Central bank of india

1.1 INTRODUCTION TO THE COMPANY

Established in 1911, Central Bank of India was the first Indian commercial bank which was
wholly owned and managed by Indians. Central Bank of India a government-owned bank, is
one of the oldest and largest commercial banks in India. It is based in Mumbai. The bank has
3,563 branches and 270 extension counters across 27 Indian states and three Union
Territories. Central bank of India is one of 18 Public Sector banks in India to get
recapitalisation finance from the government over the next 24 months. The establishment of
the Bank was the ultimate realisation of the dream of Sir Sorabji Pochkhanawala, founder of
the Bank. Sir Pherozesha Mehta was the first Chairman of a truly 'Swadeshi Bank'. In fact,
such was the extent of pride felt by Sir Sorabji Pochkhanawala that he proclaimed Central
Bank of India as the 'property of the nation and the country's asset'. He also added that
'Central Bank of India lives on people's faith and regards itself as the people's own bank'.

During the past 99 years of history the Bank has weathered many storms and faced many
challenges. The Bank could successfully transform every threat into business opportunity and
excelled over its peers in the Banking industry. Central Bank of India has approached the
Reserve Bank of India (RBI) for permission to open representative offices in five locations -
Singapore, Dubai, Doha, London and Hong Kong. This is the first time the bank is venturing
an independent overseas foray after the Sethia scam in the 1970s forced the bank to close
down its London office. RBI had then asked the other two banks, who had operations in
London, to close down.

As on 31 March 2011, the bank's reserves and surplus stood at 6,868.85 crore. Its total
business at the end of the last fiscal amounted to 2,09,757.33 crore.The bank had a staff
strength of 37,241 as on Nov 2006.

A number of innovative and unique banking activities have been launched by Central Bank of
India and a brief mention of some of its pioneering services are as under:

Introduction to the Home Savings Safe Deposit Schemeto build saving/thrift habits in
1921
all sections of the society.

1924 An Exclusive Ladies Department to cater to the Bank's women clientele.

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1926 Safe Deposit Locker facility and Rupee Travellers' Cheques.

1929 Setting up of the Executor and Trustee Department.

1932 Deposit Insurance Benefit Scheme.

1962 Recurring Deposit Scheme.

Subsequently, even after the nationalisation of the Bank in the year 1969, Central Bank
continued to introduce a number of innovative banking services as under:

1976 The Merchant Banking Cell was established.

1980 Centralcard, the credit card of the Bank was introduced.

1986 'Platinum Jubilee Money Back Deposit Scheme' was launched.

The housing subsidiary Cent Bank Home Finance Ltd. was started with its
1989
headquarters at Bhopal in Madhya Pradesh.

Quick Cheque Collection Service (QCC) & Express Service was set up to enable
1994
speedy collection of outstation cheques.

Further in line with the guidelines from Reserve Bank of India as also the Government of
India, Central Bank has been playing an increasingly active role in promoting the key thrust
areas of agriculture, small scale industries as also medium and large industries. The Bank also
introduced a number of Self Employment Schemes to promote employment among the
educated youth.

Among the Public Sector Banks, Central Bank of India can be truly described as an All India
Bank, due to distribution of its large network in 27 out of 29 States as also in 3 out of 7 Union
Territories in India. Central Bank of India holds a very prominent place among the Public
Sector Banks on account of its network of 3967 branches and 27 extension counters at
various centres throughout the length and breadth of the country.

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Customers' confidence in Central Bank of India's wide ranging services can very well be
judged from the list of major corporate clients such as ICICI, IDBI, UTI, LIC, HDFC as also
almost all major corporate houses in the country.

1.1.1 Directors

Directors of Central Bank of India & their address:

Shri. M.V.Tanksale
Chairman & Managing Director
Smt Vijayalakshmi R. Iyer
Executive Director
Shri Rajiv Kishore Dubey
Executive Director
Shri Alok Tandon
Director
Shri Salim Gangadharan
Regional Director
Shri Brijlal Kshatriya
Director
Shri Romesh Sabharwal
Director
Major (Retd.) Ved Prakash
Director
Shri B S Rambabu
Director

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1.1.2 Branches

These are the branches of Central Bank of India:

 ANDAMAN & NICOBAR

 ANDHRA PRADESH

 ARUNACHAL PRADESH

 ASSAM

 BANKA

 BIHAR

 CHANDIGARH

 CHHATTISGARH

 DADRA&NAGAR HAVELI

 DAMAN & DIU

 DELHI

 GOA

 GREATER BOMBAY

 GUJARAT

 HANUMANGARH

 HARYANA

 HIMACHAL PRADESH

 JAMMU & KASHMIR

 JHARKHAND

 KARNATAKA

 KERALA

 MADHYA PRADESH

 MAHARASHTRA

 MANIPUR

 MEGHALAYA

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 MIZORAM

 MP

 NAGALAND

 NALANDA

 ORISSA

 PONDICHERRY

 PUNJAB

 RAJASTHAN

 SIKKIM

 TAMIL NADU

 TRIPURA

 UTTAR PRADESH

 UTTARAKHAND

 UTTARANCHAL

 WEST BENGAL

1.1.3 Present Plans

Restoring the premium position of Central Bank of India amongst PSU banks is top on the
agenda of its new Chairman and Managing Director, Mr M.V. Tanksale. Following are the
plans of Central Bank of India:

Branch expansion, extensive hiring to infuse young blood into its manpower,
leveraging on technology and expanding its global footprint

Above all, they will be focussing more on relationship banking than mere transaction
banking. They will also be increasing their productivity levels in terms of business per
branch by leveraging new technology.

One of the ills affecting the bank has been its ageing manpower. To reverse this, it
plans to go on extensive hiring. This fiscal, they will be taking on board 5,000
personnel, including 2,000 officers. And next fiscal, the hiring will be more.

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Central Bank plans to introduce new products that will be tailor made for its retail
customers. Only a few days ago they decided to launch a new product, Cent Double,
which will ensure doubling of a certain amount of deposit within a stipulated time.
They are yet to work out the rate (of interest) and the time frame.

The bank will simultaneously expand its global footprint. At
present, it has presence in Zambia. This fiscal it plans to open a representative office
in Nairobi and will subsequently enter Mozambique. Later, they will expand into
West Asia through Dubai and Hong Kong.

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1.2 INTRODUCTION TO THE STUDY

Housing being one of the three basic needs of life always remains in the top priorities of any
person, society and economy. As a human being, an individual needs his own space and
privacy, which can be provided by the ownership of house. The home is the basic unit of the
society. Home provides a platform to the family and the family is the most important social
institution, which leaves its imprint on an individual for whole life. Thus housing deserves
significant attention in the context of developing policies and strategies for human
development. But still the majority of human populace lives in slums, shanties and temporary
shabby shelters in rural areas. This shortage of housing is a big impediment in the healthy
development of an individual and consequently the society, and the nation.

The problem of space, privacy, security and sanitation leads to social, economic and
environmental degeneration. The perpetual strife for space and house-ownership leads to
personal and social disorganization, which is detrimental for society and the economy.

A developing nation like India has to focus more on housing sector to cater to the housing
needs of burgeoning population and to accelerate the economic growth. The housing sector
has been globally used as an engine to propel the economic growth as it is generates
employment and demand in the market. Last one decade has seen the authorities according
significant focus on the housing sector in India. The government of India has been trying to
nurture and strengthen the housing sector in recent times through various fiscal and
legislative measures.

The total housing shortage in the country in 1997 was estimated to be 13.66 million units, of
which 7.57 million units were in urban areas. More than 90 per cent of this shortage was for
the poor and low income category. Against this background, the National Housing and
Habitat Policy (NHHP) was formulated in 1998 and stressed on:

 Removing legal, financial and administrative barriers for facilitating access to loans,
finance and technology;
 Ensuring that housing, along with supporting services, was treated as a priority and at
par with the infrastructure sector;
 The creation of surpluses in housing stock; and
 providing quality and cost-effective shelters especially to the vulnerable groups and
the poor.

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The draft National Urban Housing and Habitat Policy 2007, while focussing on urban
shelters, emphasised on the promotion of larger flow of funds to meet the revenue
requirements of urban housing and infrastructure using innovative tools. It recognized that
based on historical growth patterns, the urban population of India was likely to grow to 360
million in the year 2010 and to 533 million by the year 2025. The document noted the
Planning Commission’s projection of total requirement of urban housing during the 10th Plan
period (2002-2007) of 22.44 million dwelling units including the backlog of 8.89 million
units at the beginning of this Plan. With rising incomes, favorable demographic profiles,
swelling middle class and rapid urbanisation, the demand is projected to rise to 73.96 million
units for rural and urban areas during the 11th Plan period (2007-2012).

1.2.1 Present Scenario of Housing Loans

In India, housing finance is the fastest growing sector in the current times. Banks are cashing
on this phenomenon by offering easy home loans at attractive rates. Home loans products is
offered by almost all banks; right from loans for purchasing real estate to buying a flat, from
home improvement to home extension loans. The EMI and rate of interest is arrived at,
keeping a number of factors like, the loan amount, market value of the land or building,
tenure of loans etc.

Types of Home Loans Available:

Home Purchase Loans
Home Extension Loans
Home Equity Loans
Home Improvement Loans
Land Purchase Loans for construction of flat/home

1.2.2 HOME PURCHASE LOANS

Owning a home is perhaps the biggest and most important dream of an average family
therefore ownership of a home goes beyond pure financial considerations. Home loans
purchase has witnessed an increase owing to competition between a number of public and
private players. The cut in the loan interest rate has also fuelled the demand for this product.

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1.2.3 Kind of Home Purchase Loans Interest Rates:

Fluctuating Home Purchase Loans Interest rates: Keep changing with change in the
prevailing market rate or the prime lending rate.
Fixed Loans Interest Rate: As the name suggests, do not change during the entire loan
period, irrespective of the prevailing market rate. generally fixed loan interest rates
are higher than the fluctuating loan rate.
The current scenario in India is that of declining interest rate, so a fluctuating interest rate
makes more sense. The loan is repayable in the form of equated monthly installments (EMI).
The EMI should not exceed 50 per cent of your monthly household income.

1.2.4 Interest Rate on Home Purchase Loans:

Home Purchase Loans interest rates depend on a number of factors :

The tenure for which the loan is taken
Loan amount
Type of housing loans taken
Type of customer and his repayment capacity
Loan policy of different companies. Interest rates will be different for private sector
and public sector players. Companies lower the interest rates during festive seasons.

1.2.5 Maximum Home Purchase Loans Given Depends On:

Individual loan policy of different companies. The maximum amount of loans given is
however 85% of the value of the property (inclusive of cost of land)
Repayment capacity of the customer
Maximum term of home purchase loans
The term of home purchase loans offered is maximum 25 years. This again depends
on the repayment capacity of the individual

1.2.6 Number of Loans Applicants:

A loan can be taken either on an individual or joint basis. Some companies necessitate that
proposed owners be co-applicants, however, co-applicants need not be co-owners.

1.2.7 Other Home Purchase Loans Costs:

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Besides the interest rate, customers also have to bear the processing and administrative
charges which increase with the cost of the loan. If two housing finance corporations give
you the same amount of loan but at different interest rates, calculate what works out better for
you.

1.2.8 Home Purchase Loans Application Process:

An individual/company/professional can apply for home purchase loans in different home
loans corporations by filling the application form. These days companies provide online
forms for customer convenience. There is certain information that one must furnish in order
to qualify to approval of home loans.

1.2.9 HOME EXTENSION LOANS

Banks provide customers with home extension loans to extend their houses, add more rooms
etc. Such loans fall under the category of home loans.

1.2.10 Maximum Amount of Home Extension Loans:

Banks normally offer 70-85% of the total amount of home extension as loan. The amount of
loan sanctioned also depends on a number of factors such as the age of the applicant at the
time of loan, tenure of the loan, repayment capacity of the borrower etc.

1.2.11 Interest Charged by Bank for Home Extension Loans:

Rates of interest charged will be as per Bank's policy on the date of disbursement of loan.
Interest rates can be either on fixed or floating basis.

1.2.12Process of Home Extension Loans Application:

Customers can fill online application forms or personally visit the bank for approval of loan.
A nominal fee of 1-2% is charged as processing by the banks.

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1.2.13 HOME EQUITY LOANS

Home equity loans helps the customer to mortgage his existing property to the bank for
taking loan for some other purpose. Banks assess the current market value of the property to
give loans to customers. Customers can use the money so acquired for marriage, education,
medical purpose. Residential/Non-residential properties are considered for approval of loan.
They are only given to legal title holders, also the land should be free from any kind of
dispute.

1.2.14 Maximum Amount of Home Equity Loans:

Banks offer around 60-65% of the actual value of the property as loan. The Loan amount can
go up to 10-15 lakhs for commercial and residential properties. Repayment is done through
Equated Monthly Installments or EMI. The repayment period can range from 10-15 years
depending on the bank's policies.

1.2.15 Interest Charged by Banks for Home Equity Loans:

Rate of interest can both be fixed as well as fluctuating, according to the requirement of the
customer. Rate of interest charged is also fixed according to the prevailing market conditions.

1.2.16Home Equity Loans Application Process:

An individual/company/professional can apply for home equity loan in different home loan
corporations/ banks by filling the application form. These days companies provide online
forms for customer convenience. There is certain information that one must furnish in order
to qualify to approval of home loan.

1.2.17 HOME IMPROVEMENT LOANS

Maintaining homes is a costly affair. Banks are coming out with new products to suit the
needs of the customers. Home improvement loans have been introduced by quite a few banks.

1.2.18 Purpose of Home Improvement Loans Include:

Internal and external repairing
Waterproofing and roofing
Complete interior renovation

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1.2.19 Interest on Home Improvement Loans:
Home improvement loans interest rates depend on a number of factors :

The tenure for which the loan is taken
Loan amount
Type of housing improvement loans taken
Type of customer and his repayment capacity
Loan policy of different companies. Interest rates will be different for private sector
and public sector players. Companies lower the interest rates during festive seasons.
Rates of interest charged will be as per Bank's policy on the date of disbursement of loan.

1.2.20 Maximum Amount of Home Improvement Loans:

An old customer is sometimes given 100% cost of improvement. Generally all the new
customers are sanctioned 85% of the cost of improvement. The maximum loan amount can
vary from bank to bank, it also depends on the amount of loan taken and the repayment
capacity of the customer.

The amount of loan is however subject to the market value of property. The maximum term
of home improvement loan varies from bank to bank, depending on the age of the applicant at
the time of loan application. The loan payment is made by equated monthly installments
(EMI).

1.2.21 Number Of Loans Applicants:

A loan can be taken either on an individual or joint basis. Some companies necessitate that
proposed owners be co-applicants, however, co-applicants need not be co-owners. Minimum
age of a person applying for loan should not be less than 21.

1.2.22 Home Improvement Loans Application Process:

An individual/company/professional can apply for home improvement loans in different
home loans corporations/ banks by filling the application form. These days companies
provide online forms for customer convenience. There is certain information that one must
furnish in order to qualify to approval of home loans.

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1.2.23LAND PURCHASE LOANS

In India, various private and public sector banks are coming out with attractive loan plans for
its customers for purchase of land for construction of house/flat. The loan can be taken for
both land purchase as well as construction on the land.

1.2.24 Eligibility for Land Purchase Loans:

Any individual aged 21 years or above having regular income is generally eligible to apply
for land Purchase loan.

1.2.25 Maximum Amount of Loans:

The quantum of loan sanctioned, depends on a number of factors like the cost of house/flat,
person's age while applying for loan, income, repayment capacity etc. Loans of higher
amount may be considered on the basis of merit of the case. The loan can then be repaid
through Equated Monthly Installments or EMI. The loan is payable maximum in years.

1.2.26 Margin for purchase or construction of new house/flat:

Minimum 15% of the project cost for individual

Minimum 10% of the project cost in case wife joins as co-borrower

1.2.27 Margin for purchase of old house/flat/land:

Minimum 30% of Purchasing value. This value may vary from bank to bank.

1.2.28 Interest on Land Purchase Loans:

Interest on both fixed as well fluctuating rates are available. The actual interest rate is
governed by prevailing market conditions at the time of taking loan. Special reductions in
interest rates may sometimes be allowed for women and in other special conditions. A
nominal processing fee of 1% of amount of loan taken is generally charged by banks.

1.2.29 Documentation :

Businessman/ Self employed professional:
Application form with photograph
Educational qualification
Identity and residence proof

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Proof of business existence with business profile and last three years income tax
return
Last 3 years income statement and balance sheet.
Last 3 month's personal and business bank statements.
1.2.30 Salaried customers:

Application form with photograph
Identity and Residence proof
Latest salary slip
Form16
Last 6 months bank's statement

1.2.31 Reasons For Which People Get Their House Financed

1. The fear of Income Tax authorities :- In a country like India where there is a lot of flow
of black money, spending lakhs of rupees together catches the attention of income tax
authorities. Also for this reason people get their house financed.

2. Easy payment in Installments :- It is a human psychology that when one asked to pay Rs.
1000 altogether, it pinches more than paying Rs. 100 every month for ten months. So the
lum sum payment looks too much and hard to pay.

3. Necessity :-Housing loan becomes necessity for those people who have no funds for
Renovation/ Construction/ Extension/ Purchase or Improvement for own and buy a new
house.

4. Dead investment :- Generally people consider investing on houses a dead investment ,
which locks to capital and gives no return, so they prefer paying slowly through
installments.

5.Maintain the Liquidity :- Investing lakhs of rupees altogether, disturbs the liquidity
position of the firm. As its very important to maintain the liquidity of a concern, getting
the houses financed is the only way out to possess a house without disturbing the
liquidity position.

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6. Better Investment facilities :- Funds are always limited. Thus it is very important to
invest them in the most beneficial way. As said earlier that investment in houses is
considered as a dead investment, which doesn't give any return, thus by getting their
houses financed an individual or a firm try to keep the money with them to invest in
better alternatives.
1.2.32 Computing Eligibility for The Home Loan

A number of factors are taken into account when assessing customer repayment capacity.
Customer income, age, number of dependants, qualifications, assets and liabilities, stability/
continuity of your employment/ business are some of them. Besides the proposed owners in
respect of which he is seeking financial assistance will have to be co-applicants. However, all
co-applicants need not be co-owners. Income of the spouse can also be clubbed if he/she has
been made the co-applicant.
However, there are ways by which a customer can enhance their eligibility.
For instance, if customer spouse is earning, put him/her as a co-applicant. The additional
income shall be included to enhance his/her loan amount. Incidentally, if there are any co-
owners they must necessarily be co-applicants.
Customer fiancée's income can also be considered for sanctioning the loan on his/her
combined income? The disbursement of the loan, however, will be done only after customer
submit proof of your marriage.
The housing finance company can consider all the income accruing to the applicant on a
monthly basis, i.e. all the recurrent credits (basic salary, HRA, other allowances but not the
LTA and medical), any rental income that he is getting and the savings in rent payment
which might accrue to him an account of his moving from a rented dwelling to self-occupied
property. In short, the calculation will be as per the applicants net cash inflows, less expenses
and commission for the salaried class, and as per his profit-and-loss account for the self-
employed or a private company ( net profit + 2/3rd depreciation + directors' remuneration).
Providing additional security like bonds, fixed deposits and LIC policies may also help to
enhance eligibility.

1.2.33 When to apply
The movement customer decides to buy a home, borrower can put in their application,
borrower can apply for a loan even before they have selected the property. Yes, customer can
apply for a loan even before he/she have selected the property. The property need not even be

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in the same city where customers are residing. Should there be a change in customer’s
financial status or plans, he/she can withdraw their sanction within 6 months of approval.
However, Housing Finance Company's are always ready to assist their customers in the event
of legitimate problems. And, Housing Finance Company's might reconsider this if they find
that there are satisfactory reasons for the delay.
If it is refinancing customer are interested in, it is possible within 6 months from the date of
purchase of property.

1.2.34Sanctioning
On the basis of certain documents submitted by borrower , Housing Finance company's will
determine borrower eligibility. How ever, there are ways by which borrower can enhance
their eligibility.
For instance, if customer spouse is earning, put him/her as a co-applicant. The additional
income shall be included to enhance his/her loan amount. Incidentally, if there are any co-
owners they must necessarily be co-applicants.
The disbursement of the loan, however, will be done only after customer submit proof of
their marriage. Providing additional security like bonds, fixed deposits and LIC policies may
also help to enhance eligibility.
While there is no need for a guarantor, it could be that having one might enhance customer
credibility with Housing Finance Company's. If so, their loan officer would provide you with
the necessary details.
Below is a list of documents required from you for sanctioning. You may be asked to submit
further legal documents if required by Housing Finance Company's or its approved lawyers.
Do retain photocopies of all documents being submitted by customer .

1.2.35List of documents for sanctioning
1. Passport size photograph
2. Age verification: PAN card, Voters ID, Passport, License
3. Bank statement for the last six months.
4. Income Documents e.g. Latest Form 16, Certified IT returns for latest 3 years
5. Processing Fee cheque & Loan Enclosure letter.
In case of further queries , additional documents may be required.

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1.2.36 Loan Disbursement
For outright purchase of house/flat, the loan amount will be paid in lump sum to the vendor at
the time of registration after satisfying that the borrower has paid/provided for the balance
amount. For houses/flats under construction, the loan amount will be disbursed in stages
based on the progress of construction. Disbursement will be made after the property has been
technically appraised and all legal documentation has been completed. The borrower has to
invest his proportionate share of the cost, prior to disbursement of loan. Home loan will be
disbursed after customer identify and select the property or home that he/she are purchasing
and on his/her submission of the requisite legal documents.
While borrower may be under the impression that the list of documents asked for is rather
extensive, please note that it is for his/her own good. Each and every single document asked
for will be verified and checked to ensure his/her safety. This may take some time but HFC’s
want to ensure a clear title and will complete all the legal and technical verifications to ensure
that customer have full rights to his/her home.

1.2.37 List of documents for disbursement
a) Standard documents required :
Loan Agreements, Disbursement Requests, Post-dated cheques
Personal guarantor’s documents, as the case may be
b) Some documents, which are specific to each state are required during disbursements. For
further information, please contact the nearest office.

1.2.38What is an EMI
An EMI refers to an equated monthly installment, it is a fixed amount which borrower pay
every month to words their loan. It comprises of both, principal repayment and interest
payment.
This is one acronym that is now synonymous with the loan business. "What is EMI?" and
"How is it calculated?" are two of the most common questions put forth by loan applicants.

The EMI is an abbreviated form of the equated monthly installment and is simply referred to
as monthly installment in common parlance. And, being a self-explanatory term, that is
exactly what it is. The amount borrower will have to pay his/her financier every month when
repaying their loan.

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Being a monthly payment, at the end of the year, borrower would have paid 12 EMIs. This is
sometimes referred to as the equated annual installment (EAI) - the amount borrower would
pay every year.
However, it is important to note that though the EMI is a constant amount throughout the
repayment tenure, in actuality it is an unequal combination of principal repayment and
interest payment.
This unequal distribution is due to the EMI tilting heavily towards interest payments in the
initial years of repayment. While principal repayments take predominance as the end of the
repayment tenure nears.
For instance, in the above example, the EMI will stay constant for all the 60 months at Rs
2,226. However, in the first year of repayment, only Rs 16,218 of the principal is repaid and
in the final (fifth) year, Rs 24,179 of the same.

Finally, if borrower are dependent on income from this home (such as rental payments) to
help service his/her loan, then borrower would be in a better position to pay the pre-EMI rate
of interest and start paying his/her EMI only when their home is ready for occupation.

1.2.39Getting the papers in order

Buying a home entails a tremendous amount of paperwork. And, hence, there is a lot to
consider where documentation is concerned.

Is the Title clear? Are the non-encumbrances certificates in place? Are the permissions under
Urban Land Ceiling and Regulation Act, 1976 for developing of land/plot verified? If being
purchased in a resale, the Title and Letter attesting to the ownership of property is very
important.
Generally, if the project under construction has been approved by a leading housing finance
company (HFC), it would have examined the legal and technical documents. So the next time
you fret about how long your HFC is taking to disburse the loan, remember that all this
verification is for your ultimate benefit.
While it is comforting to know that the verification is being done, it does not shift your
responsibility and risk to the financial institution. You had better do your own verification.
In practicality, you may not understand the legal jargon used in such documents. Hence, it
would be wise to get a lawyer to take a look at it. This may set you back by around Rs 1,500
but it is money well spent.

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Then comes the registration. Registration refers to the recording of the contents of a
document with a Registering Officer appointed by the state government. Do ensure that you
are aware of what you have to pay and by when.

Stamp duty is a tax levied by state governments on certain instruments. Being levied by the
state government, this one will obviously vary between states and will depend on the
purchase price shown in the Agreement of Sale. Stamp duty is paid at the time of registration.

The payment of proper stamp duty on instruments bestows legality on them. That means, they
can be admitted as evidence in the court of law. An instrument not properly stamped doesn't
have this privilege.

1.2.40 Stamp Duty & Registration
Stamp duty is basically a tax levied by state governments on certain instruments (not on
transactions). And, the term "instrument" encompasses agreements, exchange deeds, gift
deeds, power of attorneys, indemnity bonds and conveyances.

How does it differ from registration ?
While stamp duty is payable at the time of registration, the two are quite different. Stamp
duty is revenue earned by the government on execution of instruments but registration
charges are collected for keeping the records of the documents. All documents creating rights
in immovable property require compulsory registration. Registration refers to the recording of
the contents of a document with a Registering Officer appointed by the state government. He
preserves copies of the original document. The sole purpose being to conserve evidence and
assurance of title and prevent fraud. Hence, it safeguards your interest as a buyer. Also, the
Stamp Act varies between states but the contents of the Indian Registration Act, 1908 are
common across the country. Though, registration fees may differ across states.

How much does it amount to ?
Stamp duty is always a percentage of the market value of the property. Moreover, this
percentage varies between states. For instance, in Bangalore it varies as per the slab of
property value while it is 10% in Rajasthan and 5% in Calcutta. In Maharashtra, the rates
depend on the slab of property value. Take the case of residential flats purchased in a co-
operative housing society or an apartment owners association.

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If the cost of the transaction is between Rs 1 - 2.5 lakh, the stamp duty is 0.5% of the
sale value
If the cost of the transaction is between Rs 2.51 - 5 lakh, the stamp duty is Rs 1,250 +
3% (above Rs 2.5 lakh)
If the cost of the transaction is between Rs 5.01 - 10 lakh, the stamp duty is Rs 8,750
+ 6% (above Rs 5 lakh) &
If the cost of the transaction is above Rs 10 lakh, the stamp duty is Rs 38,750 +
8%(above Rs 10 lakh)

1.2.41Supporting Documents to be attached:
a) Common for all applicants:
1. Allotment letter of the co-operative society / association of apartment owners.
2. Copy of approved drawings of proposed construction / purchase.
3. Agreement for sale/sale deed/detailed cost estimate from architect/engineer for the
property to be purchased / constructed.
4. If you have been in your present employment / business or profession for less than a year,
mention details of occupation for previous 5 years, giving position held, reasons for
change and period of the same.
5. Applicable Processing Fees.

b) Additionally,
If You Are Employed:
1. Latest salary slip/salary certificate showing all deductions.
2. If your job is transferable, permanent address where correspondence relating to the
application can be mailed.
3. A letter from your employer agreeing to deduct the monthly installments towards
repayment of the loan from your salary. This will expedite the processing of your loan
application.

If You Are Self-Employed:
1. Balance Sheets and Profit & Loss Accounts of the business/profession along with copies
of Individual Income Tax Returns for the last three years certified by a Chartered
Accountant.

21

2. A note giving information on the nature of your business/profession, form of organization,
clients, suppliers, etc.

1.2.42 MAJOR PLAYERS IN HOUSING FINANCE

In Public Sector
- HUDCO (Housing and Urban Development Corporation)

- L.I.C Housing Finance Ltd.
- G.I.C Housing Finance Ltd.

Nationalized Banks
There are 14 nationalized banks in India, but some major are:

- State Bank of India
- Central Bank of India
- Vijaya Bank
- P.N.B
- Dena bank
- Union Bank of India
- Allahabad Bank
- P & S Bank
Co-operative Banks
Private Ltd. Banks

- HDFC Bank
- ICICI Bank

22

REVIEW OF LITERATURE

Thomas O. Stanley, John K. Ford (1986) reviewed with an objective method of pricing,
where the cost of each component of a product is determined separately, is relevant to the
pricing of loans in banking. Relevant factors in this case are a “real rate” of interest, an
inflation premium, administrative expenses, a maturity factor and an allowance for credit
risk. All these can be accounted for in the pricing of retail loans. This systematic approach
enhances the loan pricing procedure and offers an objective way for an institution to establish
and monitor the risk level of its portfolio of earning assets. From data it is clear that banking
has priced its retail loans well and this brings the evolution of new pricing techniques into
question.

Rodney Shakespeare (2005) reviewed the present options for an economy all have serious
weaknesses and, in any case, the way forward for Islam must be completely distinctive.
Fortunately, Islamic opposition to riba enables a distinctive new way which addresses the real
economy, furthers justice and ends foreign financial colonialism. The new way uses Islamic
endogenous loans. These are state-issued, repayable, interest-free loans which are generally
administered by the banking system on market and private property principles. The loans are
counter-inflationary and are always directed at productive capacity.

Taisier A. Zoubi, Osamah Al-Khazali (2007) examined the factors which affect loss
provision for loans and investment in Murabaha, Musharka, and Mudarabah for banks in the
Gulf Cooperation Council (GCC) region. The effect of prior period earnings, legal and
statutory reserves, size of the bank, level of debt, and loan and investment to deposit ratio on
the loss provisions of banks are examined for the period 2000-2003.
Design/methodology/approach – To test the factors that explain the loan loss provision and to
test the income smoothing hypothesis, debt to equity hypothesis, and reserve hypothesis, a
single stage regression model was developed and tested. Findings – The results indicate that
when return on assets (ROA) before tax and loss provisions for the current year is higher than
the prior year ROA and the actual capital reserve is below the legal required reserve, then
management is expected to increase loss provisions for the current year. This result is robust
for all the years of this study. Originality/value – While prior research has examined the
issue of the loan loss provision in USA, Japan, and Europe, no research has examined the
issue of the loss provisions in the GCC region. This study demonstrates that the income
smoothing hypothesis is relevant across different regulatory requirements, economic

24

conditions, and different accounting standards. Managers of banks in the GCC region use the
loss provision, among other things, to smooth earnings to achieve certain objectives.

Sheena Thakur (2008) analyzed that Finance Minister has acted Santa Clause and
announced debt waiver and relief for small and marginal farmers. The move will cost the
government a total of Rs 60,000 crore – the waiver costing Rs 50,000 cr and a 25 per cent
discount on the one time waiver to cost Rs 10,000 crore. Agricultural loans given by
scheduled commericial banks, regional rural banks and cooperative credit institutions up to
March 31, 2007 and over-due as of December 31 that year will be covered under the waiver
scheme to address the problem of indebtedness of farmers. Agriculture loans restructured and
rescheduled by banks from 2004-06 and other loans normally rescheduled under RBI
guidelines will also be eligible under the waiver scheme. The loan waiver scheme will benefit
three crore small and medium farmers and cover loans worth Rs 50,000 crore in total – that is
4 per cent of the total loans of commercial banks. One crore other farmers will benefit to the
tune of Rs 10,000 crore in the waiver. According to industry sources, the banks have reasons
to be happy as there was an implicit hint that they would get reimbursed accordingly. In that
scenario, the move will help the banks to get rid of bad debt. The farmers can also take fresh
loans post the settlement of the older ones which will give a fillip to agri credit space that has
already touched Rs 2,40,000 cr in 07-08.

Vaibhav Aggarwal (2008) reviewed that in a remarkable move benefiting the co-operative
banks, the RBI said that it will soon allow co-operative banks to raise capital through
innovative instruments. This was suggested by the RBI deputy governor Usha Thorat, who
said that the guidelines would issue soon. This new development came when she was
speaking on the sidelines of a MoU-signing function between the Indian Institute of Banking
& Finance (IIBF) and National Co-operative Union of India/National Council for Co-
operative Training on 29th of May, 2008.

Presently, only commercial banks can come up with a premium issue that helps boost
capital, however, co-operative banks cannot. Therefore, there is a need for innovative
instruments. In the present scenario, the co-operatives improve their capital through the issue
of shares to customers and by ploughing back their earnings. Clarifying on the farm debt-
waiver scheme, stated that no benefit under the debt-waiver scheme will be allowed for farm
loans that have fallen overdue after December 2007. “Loans overdue after December 2007
will not be covered by the scheme and it is very clearly spelt out in the scheme. Those, who

25

have their payment overdues for up to February 29, 2008, will have to meet their payments
obligation. Stated otherwise, those, who have already repaid their dues by the date, stand to
lose

Zubair Hasan (2008) discussed the issue of credit creation and control in the area of Islamic
banking. Design/methodology/approach – In view of a rapid expansion of Islamic banking in
recent decades, the answer to questions whether Islamic banks can create credit like
mainstream banks and, if yes, what methods central banks could use to control it in their case
is of paramount importance. An overview of the literature on the subject is provided and
credit creation process is explained as background material for the discussion. Findings – The
literature on the subject is scanty, controversial and inconclusive. One reason seems to be the
mismatch between structural design of Islamic banks and the objectives they are supposed to
meet. It is concluded that Islamic banks can create credit in the usual manner but central
banks will have to design new tools for credit control applicable to Islamic banks. Research
limitations/implications – It is not a rigorous analytical exercise as the main purpose of the
paper is to reopen an important issue for discussion. It is an opinioned work and presents
rather tentative answers to the questions raised. Practical implications – The findings of the
paper may have serious implications for the current structure of Islamic banks and the legal
framework for regulating their credit creation activities. Originality/value – The paper draws
attention to a rather neglected issue in Islamic banking and offers guidelines to resolve it.

26

3.1 NEED OF THE STUDY

The review of literature revealed the fact that majority of researchers have conducted a full
fledge study on the types of Home Loan in the organization. Few studies have been
conducted on the effect of Home Loan on the customers of the organization and satisfaction
level. This study is being conducted in order to throw more light on the types of Home Loan
product.

3.2 SCOPE OF THE STUDY

This study has covered the 100 respondents of Amritsar City.

3.3 OBJECTIVES OF THE STUDY
 To know the factors which influence a customer to select a particular institution for
home loan.
 To know the satisfaction level of customer regarding home loan policy of bank.
 To know the problems faced by respondents while getting housing finance.

28

4.1 Research Methodology
Research Methodology is a way to systematically solve the research problem. The Research
Methodology includes the various methods and techniques for conducting a Research.
“Marketing Research is the systematic design, collection, analysis and reporting of data and
finding relevant solution to a specific marketing situation or problem.

The purpose of Research is to discover answers to the Questions through the application of
scientific procedures. My project has a specified framework for collecting data in an effective
manner. Such framework is called “Research Design”.

4.2 Research Design

4.2.1 Sampling Plan – Sampling can be defined as the section of some part of an aggregate
or totality on the basis of which judgment or an inference about aggregate or totality is made.
The sampling plan helps in decision making in the following areas: -

4.2.2 Sample size – Sample size refers to the total numbers of items about which the
information is desired. The sample size of the study is 100.

4.3 Data Collection And Analysis

4.3.1 Data Collection - Research work is exploratory in nature. Convenient sampling has
been used. Information has been collected from both Primary and Secondary Data.

Primary sources – Primary data are those, which are collected are fresh and for the
first time, and thus happen to be original in character. Primary Data has been
collected by conducting surveys through Questionnaire, which include both open
ended and close-ended Questions.
Secondary sources – Secondary Data are those which have already been collected by
someone else and which already had been passed through the statistical process.
Secondary data has been collected through Magazines, Web sites, Newspaper and
Journals.

4.3.2 Tools Of Presentation And Analysis

Analysis of Data: After collecting the data has been analyzed through various statistical
tools and techniques. The analysis of data requires a number of closely related operations
such as establishment of categories, the application of these categories to raw data through

30

coding, tabulation and then drawing statistical inferences. The unwieldy data should
necessarily be condensed into few manageable groups and tables for further analysis. Thus it
helps to classify the raw data into some purposeful and usable categories.

4.4 Limitations Of The Study

Following are the limitations of this study:

1. This study has been restricted to Amritsar City only.

2. The information provided by the respondents may be biased and incorrect.

3. The sample may not represent the whole population.

4. Paucity of time and resources could lead to the inability of conducting a large survey.

5. Approaching customers who had taken loan from sample institutions may not easy.

31

DATA ANAYSIS AND INTERPRETATION

1.Do you have a home loan?

Table No. 5.1 Response regarding home loan facility

Response %Age

Yes 100

No 0

Figure No. 5.1 Response regarding home loan facility

0%

100%

Yes No

Interpretation: The study is limited to those 100 respondents who have availed home loan
facility from Central Bank of India.

33

2. What is your purpose for the home loan?

Table No.5.2 Purpose for the home loan

Reason %Age

Construction 38

Purchase 52

Extension 8

Renovation 2

Figure no.5.2 Purpose for the home loan

8% 2%

38%

52%

Construction Purchase Extension Renovation

Interpretation: The above figure depicts that out of the total sample of 100 respondents, it is
found that most of the applicants applied for the purpose of purchase that is 52% as against
the other purposes of home loans i.e. construction, extension and renovation which amounted
to 38%, 8%, and 2% respectively.

34

3. Why did you select that particular institution?
Table No. 5.3 Particular institution by the respondents

Reason %Age

Easy Accessibility 39

Prompt Services 14

Existing Customers 19

Others 28

Figure No5.3 Particular institution by the respondents

28%
39%

19%
14%

Easy Accessibility Prompt Services
Existing Customers Others

Interpretation: The above figure depicts that out of the total sample of 100 respondents, it is
found that 39% of the respondents come to a particular institution due to easy accessibility
while 28% of the respondents are recommended by some one to avail loan from a particular
institution, and only 14% respondents opt because of prompt services while 19% are the
existing customers.

35

4.What problems did you face while getting the home loans?

Table No. 5.4 Problems Faced while getting the home loans

Response %Age

Lengthy Procedure 20

Terms & Conditions 21

Attitude of the staff 04

Timely Credit 24

Others 31

Figure No. 5.4 Face while getting the home loans

20%
31%

21%
24% 4%

Lengthy Procedure Terms & Conditions
Attitude of the staff Timely Credit
Others

Interpretation: The above figure depicts that out of the total sample of 100 respondents,
it is found that 31% of the respondents faced the problem of more documentation
formalities while availing the home loans. 24% of the respondents faced the problem of
time involved in the disbursement process followed by other problems like terms &
conditions, lengthy procedure and attitude of the staff.

36

5.Are you satisfied with the services provided by Central Bank of India?

Table No.5.5 Satisfaction With the services

Response %age
Yes 80
No 20

Figure No.5.5 Satisfaction With the services

20%

80%

Yes No

Interpretation: The above figure depicts that majority of the customers are satisfied with the
services provided by central bank and only 20% of the customers that are not satisfied with
those services.

37

6.If no what do you think could be the solution to improve the shortcomings?

Table No. 5.6 Improvement for the shortcomings
Response %age
Better service quality 30%
Cordial staff behaviour 30%
Reduction in complexity in processes 40%
Others 0%

Figure NO. 5.6 Improvement For the Shortcomings

0%
30%
40%

30%
Better service quality
Cordial staff behaviour
Reduction in complexity in processes
Others

Interpretation: The above figure depicts that 40% of the customers are saying that there
should be reduction in complexity in processes while 30% of the customers saying that
cordial staff behaviour should be there and there should be better service quality.

38

7 How do you rate Central Bank of India regarding home loan a whole ?

Table no. 5.7 Rating of central bank

Response %Age

Excellent 16

Very Good 47

Average 32

Poor 5

Figure no.5.7 Rating of central bank

5% 16%

32%

47%

Excellent Very Good Average Poor

Interpretation :

From the above graph it is clear that out of 100 respondents, 16% respondents have rated the
home loan facility of Central Bank of India as Excellent followed by 47% rated it as Very
Good, 32% rated it as Average and rest of them rated it as “Poor”.

39

Findings of the Study
1. The study is limited to those 100 respondents who have availed home loan facility from
Central Bank of India.

2. The applicants applied for the purpose of purchase that is 52% as against the other
purposes of home loans i.e. construction, extension and renovation which amounted to 38%,
8%, and 2% respectively.

3. 39% of the respondents come to a particular institution due to easy accessibility while 28%
of the respondents are recommended by some one to avail loan from a particular institution,
and only 14% respondents opt because of prompt services while 19% are the existing
customers.
4. 31% of the respondents faced the problem of more documentation formalities while
availing the home loans. 24% of the respondents faced the problem of time involved in the
disbursement process followed by other problems like terms & conditions, lengthy procedure
and attitude of the staff.
5. It is also found that majority of the customers are satisfied with the services provided by
central bank and only 20% of the customers that are not satisfied with those services.

6. 40% of the customers are saying that there should be reduction in complexity in processes
while 30% of the customers saying that cordial staff behaviour should be there and there
should be better service quality.

7 16% respondents have rated the home loan facility of Central Bank of India as Excellent
followed by 47% rated it as Very Good, 32% rated it as Average and rest of them rated it as
“Poor”.

41

7.1 CONCLUSION

At last, after the five decades of independence, the vital housing finance industry is coming
into its own. On the one side, the govt. has recognized the role that housing can play in the
revival of the national economy and has accordingly, started taking steps to give a boost to
housing finance sector, and, on the other, the industry, dominated-nay virtually monopolized
by one company all these years, is now attracting new players from private bank, insurance
and finance sector. More over the prolonged depression in the real estate market during the
last three years or so, has brought down property prices from unthinkable heights to
somewhat reasonable levels prompting millions of middle class people to go for their own
houses, giving a boost to housing finance sector in the process.

Future prospects of housing finance institutions are very much bright in the Indian market.
The housing finance market – with a turnover of more than Rs. 50,000 crore a year is
expanding and has tremendous future prospects Because of the following reasons: -

Growth in demand is driven by improved offer debility
- Falling property prices
- Lowest interest rates since inception
- Rising income level increasing
- Fiscal incentives on both interest & principal repayments
- Increasing urbanization
It is a very good opportunity for genuine house seekers to go for a housing loan and give a
secure feeling to their families. Housing is one toll that can ease the unemployment problem
in the country. It employs both skilled and unskilled labour and catalyses activity in at least
200 related sectors. As a result it and is trying to make housing affordable to common man by
giving all kinds of incentives and sops. Tax relief is a part of this.

Notwithstanding the various constraints the future outlook for the housing finance sector is
highly promising.

43

7.2 RECOMMENDATIONS

1. Most of the customers said that the formalities involved in getting the loan sanctioned
made the procedure lengthy and cumbersome and they face difficulty in getting timely credit.
So there is a need to cut short the lengthy and cumbersome procedure into simplified
procedure with minimum formalities. They further suggest that the authority to sanction the
loan must be given to the local branch mangers in order to minimize the levels through which
the loan application is required to be passed.

2. Another suggestion from the customers is that as the customer enters into the bank to take
a housing loan he should be guided properly as to how to apply for the loan. What are terms
and conditions required to be fulfilled so that his loan application and they can get credit on
time.

3. Specialized staff should be recruited to guide the customer as the customers are not fully
aware of the housing loan schemes available with the banks. When he wishes to take a
housing loan, he should be properly guided as to what schemes are available, what are the
terms and conditions of each schemes, which schemes would match the requirements of the
customer.

4. Some customers suggested that eligibility criteria should be widened so that more and
more customers can avail of the facility of housing finance and fulfill their dream of having a
house of their own.

5. More marketing efforts should be undertaken to make the housing schemes popular among
the people. Stress on advertising should be made to reach the masses. Moreover institution
staff should go to the different rural areas and provide information to rural people through
seminars on housing loan facility provided by them.

6. Awareness level should be increased through Exhibitions, Newspaper, Hoarding’s.

7. There should be some relaxation in the matter of guarantee.

8. Customer waiting time can be minimized.

9. Door step service can be provided to the customer.

10. Disbursements and applications processing time should be minimized.

44

REFERENCES

Vaibhav Aggarwal (2008), “Co-operative Banks to benefit: RBI” published Rupee
Times Online Edition.
Sheena Thakur (2008), “Debt waiver, relief schemes for marginal farmers” published
by The Economic Times.
Taisier A. Zoubi, Osamah Al-Khazali (2007), “Empirical testing of the loss provisions
of banks in the GCC region”, Journal: Managerial Finance, Volume: 33, Issue: 7, Pg:
500 – 511, published by Barmarick Publications
Rodney Shakespeare (2005), “Islamic Endogenous Loans”, Journal: Humanomics,
Volume: 21, Issue: 3, published by Emerald Group Publishing Limited
Thomas O. Stanley, John K. Ford (1986), “The Role of Risk in Pricing Retail Loans”,
International Journal of Bank Marketing, Volume: 4, Issue: 5, Page: 58 – 65 published
by MCB UP Ltd
Zubair Hasan (2008), “Credit creation and control: an unresolved issue in banking”,
International Journal of Islamic and Middle Eastern Finance and Management,
Volume: 1, Issue: 1, Page: 69 – 81, Emerald Group Publishing Limited

46

QUESTIONNAIRE
SECTION A : PERSONAL PROFILE

 Name: ________________________________________________
 Age: _____________
 Occupation:
(a) Govt. Employee  (b) Private Sector Employee 

(c) Self Employee/Professional 

 Monthly Income:
(a) Below Rs.10000  (b) Rs.10001-Rs.15000 

(c) Rs.15001-Rs.20000  (d) Rs.20001-Rs.25000 

(e) Rs.25001-Rs.30000  (f) Above Rs.30000 

 Gender:
(a) Male  (b) Female 

SECTION B

1. Do you have a home loan ?
(a) Yes 

(b) No 

2. What is your purpose for the home loan?
(a) Construction  (b) Purchase 

(c) Extension  (d) Renovation 

48

3. Why did you select that particular institution?
(a) Easy Accessibility 

(b) Prompt Services 

(c) Existing Customer 

(d) Others 

4. What problems did you face while getting the housing finance?
(a) Lengthy procedure 

(b) Terms & Conditions 

(c) Attitude of the staff 

(d) Timely credit 

(e) Others 

5. Have you compared the rate of interest Central Bank of India with others ?
(a) Yes 

(b) No 

6. Are you satisfied with the services provided by CBI?

(a) Yes 

(b) No 

7.If no what do you think could be the solution to improve the shortcomings?

(a) Better Service Quality 

(b) Cordial Staff Behaviour 

(c) Reduction in Complexity in processes 

(d) Others 

49

8.How do you rate Central Bank of India regarding Home Loan as a whole?

(a) Excellent 

(b)Very Good 

(c)Average 

(d)Poor 

50

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