17736122 Hdfc Summer Project Report

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SUMMER PLACEMENT REPORT,2007

CREDIT APPRAISAL OF A

LOAN APPLICANT

INTRODUCTION

REQUIRED DOCUMENTS

PROCESS

PRECAUTIONS

DAYALBAGH EDUCATIONAL INSTITUTE,AGRA UMANG GUPTA057533

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INTRODUCTION

Credit appraisal is one of the most important and significant step in the Loan process.In case of Loans we either create new accounts or maintain pre existing ones.Credit appraisal is

however a part of sanctioning new loans.or enhancing the existing one

Credit Appraisal starts from the moment you take the documents from customer for Loan.Which is then sent to back office for processing which is called HUB .In case of India HabitatCentre it refers to the well recognized HDFC Regional office at Munirka .

CATEGORIES

In case of Credit Appraisal there are three main cateogories

1. SALARIED PERSON

Here the Credit Appraisal is done for a salaried person .We try to compute the creditworthiness of a salaried person .By saying that we mean that the person is employed asan employee in a recognised organization.The organization may be public or private

The person must have proof to prove his employment like credit documents etc.

2. SELF EMPLOYED PERSON

The nature of Credit Appraisal done for a self employed applicant is slightly more complexand dicey.This is due to the presence of enormous bank statements as well as transactionsinvolved in business.As conducting Business in modern times is a capital intensive process


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the bank statements of self employed persons are large and much more complex.Thestatement runs into a large number of pages due to the multiple number of transactions

Apart from that their income statements are also quite complex due to presence of

many components.

Hence in the case of a self employed person demanding a loan the credit appraisal has to bedone very carefully .For this very purpose HDFC Ltd has appointed Specialized CreditAppraisers and a specilaised Selfemployed Committee.These consist mainly of CharteredAccountants. They handle the important job of appraising the credit worthiness of the selfemployed applicants.

3)SELF EMPLOYED PROFFESSIONAL

The self employed professionals include people like Doctors,Chartered accountants,Engineers etc. Only HDFC recogonizes these professionals as a separate category and hashence developed a comparitively smoother procedure for their Credit Appraisal andsanctioning.of loan.


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REQUIRED DOCUMENTS

The Credit Appraisal is an important step in sanctioning loan applications .Hence the CreditAppraiser needs to have certain important documents to compute the credit worthinessof the applicant .In the case of salaried person these include the following

1. SALARY SLIPS (3 MONTHS CURRENT)The salary slip is usually a printed sheet of paper that contains 2 components

A. Income/Earnings collumn

It contains an exhaustive list of the various components that are added to the personssalary.They contain various components like Basic pay ,HRA etc.

B. Deductions

It contains an exhaustive list of various components that are deducted from the personsEarnings.They contain various components like Income tax,Provident fund,EmployeeLoans etc.

2. BANK STATEMENTS(6 MONTHS CURRENT) The bank statement contains the various transactions that the applicant performs in

his bank account.It has 3 components


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A. Date

B. DescriptionsIt contains the brief and standardised description of the activity or the account

related to the transaction .Eg. Clearing cheque 166129,Transfer deposit

C. DepositsIt contains the amounts that were credited to the account

D. WithdrawalIt contains the amounts that were debited to the account.This is carefully studied to find

out about any regular withdrawals or a series of checks so that any exsting loans may berevealed and there can be a correct estimate of the repayment capacity.

E. BalanceIt shows effect of transaction on the pre existing account balance

F. Special feature

HDFC will not consider any loan s with out standing EMI of or below 6 months.

3 FORM 16It is form given by Employer which states the income earned from that company during thefull financial year ,and gives the details of Tax deducted at source.

4 .COPY OF INCOME TAX RETURN(SARAL)The SARAL tax return form reveals the structure of incomes and/or the vaious earnings ofthe tax returnee .It also shows the various deductions that will not be included and it also

contains the Rebates on which he earns tax benefit.5. RESIDENCE PROOF

The residence proof includes the Electricity bill,Telephone bill,Ration Card ,Passport.


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6. PHOTO ID PROOFThe photo proof includes the Pancard ,Voter ID card,Employee ID card,Passport etc.

7. AGE PROOFThe age proof includes the Pan card,Passport,Photo ID.

8. LOAN APPLICATION FORM DULY FILLEDIt can also be downloaded from HDFCs user friendly web based portal.

9. CHARGES FOR PROCESSING FEESThis is a standard and nominal fees to be paid at the time of applying for loan

Fees structure. 0.5% of loan amount+Service tax of 12%(less)Education cess of 3%

OR 5618/-

HDFC takes from applicant whichever is less.This is applicable time to time.

10. PHOTOCOPIES OF PROPERTY PAPERS


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SPECIAL CASE

In the event that the applicant has only recently joined an organization OR there is a recentincrease in the salary he will not be able to produce the afore mentioned documents.In that case to not give inconvenience to Borrower HDFC will demand only the following

A. Copy of appointment letterB. Increment letter

SELF EMPLOYED PROFESSIONAL1. Application form with photo2. Identity and residence proof3. Educational Qualifications Certificate and Proof of Business Existence4. Last 3 years Income Tax returns (self and business)5. Last 3 years Profit and Loss and Balance Sheet6. Last 6 months Bank Statements

7. Processing Fee Cheque

SELF EMPLOYED BUSINESSMAN

1.Application form with photo2. Identity and residence proof3. Educational Qualifications Certificate and Proof of Business Existence4. Last 3 years Income Tax returns (self and business)5. Last 3 years Profit and Loss and Balance Sheet

6. Last 6 months Bank Statements7. Processing Fee Cheque8. Business Profile


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PROCESS

The process of Credit Appraisal involves the calculation of two important ratios

A. Income to Installment ratioB. Loan Eligibility ratio

However ahead of that we need to compute the actual salary we are going to consider forAppraisal.Along with that we will compute the deductions that need to be reduced from the

salary

STEP 1

The income slip of the applicant has many components .We first calculate the GROSS SALARYof the applicant .It is a simple process of adding the various incomes and/or earnings of theapplicant.However in HDFC the aim is to provide convenience to the customer throughevery stage .Hence a special procedure is followed in calculation of this salary.

We will add various standard and uniform components .That means that in the calculation ofGross Salary we shall consider 100 percent of these components .This is because these

Earnings will always be a part of his take home pay package .Hence they are going to alwaysbe a fixed constituent of his REPAYMENT CAPACITY.

After we have added the fixed components we will search for those items that do not appearas standard components in the Income Slip of the current 3 months.These can be


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A. Regular ItemsThese items are present in all the income slips .However their amount is variable.This is because they are linked to performance or their amount depends on the descretionof the Employer.

Eg Additional HRM,Vehicle allowance etc.

We first calculate the Average amount of these items.We then divide this Average amountby two. This is because they are variable components of the REPAYMENT CAPACITY.

Profit Allowances OR = Average of 3 monthsSome other 2

B. Non regular ItemsThese items are not present in all the income slips.At HDFC for sake of the Applicantthese items are not considered to be affecting the REPAYMENT CAPACITY ofthe Applicant.They only affect it temporarily.

STEP 2

This step is the calculation of the

1 Income to Installment Ratio2 Fixed Obligation to Installment Ratio


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2.1 INCOME TO INSTALLMENT RATIO (IIR)

This ratio reveals the available repayment capacity that HDFC can consider from theGross Salary of the Applicant

It is affected by the following

A. Income

B. Obligations-Towards family,no of children,spending habits

C. Profile -The Applicants profession .If he currently receives less income but his profile issuch that there is large scope of increments and/or he receives many variable

amounts like Profit allowances ,certain fees,etc .Then in that case it positivelyaffects his IIR and it is increased.Eg Director,Principal.etc..

IIR = EMI *100INCOME

The percentage revealed in this calculation tells us what amount of the Gross SalaryThe applicant has to repay HDFC s loanA good IIR should lie between 35to 50%.Only a very good profile will allow a

person with IIR of above 50% to be considered for a loan.

2.2 FIXED OBLIGATION TO INCOME RATIO

This ratio is an extension of IIR.The nature of information revealed by this ratio is the same asIIR. However this ratio also shows the effect of the various Obligations/Liabilities

On the repayment capacity of the applicant.


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FOIR = EMI+OBLIGN * 1OOINCOME

It should also lie between 35 to 50%. However in the case of a good profile there is a positiveeffect on FOIR same as IIR.If we are calculating FOIR then we dont need to calculate IIR.

.

STEP 3

LOAN ELIGIBILITY RATIO

This is the most important and significant ratio that will reveal the maximum amountof loan that can be sanctioned to the Applicant .It is the ratio of the salary to be considered for

repayment of the loan and the EMI per 1 lakh of the loan amount.

The amount of loan demanded by the Applicant and the term for which it has been demandedmust both fall within the permissible limits as shown by the loan eligibility ratio.

FORMULA = Available salary for repaymentEMI per 1 Lakh of the amount


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NON RESIDENT INDIAN

SALARIED/EMPLOYED

An NRI is a person with Indian citizenship but residing in another country.An NRI can takea housing loan from HDFC . He is however not eligible for aTop Up loansHome Equity Loans

Non Residential Premises LoansHe is however eligible for Home Improvement and Home Extension Loans from HDFC .important

An NRI Loan is appraised on the Net Salary . This is the take home pay package obtained afterreducing the deductions from the earnings .As this salary is low it reduces their loaneligibility .However the salary is converted into Indian Currency for computing credit

worthiness.The figure obtained is higher in Indian currency hence the loan eligibility rises.Eg5,487$ american dollars will mean 2,46,915 Rupees.

SELF EMPLOYED PROFESSIONALS

An NRI applicant can also be a Doctor,Engineer etc.In these cases HDFC will put them in thespecial category of Self Employed Professionals.

Their credit appraisal is carried out as follows

Their latest available Profit and Loss A/c is reviewed by the credit appraiser. This account hastwo sides a Profit side which reveals all earnings and gains .There is also a Loss side whichshows all taxes, liabilities and losses.We refer to the Profit side a the Gross Receipts.These includes components revealing the natureand amount of the Prime income and other earnings Eg Consultation fees in case of Doctor .From the Gross Receipts we calculate the Gross Profits and thereon move to calculate Loaneligibility .Which is the loan amount that can be conveniently sanctioned to the applicant.

Loan Eligibility = Gross Profit * 2

Another important consideration is that the Annual outflow of EMIs should not exceed the NETPROFIT. The Net Profit is computed by deducting the various costs and losses from the Gross

profit.


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STEP UP REPAYMENT FACILITY

HDFC Ltd has a hitherto with you ,right through .This statement HDFC proves time andagain by developing close relationship with individual customers and by constantlydeveloping and marketing in the market new and innovative products that increase thecomfort level of the customers

.Along the same philosophy HDFC came up with Step Up Repayment Facilitywhich once again reassures customers that HDFC helps you achieve your dream.This facility is especially helpful to those customers who want to get a loan on an amountthat is not falling within the permissible limit of their repayment capacity.It also is in linewith HDFCs aim to provide greater degree of personalization in service and the tools.Hence there can be the situation wherein the applicant is not in the position to paythe required EMI which is calculated by the ILPS (Individual loan processing system).

HDFC in this case offers to let the applicant use one of the two plans to repay the loanamount.

A. The EMI Chooser 1

In this plan the applicant gets the advantage from HDFC to select the amount thathe wants to pay as his fist EMI.This means that HDFC will let the applicant decide

what amount he can comfortably pay to HDFC in the first term of his Loan RepaymentSchedule.The system will calculate the next two EMIs for the next two termsThe customer can hence decide when he wants to repay the maximum amount of the


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Loan to HDFC and when he wants to repay minimum leftover or remaining amount ofthe loan in the form of still smaller EMIs.

B. The EMI Chooser 2

This plan is an extension of the aforementioned plan .In this plan HDFC helps theApplicant by letting him choose two EMIs .This means that the Applicant can select thamount that he wants two pay for both the First and the Second terms of his repaymentschedule.This translates into more help and more convenience to the Applicant

However the benefits of these plans dont stop here .

A. The Applicant can also allocate the term length for which he wants to pay what amountThis translates into a great advantage to the Applicant .He can now link

1. His current salary2. The rate of average increment,3. His existing and expected obligations,4. His existing and expected expenses5. The length of the term among others.

HDFC can hence assist the Applicant in developing a much more personalized loan

plan as compared to its competitors in the Housing Loan market.

B. The Applicant can also save money by using these plans .This is because the totaloutflow in case of a regular plan is more as compared to these special plans .The Applicant will hence obtain more benefit in case of Prepayment and elsewhere.

C. All Loans from HDFC Ltd are subject to Tax exemption and be treated asRebate.Hence HDFC lets the customer save their hard earned money.


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PRECAUTIONS

The credit appraisal is an important step for both the borrower and HDFC .Hence itnecessary for us to take all precautions.

1. All calculations must be done with correct figures. The data entry in the system mustmatch the actual data .also care should be taken in places like the decimals androunding off.The data entries should not be going outside the space provided to them

2. The source of the data should be mentioned so that another person may easily verifythe facts and figures

3 Sometimes it may happen that the Applicant has intentionally or by mistakenot mentioned the full status of his obligations.The common situation in thiscase are

A. He has not revealed of any loans that he may be paying off from an undisclosedbank account in any other bank

B. He is disclosing information related to any defaults,Revolving accounts such asDebit card ,Credit card.etc.

In these conditions it is difficult to correctly compute the credit worthiness of the personAs a result an unscrupulous element might get a loan .This will lead to loss of bothHDFC and its honest customers .The precaution taken by HDFC in this case is that it contacts CIBIL(Credit Bureau ofIndia Ltd) which is the mega Repository of financial data in India .HDFC electronicallyrequests CIBIL to reveal information it posseses pertaining to the persons financial

obligations.CIBIL passes on the information by means of a fax containing all revolvingaccounts,loans and liabilities.

DAYALBAGH EDUCATIONAL INSTITUTE,AGRA UMANG GUPTA

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FLEXIBLE LOAN INSTALMENT PLAN(FLIP)

Another First of its kind product from HDFC .This is also to assist the Applicant to easilysecure a loan in the following condition.FLIP is used when the applicant and co-applicantwant to jointly repay the loan.There is however a problem in the situation which wouldotherwise not allow the loan to be sanctioned.There are two applicants hence two incomes.Therefore in the joint payment they can combine their income to repay the loan .Let there beMr A and B who want to take a loan for 14 years .A is the father and B is the son of A .Nowconsider the situation in which A and B want to take a loan and jointly repay it .But A is 52years old and B is only 25 .Hence A will retire after 8 years and will not be repaying the

EMI but B can continue to repay the loan.In that case although there will be a problem atother places but in HDFC this is solved by taking different incomes in the terms . Hence theincome that will be considered earlier will be the fathers income and at his retirement or atany other selected stage of repayment we will begin to consider only the income of the son.

The advantage of FLIP in terms of the Applicant is that of joint payment,personalization,easy repayment ,and freedom from many possible problems.

In the Illustration the father is going to pay only for 105 months and after that we are toconsider the sons salary only for the next remaining 60 months.

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COMPANY OVERVIEW

1

HOUSING FINANCE SECTOR

2

BACKGROUND

3BUSINESS OBJECTIVE

4

ORGANIZATIONAL GOAL

5

WIDE PRODUCT RANGE

6

CONVENIENCE VALUE ADDED SERVICES

7

GEOGRAPHICAL SPREAD

8

FUTURE


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THE LOAN PROCESS

A Loan is not something which we can obtain by just walking right into any market or anyplace like that.It is a systematic process where a loan application file goes through thehands of many experienced employees of HDFC.The applicant has to submit the original or

photocopies of a few documents ,he also has to correctly fill and give certain forms tostatehis requirements very clearly and to also communicate the information demanded by HDFC

The work of HDFC in sanctioning a loan goes through the following stages

SOURCES OF LOAN APPLICANTS

1. WALK INThis refers to the Applicants who apply for the loan by going to the service centre orregional branch office .They may have come to know about HDFC s Loan service fromany source but this is their first contact with HDFC is in absence of any intermediary likefriends,sales men etc.The applicants who contact through or by the Website are alsoincluded in the walkin cateogary.WalkIn applicants are given concessions on fees and charges which is applicable fromtime to time.

2. CALLCENTRE LEADSThe callcentre leads refer to the applicants that come in contact with HDFC throughHDFC Bank or through HLSIL .HDFC bank is the banking sction of HDFC whichinforms HDFC Ltd about persons who it thinks to be needing a loan .HLSIL whichhas been started by HDFC Ltd and refers to Housing Loan Services India Limited

This organization has been especially started by HDFC to assist persons searching forLoans at easy rates and good service.HLSIL contacts probable needfuls of Loan ,contactsthem, explains them the various advantages of an HDFC Loanand get thir loan application filled.


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Every HDFC service centre has its own team which is managed by leader who reportsdiectly to the Branch Manager .In the India habitat centre the HLSIL team is underthe leadership of a team leader who reports directly to Mr Prashant Malik(Branch MgrIHC /Ranked 2nd in the prestigious National Corporate Challenge 2005 conductedannually by HDFC )

3. DSAs and BSAsThese are respectively the Direct selling agents and the Business selling agents.The DSAs refer to organizations which work in agreement with HDFC andforwards them the loan requests of applicants they contact or those that contact themOn the other hand BSAs usually forward loan requests and assist HDFC

by forwarding them the names addresses contact nos etc of various probable needfuls ofLoans .BSAs usually are Builders who book houses for sale in the future.

They may also include Brokers.Egs for DSAs are Nishk,Chatrath,BKM.etc

STAGES OF LOAN


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RecommendationOver(ROVR)

DoubleChecking

Over(DCOVR)Fixchrgs

DISBURSE

The Loan

ApplicationMunirkaHUB Login Scanning

DataEntry


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The representation shown above is not a perfect copy of the actual process.This is becausethese stages are taking place simultaneously and one application is being taken care for by

the experienced employees of both HDFC Ltd service centre and HDFC Ltd HUB (alsocalled the back end office).Also the applicant may be asked to send information or may beasked questions regarding his requirement and/or his documents for his own convenienceHence the loan application may or may not shuttle through different stages

APPLICATION STAGE

This is the stage where the Application Form first reaches the concerned Service CentreHere all the documents in the application are reviewed by the experienced staff presentat the service centre . The HDFC Ltd employee who reviews the file checks to seewhether all documents are present and in their proper place .He checks if the documentsare duly filled,not fake,attested by authority in question and present in order.In case anydocument is missing the applicant is contacted electronically or by mail .The applicant iscontacted by telephone and requested for the document until he denies it being with him. Thiexercise is called FOLLOW UP. The credit appraisal of the loan application starts at this

stage. The service centre employees compute the gross salary ,IIR,FOIR,LoanEligibility ratioetc.The credit worthiness of the applicant is calculated here.

It is also at this stage that the QUICK DATA ENTRY of the loan applicantionis done to create a serial no. of the application.After that another page appears and more data

is entered .It is now that a special and unique LOAN A/C NO. is created under which all theloan processes will be carried out.The number that has been generated is communicated tothe applicant by means of a letter and/or electronic communicationThe system of

elecronically recording the data helps to create ready reference,a proof ,helps in quick andeasy processing of the data.It also helps to very easily and quickly share data with otheremployees of HDFC ..


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The next and important processing performed at the service centre is that of fillingup a document known as the INTERVIEW SHEET.for processing individual loans(salaried cases) .It contains various simple entries like

1. Name of borrower

2. Name of co-borrower3. Income details4. Family background and permanent address etc

It also contains various important entries like

5. Gross Salary6. Rental7. Other incomes

8. ObligationsThe various other loans that the applicant is entitled to pay ,their amount,their remainingterms ,source etc.

9. RemarksThis collumn contains the various findings that the employee has found out afterthorough review of the applicants documents such as bank statement,salary slip etc.

Hence the interview sheet contains the important findings which the employee hascollected after careful review of the various documents .The interview sheet helpsto cut corners and helps save time by not having other employees to go through thedocuments again and again .It hence acts as a souce of quick reference.

After all this has been performed well enough the loan application will be arrangedin a file and all it will be given its loan a/c no which also acts as its file no..The file is now ready to be sent to the HUB where further processing will take place.


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SCANNING

In this stage the various important documents of the applicant are scanned.This helps tocreate their electronic copy which acts as a ready reference,a proof,and can also be

shared and utilised by other employees of HDFC Ltd.

DATAENTRY

The file has been sent to the back end office or the HUB .At HUB there are many expertswith their own specializations . These officials review the various parts of the filae againand perform many specialized tasks .

Dataentry is also one of these tasks .This entry is much more different and complex ascompared to the earlier performed Quick Data Entry.An exhaustive amount and type ofinformation has to be entered into the ILPS system ranging from Personal

Details,Employment Details to Property Rate History and Customer Interactions.

RECOMMENDATION OVER(ROVR)

The Recommendation OVER is also reffered to as the First Appraisal .At this stage certainspecially appointed persons have been given the responsibility of recommending a loanThese people have to take special care of reviewing every document ,and all the small detailsthat need to be considered before considering the loan application to be valid .


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After this the file is sent to another specially appointed person as explained below.At thisstage if any correction or mistake is present it can be sent back to the Service Centre.

DOUBLE CHECKING OVER

As the name suggests at this stage a specially appointed person will double check all thepast proceedings .He will examine the Loan file for any discrepancies ,any missing and /ormisplaced documents,the Credit Appraisal results,etc.This is a very important stage and must be handled with exceptional care.This is because amistake at this stage can cause a great loss to the company.The Double checker is responsiblefor the ultimate sanctioning of the loan .If any mistake is done at this stage there is no going

back and hence no protection.HDFC takes great care while appointing double checkers

.They should have completed a select number of years with the company and should haveshown exemplary performance and must posses experience.

SANCTIONING

An authorised sanctioning authority within HDFC itself will review the remarks ofDouble Checker and Sanctioning authority .If it considers the loan suitable to beSanctioned it gives its approval .After it has given its approval stamp the ILPS systemwill automatically send a letter to the Applicant that his loan has been sanctioned.

After this approval the Applicant can go to whichever Service Centre which he selectsto get his loan disbursed.


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SPECIAL CASE

A special case can arise if the applicant has not mentioned the property for which he wants to

take a loan .In that case the applicant can let the case be remain pending . This means that theApplicants loan request will be considered to be complete even though he has not decidedthe property.However the Applicant is expected to finalise the property in a short timeA Property Address is necessary to

1. get the loan disbursed2. process the Legal and Technical Appraisal of the property and its Papers.

DISBURSEMENT

The last and final stage in the Loan process is that of disbursement.After the sanctioning hastaken place the applicant becomes a registered customer of HDFC Ltd .He can now take the disbursement of the loan from any of the various service centreof HDFC .The loan shal be disbursed in one Lumpsum or in suitable instalments to be

decided by HDFC with reference to the need and/or progress of construction (whichdecision shall be final and binding on the borrower).The borrower hereby acknowledgesthe receipt of the loan disbursed as indicated in the receipt.


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SHORT NOTES

CASE OF NEGATIVE AMORTIZATION

HDFC offers two types of loan

1.Fixed rate of interest loan2.Variable rate of interest loan

The problem of Negative Amortization is specific to the Adjustable or the Variable rate loansthat are lent to customers.In the case of Variable rate Loans there are three components

RPLR SPREAD ROI14% (CURRENT) 3%(current) 11%

The term RPLR is short for Retail Prime Lending Rate.This rate is dependent on marketforces .In India the RPLR has been observing an upward trend .As a result of this there is achange in rate of interest to be applied to different loans.RPLR is revised every 3 monthsIn which it may or may not change.

Spread refers to a special discount offered to loan applicants coming to HDFC.This discountis fixed by HDFC .Every loan applicant is eligible to receive this discount from HDFC Ltd.It helps create a market advantage and benefits the Applicants.Spread is fixed for anuncertain length of time .It is absolutely dependent on the companys discretion tochange it or not.Currently HDFC is offering 2.5% spread on a loan of above 20 lacs and 3%spread on a loan of below 20 lacs.

ROI is the rate of interest that is applicable to the loan at the time of lending. It is computedDAYALBAGH EDUCATIONAL INSTITUTE,AGRA UMANG GUPTA

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by subtracting spread discount from the RPLR.At the time of lending the ROI is good enough to repay the interest as well as the principalcomponents .However as the RPLR increases as it is bound to do so after some timethe required EMI also increases .Hence after some time the EMI becomes insufficient

to repay the principal as well as the interest component .

As a result of this the system releases a warning when the Loan a/c no is entered into thesystem as shown in the illustration .

This leads to two changes

1. The Term increases2. The EMI increases

This problem can be in advance by two ways

1. PREPAYMENT

Prepay a certain required sum of money so that the EMI remains the same. In this case theadvantage is that the PDCs(Post Dated Cheques)that we have given earlier will stillremain valid to repay the remaining EMIs .The term of the loan will decrease and

come back to actual outstanding term.2. CHANGE THE EMI

If the customer wishes to change the EMI then he will have to prepare a new set of post .dated cheques in favor of HDFC .This method is not so preferred as it is unlikely

that the customer would want to again prepare more PDCs.The term in this case willbecome the same as the actual remaining term .

PRINCIPAL PREPAYMENT

The word prepayment in the loan process means to pay a certain amount of the loanto decrease the principal outstanding .A customer can decrease the principal outstanding by


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prepayment .The customer can utilise this service of HDFC in case he wants to speed up theloan repayment process .HDFC will only charge the person a 2% fees in case the person is prepaying a Fixed rateLoan . There are no charges in the case of a Variable rate Loan .

OTHER CATEOGARIES OF LOAN

A Loan is not only taken to construct a house on freehold land .It may also berequired by a person to purchase land , to buy a house from a builder ,to buy a house from aHousing Society . to buy a house under resale.

CATEOGARY 1

If the Loan is taken to buy a house from a builder .The applicant will needto produce the following documents1. Original Stamped Agreement with builder duly registered

If the original agreement has been lodged for registration and not received backThe following documents are to be submitted

(a) Certified or Photocopy of the original agreement(b) Original receipt for payment made to the Sub Registrar for registration(c) Copy of the Letter to the Sub Registrar

2. Original Receipts for the payment made to the Builder till date3. Letter from the Builder on his Letterhead4. Copy of the Permission letter issued in favor of th builder under the Urban Land Act

1976 by the Competent Authority

5. Copy of the floor Plan approved by the Competent authority6. Certificate from the builder stating the cost of the Flat/House ,type ,schedule of payment.


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In the sanctioning only photocopies are required from the applicant but after the loan issanctioned the orginals are demanded from him and only then is the loan disbursed .The originals are taken from the applicant and then put in a docket and sent to Mumbai headoffice to be kept in a locker for safety.

CATEOGARY 2If the Loan is to buy a house from a Housing Society.The Applicant will need to producethe following document

1. Share certificate issued by society in general2. All Receipts for the payment made too the society in original3. Letter from the society4. Copy of the Bye Laws of the society

5. Certificate from the society stating the cost of the flat and type along with schedule ofpayment

6. Copy of the Lease deed in favor of the society7. Approved copy of the plan8. Location sketch of the society

Rest is same as above.

CATEOGARY 3

FLAT DEVELOPMENT AUTHORITYThis includes all Government developent authorities like

Noida Development AuthorityGhaziabad Development AuthorityDelhi Development Authority,Housing Urban Development Authorityetc.


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In the case of a Flat development authority the documents required are1. Allotment letter2. Receipts of payment3. Mortgage permision

The rest is same as above in above cases .

CATEGORY 4

RESALE OF PROPERTY

This is slightly different from the above types . In the case of resale of property theownership of the property has to pass from one individual to the other .Let us take anexample to explain this case.A is the original owner of a property and B is the current owner of the property

and C is the person who wants to own this property .He will approach to HDFCfor a loan . The first thing he has to do is to obtain the freehold on the property

.For that he will have to pay a stamp duty and/or a registry of a certain sum ofmoney.

In the case of resale HDFC will look into the past 13 years of ownership records of the propertyIt does not matter if there has not been any resale it is part of a regular practice.This is a part ofthe legal aspect of Loan Lending.

CATEGORY 5

House is being constructed on Freehold Plot

1. Registered sales deed in favor of Applicant in original2. All previous registered Sales Deed in original3. Certificate of Search cum Non Encumberance issued by the sub registrar for the


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Last 12 years Search4. Intkaal/Jamabandi fard of land in original

CATEGORY 6

House is being constructed on a plot alloted by Haryana Urban DevelopmentAuthority(HUDA),Chandigarh Administration Urban Estate Punjab andVarious trusts

1. Allotment letter in original2. Possesion letter in original3. Conveyance deed /Lease deed in original4. Permission from concerned authority to mortgage the plot in favor of HDFC5. Non Encumbrance Certificate from concerned authority

Additional documents to be submitted in cases where the plot is acquired by way of Gift /Transfer

1. Transfer permission from concerned authority in original2. Previous Conveyance deeds in original

3. Transfer deed in original

TRANCH EMI

Instead of making payments of PEMI on the loan amounts disbursed by HDFC pendingcommencement of the EMI ,the borrower can now pay an interim EMI on the disbursedAmounts. Under this arrangement the borrower would need to pay PEMII only for the

remaining days of the month in which he has taken the disbursement. The advantageUnder this scheme is that when the borrower avails the final disbursement of the loan hewould have repaid a part of the principal amount out of the previous disbursements and


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hence he woud be paying the regular EMI on an amount which would be less than the loanavailed by him from HDFC .Under this scheme the borrower will pay Interim EMI s pending commencement of theregular EMIs .

The following are the principal terms and features of the above scheme:

1. Principal repayment commences on the installment that has been drawn by the borrrowerWith effect from the subsequent month .

2. Interim EMI will be computed with reference to the term of repayment mentioned in theLoan agreement on the amount or disbursed with repayment of principal commencingfrom the following month .

3. Subsequent DisbursementsThe Interim EMI will be re-computed oneach subsequent disbursement /s on:(a) The principal amount outstanding of the previous disbursement/s

Plus(b)The further amount being disbursed .

4. Final disbursement:

Regular EMI will be recomputed with reference to the term of repayment mentioned inthe loan agreement on:

(a)The principal amount outstanding of the previous disbursement/splus

(b) The final amount being disbursed.

5. The Borrrower can opt for this scheme at the time of the first disbursement/s , butbefore commencement of the final EMI .

6. Interest rate applicable for each tranche will be as applicable on the total loan and not onthe amount representing each respective disbursement.


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7. Pending full disbursement , the borrower will have an option to choose in consultationwith HDFC the Interim EMI he may want to pay till a)further disbursement/s b)fulldisbursement.

8. Pre EMII :

Pre EMI interest will be payable from the date of the disbursement on the amountdisbursed till the last day of the concerned month in which disbursement is made .

9. Upon each subsequent disbursement the Interim EMI will be reworked on the principaloutstanding of the amount/s disbursed previously as of the last date of the concernedmonth (in which the further disbursement is made) plus the further disbursement amount.Repayment of the Regular EMI (which will be also calculated in the same manner )willcommence from the month in which the last disbursement is made .

GENERAL

(A) The Regular EMI may be different from the one mentioned in the loan agreement.

(B) If the disbursement of the loan (part or final) is made on the first working day of amonth ,then the Interim EMI or the regular EMI ,as the case may be will

commence from that month itself.

HDFC LOAN ADVANTAGES1. Loan counselling sharing over 29 years of Loan experience2. Door step service3. Helps in finding Dream home4. Wide Product Range5. Multiple Repayment Option

6. Wide Network of financing7. Post disbursement service8. Loan repayment option


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SUBMITED TO

Dr K .SANTI SWARUP

HEAD OF DEPTT

FACULTY OF SOCIAL SCIENCE

SUBMITTED BY

UMANG GUPTA

BBM 4th SEM

057533


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HOUSING FINANCE SECTORAgainst the milieu of rapid urbanisation and a changing socio-economic scenario, the demandfor housing has grown explosively. The importance of the housing sector in the economy can beillustrated by a few key statistics. According to the National Building Organisation (NBO), thetotal demand for housing is estimated at 2 million units per year and the total housing shortfall isestimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64

million units from urban areas. The housing industry is the second largest employment generatoin the country. It is estimated that the budgeted 2 million units would lead to the creation of anadditional 10 million man-years of direct employment and another 15 million man-years ofindirect employment.

Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), theNational Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector.In order to achieve this investment target, the Government needs to make low cost funds easilyavailable and enforce legal and regulatory

Growth in demand driven by improved affordabilityRising disposable incomeAffordable interests rateFiscal incentives on both interests and principal repayments

Increasing urbanisationYoung populationIncreased urbanisationMortgages contribute approximately 5 percent of Indias GDP as comared to over 70% in the

USAHousing shortages estimated at 24.7 million units (Census reports)


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BACKGROUND:

HDFC was incorporated in 1977 with a primary objective of meeting a social need - that ofpromoting home ownership by providing long-term finance to households for their housingneeds. HDFC was promoted with with an initial share capital of Rs. 10 crores.

BUSINESS OBJECTIVES :

The primary objective of HDFC is to enhance residential housing stock in the country throughthe provision of housing finance in a systematic and professional manner, and to promote homeownership.Another objective is to increase the flow of resouces to the housing sector by integrating thehousing finance sector with the overall domestic financial markets.

ORGANISATIONAL GOALS:

HDFC's main goals are to :a) develop close relationships with individual households,

b) maintain its position as the premier housing finance institution in the country,c) transform ideas into viable and creative solutions,d) provide consistently high returns to shareholders, ande) to grow through diversification by leveraging off existing client base


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WIDE PRODUCT RANGEEquity loans (Home and Non Residential Premises)Under Adjustable Rate Loan OptionHome Extension LoansHome Improvement LoansLand Purchase LoanAdjustable Rate Housing LoanTOP-UP FINANCING Against Property FinancedShort Term Bridging Loans

Non Residential Premises LoanIndividual Housing Loan Fixed Rate

CONVENIENCE VALUE ADDED SERVICES

HDFC Standard Life Insurance Co. Ltd

Original Life Insurance Cover at an attractive price from HDFC Standard LifeThis insurance cover ensures that lifes uncertainties do not affect your familys shelter .This

affordable life cover from HDFC Standard Life has been designed to help your family repay theoutstanding loan in case of the policy holders unfortunate demise.As it is a pure risk cover therewould be no policy benefitspayable on survival at the end of the term of the policy

HDFC CHUBB General Life Insurance Company Ltd

Attractive home insurance plan from HDFC CHUBBThis hassle free insurance cover helps safeguard your property and possesions from fire andallied perils such as earthquakes ,flood,riots,etc. You also have the option to protect the contents

of your home against any loss caused by burglary and/or theft.

HDFC BANK LTD


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e-Age Savings Bank AccountAs a special offer you can open an e-Age savings Account from HDFC Bank at a lower AverageQuarterly Balance of Rs 5000/-You can avail benefits like free Phone Banking ,free Net Bankin,24 hour ATM access ,interbranch /intercity banking, a personalized chequebook and much mor

Automatic repayment of Loan Equated Monthly Instalment(EMI)You can give HDFC standing instructions to repay your Loan EMIs directly from your HDFCBank Savings Account .Thus saving you the trouble of procuring,signing,and tracking Post dated cheques.

Free International Credit CardsAn international credit card from HDFC Bank with most compehensive insurance coverage .

This card is accepted worldwide .You can even withdraw 30% of your entire credit card limitthrough the ATM.

Lower Interest rates on other loansYou can avail of lower interest rates on other loans from HDFC Bank such as PersonalLoans,Car and Two Wheeler loans ,Consumer Loans and Loans Against securities

FUTURE

HDFC has always been market-oriented and dynamic with respect to resource mobilisation aswell as its lending programme. This renders it more than capable to meet the new challenges thahave emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors,shareholders and agents, and it hopes to capitalise on this loyal and satisfied client base forfuture growth. Internal systems have been developed to be robust and agile, to take into accountchanges in the volatile external environment. ]

HDFC has developed a network of institutions through partnerships with some of the bestinstitutions in the world, for providing specialised financial services. Each institution is beingfine-tuned for a specific market, while offering the entire HDFC customer base the higheststandards of quality in product design, facilities and service.DAYALBAGH EDUCATIONAL INSTITUTE,AGRA UMANG GUPTA

057533

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DOCUMENTS TO BE COLLECTED IN

APPLICATION FORM

Photographs of all applicants with attestationSignature of all applicantsDate of submission of applicationAll fields duly completed

Residence and office land line phone no.Fee chequeEnd use letter(for Top Up loan and Home Equity )Self attestation on all documents by applicant/co-applicant

PERSONAL DOCUMENTS

DOB Proof of all applicantsPhoto ID proofResidence address proofCopy of qualification/degree certificate

INCOME DOCUMENTS

Last three years individual ITRs(with computation of income ,profit and loss account,balance sheet ,schedules,and auditreport and latest tax report)Copy of resolution of general meeting ,fixing renumeration of directors)


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List of assets and investments held by an individualLast 3 years company OR partnership firm ITRs(with computation of income ,profit and loss account,balance sheet,schedules andaudit report and latest tax report)Obligations details

Sanction letter of credit facilities availedCA Attestation on financials if accounts are not auditedMOA ,AOA OR Partnership DeedShare holding pattern certified by the auditor with a copy of latest annual return filed withROCProvisional profit and loss account,balance sheet,schedules and copies of advance taxchallans,if applicableBusiness Profile

BANK STATEMENT

Last 6 months statement of OD A/c and other current A/csLast 6 months individual bank A/c statement

PROPERTY DOCUMENTS

Copies of all title documentsApproved planConstruction/Improvement estimate

REFINANCE DOCUMENTS

Outstanding loan account statementList of documents held by previous institutionCopy of loan agreements


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NON RESIDENT INDIAN

REQUIRED DOCUMENTS

1 SALRIED

1.Pay Stubs/Salary slips(3 months current)

2. Bank statement(6 months current)

3. W2,Form 16,TDS from employer (tax deducted at source)

4. Credit report

5. Tax report

6. Employment contract/Appointment letter

7. Past occupational history

8. Work permit


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9. Visa stamped on passport

10. ID from Employer

11. Continuous Discharge Certificates for (Merchant Navy Employees)

In case of PIO .The PIO card copy else

1. Photocopy of current passport2. Photocopy of Indian passport held earlier

12. Power of Attorney

2. SELF EMPLOYED

All of the above required except items1,3,6,10,and 11.


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SUMMER PLACEMENT

REPORT


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TABLE OF CONTENTSAcknowledgement

Company Overview

Housing Finance SectorBackgroundBusiness ObjectiveOrganizationalGoalWideProductRangeConvenienceGeographical SpreadFuture

Credit AppraisalIntroductionRequired DocumentsProcessPrecaution


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ACKNOWLEDGEMENT

I would like to acnowledge with profound gratitude and thank all those people who have beenhelpful in completion of this project.First of all I would like to thankHDFC Ltd for giving me the opportunity to be a part of itswonderful familyI would like to thankMrs Renu Sud Karnad for allowing me this summer placement.I would also like to take this opportunity to express sincere gratitude to Mr PrashantMalik(Resident Manager) along with Mr Bishnu Prasad Bhattarai(Senior Officer) for thereundivided attention and for being there whenever neededI would also like to heartily thankMr Vimal Prakash( Marketing Head) for helping me withall his powers to persue summer placement in HDFC Ltd.I would also like to thank Mr K Santi Swarup who encouraged me by making helpful

suggestions .He has been the motivating spirit behind all my efforts in executing presentstudy.I would also like to take this opportunity to thank parents and God for helping mein coming so far.

UMANG GUPTA


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