JAIIB RBWM Paper-4 Module-B Unit 5: Important Retail Asset products

To renovate/extend/repair existing house/flat.

To purchase a plot of land for construction of house.

To acquire household articles along with the house/flat – for furnishing the house/flat.

Repairs/renovation/extension to house/flat – amount varies from bank to bank

Purchase of a plot – amount varies from bank to bank

Purchase/acquire household articles for furnishing the house/flat – amount varies from bank to bank

Margin is subject to RBI stipulated LTV (Loan to Value) of Max. 90% for loans upto Rs. 30.00 Lakh, Max. 80% for loans above Rs. 30.00 Lakh & upto Rs. 75 Lakh, and Max. 75% for loans above Rs. 75 Lakh. Banks should not include stamp duty, registration and other documentation charges in the cost of the housing property they finance so that the effectiveness of LTV norms is not diluted. However, in cases where the cost of the house/dwelling units does not exceed Rs. 10 lakh, bank may add stamp duty, registration and other documentation charges to the cost of the house/dwelling unit for the purpose of calculating LTV ratio.

(if mortgage could not be created at the time of disbursement, banks may get the loan secured by creating charge on alternative assets/obtaining third party guarantee).

Closely linked to the stages of construction of the housing project/houses; and Upfront disbursal should not be made in cases of incomplete/under construction/green field housing projects.

·       No Pre-Payment Charges on Floating Rate Loan

·       Repayment allowed up to age of 70 years in select cases

·       Facility for step up/step down EMIs available

·       Inclusion of Income of Close relatives for enhanced loan

·       Tax Benefit on Interest and Instalments repaid in Home Loans

·       To have differentiation in housing loan products, many banks add some features the generic products. For example, the provisional sanction of Home Loan limits to the customers before finalization of the property which enables them to negotiate with the Builder/Seller confidently. Cash credit facilities are also provided by some banks to make the product more attractive.

•             Individuals should have regular income from Agriculture/Profession/Trade, Business/Salary in case of employment.

•             In case of employed persons, minimum three years of confirmed service is necessary.

•             In case of Self Employed Professionals, Business Persons, minimum three years standing in their respective field is necessary.

immovable property also accepted by banks.

•             Individuals should have regular income from Agriculture/Profession/Trade,

Business/Salary in case of employment.

•              In case of Self Employed Professionals, Business Persons, minimum three years standing in their respective field is  necessary.

·       In case of employed people, take home pay not less than 50% of gross salary.

·       In cased of used car, the age of the car should not be more than 5 years.

·       25/30% for used cars

·       10% for two wheelers.

·       Margins also may vary with the banks.

·       Repayment of the loan commences from the immediate following month.

·       Some Private Sector banks collect pre payment while some don’t.

·       4 Wheelers- Max. 7 years, generally

·       2 Wheelers- Max. 5 to 6 years, generally

·       For Corporate/ Firms, etc- Max. 5 years, generally

·       For Second Hand vehicles- Max. 3 years, generally or a period depend on the age of the vehicle.

For education of self/ children

For Repairs, renovation, extension

Any other personal expense

Secured Loans– Amount varies from bank to bank and depend on the schemes developed by each bank and the target group.

Hypothecation charge on assets acquired.

Credit to account of borrower in respect of clean loan

Secured loans– 60 EMIs

·       Indian Banks’ Association has brought out a Model Educational Loan Scheme prescribing the modalities to be followed by banks regarding disbursement of educational loans. The objective of IBA is to make the banks to adopt a uniform approach as per the prescribed guidelines.

·       Amount of loan, purposes, approval requirements of colleges, security prescriptions.

·       Loan to be given jointly to the student and their parent.

·       For studies in India and abroad.

·       Foreign Studies – Upto Rs.20 Lacs

·       In case the amount required is more, the same can be considered by banks on a case to case basis.

•                      Above Rs.4 Lacs and upto Rs.7.50 Lacs – Additional Personal Guarantee worth the amount.

•                      Above Rs.7.50 Lacs – To be secured by tangible asset to cover the loan in the form of property, Govt. Securities like NSC.KVP

•                      etc.,

·       Payment to be made direct to the institution.

·       But generally pre payment will not happen in Educational Loans as the repayment is fixed only after completion of the studies and revenue streams for pre payment will be very rare.

·       But parents have the option to service the interest whenever due and if interest is serviced, Tax Exemption for interest serviced is available.

·       Some banks offer Interest Rebate of 1% for prompt repayment of the loan.

(Brand Level Processing)

(Retail Loan Processing Hubs/Centres)

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No standardised approach

Retail Loans are only one part of the multiple activities.

Difference in quality of appraisal based on the branch and its personnel. Processing time may differ based on the priorities of the branches and importance of the customers/proposals.

Compliance of appraisal norms may be biased based on the customer profile.

Documentation standards may not be uniform.

·       Standardised approach.

·       Exclusive activity and hence will be more faster and professional in approach.

·       Quality will be uniform as the activity is exclusive.

·       Processing time will be uniform and based on fixed Turn Around Time (TAT) for different retail loans

·       Uniform and impersonal appraisal standards.

·       Professional documentation standards.