Retail Asset products: CAIIB Retail banking (Module B),Unit 4
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We all know that CAIIB exams are conducted by the Indian Institute of Banking and Finance (IIBF). CAIIB is said to be one of the difficult courses to be cleared for the bankers. But we assure you that with the help of our “CAIIB study material”, you will definitely clear the CAIIB exam.
CAIIB exams are conducted twice in a year. Candidates should have completed JAIIB before appearing for CAIIB Exam. Here, we will provide detailed notes of every unit of the CAIIB Exam on the latest pattern of IIBF.
So, here we are providing “Unit 4: Retail Asset products” of “Module B: Retail Products” from “Optional Paper: Retail Banking”.
The Article is CAIIB Unit 4: Retail Asset products
♦Types of Loans
- Home loan
- Vehicles loan
- Personal loan
- Education loan
♦HOME LOANS
Home Loans Scheme
No. | Particulars | Features |
1. | Eligibility and Other Conditions |
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2. | Purpose |
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3. | Amount |
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4. | Margin |
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5. | Security |
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6. | Disbursement |
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7. | Moratorium |
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8. | Prepayment Issues |
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9. | Repayments/ Collection |
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10. | Price and Interest Rate |
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♦Housing Loan Under Pradhan Mantri Awas Yojana (PMAY)
What is PMAY?
- The Pradhan Mantri Awas Yojana (PMAY) is an initiative of the Government of India which aims at providing affordable housing to the urban poor by the year 2022. The scheme was first launched on 1 June 2015. The interest rate for the PMAY scheme starts at 6.50% p. and can be availed for a tenure of up to 20 years. The deadline for availing the PMAY CLSS scheme for the MIG-I and MIG-II categories has been extended to 31 March 2021. The same has been extended to 31 March 2022 for the LIG and EWS categories.
Features and Benefits of PMAY Scheme
- Under PMAY Scheme, subsidy interest rate is provided at 6.50% p.a. on housing loan for the term of 20 years to all the beneficiaries.
- Differently abled and senior citizens will be given preference in allocation of ground floors.
- Sustainable and eco-friendly technologies would be used for construction.
- The scheme covers entire urban areas in the country which includes 4041 statutory towns with the first priority given to 500 Class I cities. This will be done in 3 phases.
- The credit linked subsidy aspect of the PM Awas Yojana gets implemented in India in all statutory towns from the initial stages itself.
Pradhan Mantri Awas Yojana Beneficiaries
The beneficiaries under the PMAY scheme can be listed as follows:
Beneficiary | Annual Income |
Middle Income Group I (MIG I) | Rs.6 lakh to Rs.12 lakh |
Middle Income Group I (MIG II) | Rs.12 lakh to Rs.18 lakh |
Lower Income Group (LIG) | Rs.3 lakh to Rs.6 lakh |
Economically Weaker Section (EWS) | Up to Rs.3 lakh |
Identification and Selection of Beneficiaries under PMAY
- The Pradhan Mantri Awas Yojana – Urban scheme caters mainly to the housing requirements of the urban poor. The scheme also caters to the housing requirement of slum dwellers residing in confined areas of slums with inadequate infrastructure, poor sanitation and drinking facilities.
- Beneficiaries of PMAY-U mainly include Middle Income Groups (MIGs), Low-income Groups (LIGs) and Economically Weaker Section (EWS).
- While the beneficiaries from the EWS category is eligible for complete assistance under the scheme, beneficiaries from LIG and LIG categories are only eligible for the Credit Linked Subsidy Scheme (CLSS) under PMAY.
- In order to be recognised as a LIG or EWS beneficiary under the Scheme, the applicant is required to submit an affidavit as income proof to the authority.
PMAY Interest Subsidy
Particulars | Interest Subsidy | Maximum Loan for Subsidy |
EWS | 6.50% p.a. | Rs.6 lakh |
LIG | 6.50% p.a. | Rs.6 lakh |
MIG -1 | 4.00% p.a. | Rs.9 lakh |
MIG-2 | 3.00% p.a. | Rs.12 lakh |
Home Improvement Loans
No. | Particulars | Features |
1. | Eligibility and Other Conditions | • Individuals/Group ot Individuals/Members of Cooperative Society who owns a house/flat.
• 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. |
2. | Purpose | • For repair, renovation, upgradation, painting, and other repairs. |
3. | Amount | • Maximum of Rs. 5 lacs but some banks give higher amounts upto Rs.10 lacs also. |
4. | Margin | • 20% to 50% |
5. | Security | • Equitable mortgage of property under repair/ renovation or any other unencumbered
immovable property also accepted by banks. |
6. | Disbursement | • Depending on the nature of repair/renovation. |
7. | Moratorium | • 3 months. |
8. | Repayments/Collection | • As allowed by banks |
Home Decor Loans
No. | Particulars | Features |
1. | Eligibility and Other Conditions | • Individuals/Group of Individuals/Members of Cooperative Society who owns a house/flat.
• 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. |
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2. | Purpose | • For furnishing the house/flat, interior decoration/air conditioners, etc. |
3. | Amount | • Maximum of Rs. 5 lacs but some banks give higher amounts upto Rs.10 lacs also. |
4. | Margin | • 20% to 50% |
5. | Security | • Equitable mortgage of property under repair/ renovation or any other unencumbered immovable property also accepted by banks. |
6. | Disbursement | • Depending on the nature of repair/renovation. |
7. | Moratorium | • 3 months. |
8. | Repayments/Collection | As allowed by banks |
Note: Different banks offer different variations of the above loans. But the fundamental approaches of the banks will be to address the entire needs of the customers regarding housing loans.
♦Auto/Vehicle Loans
No. | Particulars | Features | ||
1. | Eligibility |
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2 | Purpose |
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3 | Margin |
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4 | Security | |||
5 | Disbursement |
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6 | Moratorium |
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7. | Prepayment issues |
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8. | Repayments/Collection |
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♦Personal Loans
Personal Loans are basically unsecured in nature and are backed by personal guarantees only. As credit risk and delinquency rates are more in this segment, public sector banks tread cautiously in this segment and private banks do it aggressively.
Eligibility | Salaried employees, Professionals and individuals with High net worth, Regular pensioners or family pensioners drawing regular monthly pension through Bank. |
Purpose | Marriage expense of self, children or a dependent. Medical expense
For education of self/ children For Repairs, renovation, extension Any other personal expense |
Amount | Clean/ Unsecured loans– Amount varies from bank to bank and depend on the schemes developed by each bank and the target group.
Secured Loans– Amount varies from bank to bank and depend on the schemes developed by each bank and the target group. |
Security | Equitable/legal Mortgage of commercial or residential properties.
Hypothecation charge on assets acquired. |
Disbursement | Directly to suppliers/ dealers wherever feasible.
Credit to account of borrower in respect of clean loan |
Rate of interest | As applicable (vary from bank to bank) |
Moratorium | No moratorium normally |
Repayments | Clean/Unsecured loans– 36 to 60 EMIs generally
Secured loans– 60 EMIs |
♦ Educational Loans
No. | Particulars | Features |
1. | Eligibility |
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2. | Purpose |
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3. | Amounts |
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4. | Security |
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5. | Disbursement |
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6. | Moratorium |
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7. | Prepayment issues |
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8. | Repayments |
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♦Processing Of Retail Loans
The success of retail asset expansion by banks depends on the processing speed of retail loans and making the procedures hassle free for the customers. Banks adopt different models for processing of retail loans. The important models of retail loans processing are explained below:
- Stand Alone Model and
- Centralised Model
- Stand alone Model for Retail Loan Processing: Stand alone model for retail loan processing refers to processing of retail loans independently at the branch level. Based on the discretionary powers given the Branch Head, Branch will market the retail loans and process and sanction the loans based on the eligibility of the applicants. Obtention of the necessary documents, appraisal of the proposal and sanction of the loans will be done independently at the branch level. The valuation, legal opinion etc, are obtained at the branch level through the approved panel valuers/lawyers.
- Centralised Model for Retail Loans Processing: Centralised Model for retail loans processing refers to processing of loans at a centralised place depending upon the geography of branches. Banks adopt differen centralised models for processing of retail loans. Some of the names. Banks give to these retail loans processing centres are
- Retail Loan Factory
- Retail Loan Hub
- Retail Loan Processing Centres
- Retail Asset Processing Centres
- Retail Loan Branches
Standalone Model Vs Centralized Model
Standalone Model
(Brand Level Processing) |
Centralized Model
(Retail Loan Processing Hubs/Centres) |
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4. 5.
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Better Understanding of the customer requirements.
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. |
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