate of over 40% over the period of the last four years. And from the reports from one of the industry experts, it is evident that these are very little chance that these will be any significant decline in growth rates in the future. There fore it becomes important at this point in time to examine the key factors that have been instrumental in triggering this high growth period. These are several reasons that can be considered as having attributed to the growth of the home loan market. On the demand side, the first and the most important factor for the growth has been faster rise in incomes as compared to property prices, thus making housing more affordable. Most of the housing finance companies in India 116

7 have introduced several new home loan products in order to meet the needs of a wide variety of customers. The various home loan schemes have market. The customer can choose those schemes which he feels is good for him and have the capacity to repay it on that specified time period. References Books 1. Agawam, H.N A portrait of Nationalized Banks, Delhi: Inter India Publication. 2.. Versgney, P.N Banking Law and Practices. (34thed) New Delhi: Sultan Chan & Sons. 3.. P.N.VARSHNEY and D.K.MITTAL.2003 Indian Financial system, Chennai 4. M.Y. Khan, 3rd Edition, financial institutions and markets structure, growth and Innovations. Websites loan yahoo.co.in google.co.in 117