Copy ICICI-COMPARISON OF PROPERTY OVERDRAFT & CASH CREDIT FACILITY

SUMMER TRAINING REPORT ON

“COMPARISON OF PROPERTY OVERDRAFT AND CASH CREDIT FACILITY OF ICICI BANK WITH OTHER BANKS”

SUBMITTED TO

Under the Guidance of Submitted By

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TABLE OF CONTENT

Topics Page No.

1. Certificate

2. Acknowledgement

3. Introduction General view of banking Introduction about topic

4. Reasearch methodology

5. Property overdraft

6. Cash credit Meaning Need for cash credit Various methods of assessement of cash credit

7. Introduction to different banks Bank of India Bank of Baroda Punjab National Bank Canara Bank HDFC Bank ICICI Bank

8. Points considered by all banks before extending limits to borrowers

Monitoring of advances Stock statement as the tool to monitor

9. Points of comparision of Property overdraft and Cash credit facility of different banks.

Product available Eligibility

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Security Rate of interest Repayment period Quantum of advances Documentation required Margin

10. Findings on the basis of survey conducted

Response to questionnaire by customers Response to questionnaire by bank executives

11. Analysis

On the basis of comparison made On the basis of survey conducted

12. Conclusion 13. Recommendation 14. Bibliography 15. Appendix

Questionnaire for customers Questionnaire for executives

INTRODUCTION

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General view of banking

Introduction about topic

GENERAL VIEW OF BANKING

The organized banking system in India can be broadly divided into three categories, viz, the central bank of the country known as the reserve bank of India, the commercial banks and the co-operative banks. The RBI is the supreme monetary and the banking authority in the country &has the responsibility to control the banking system in the country. It keeps the reservbe of all the commercial banks and hence is known as reserve bank.

Commercial banks have been in the existence for many decades.Commercial banks mobilize savings in urban areas and make them available to large and small industrial and trading units mainly for working capital requirements.After 1969 commercial banks are

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broadly classified internationalized or public sector banks and private sector banks.The state bank of India and it’s associates banks along with another 20 banks are the public sector banks.The private sector banks include a small number of Indian scheduled banks, which have not been nationalized and branches of foreign bank operating in India-commonly known as foreign banks. Today banks are facing a stiff competition for resources mobilization not only among themselves but also from other financial institution like unit trust of India, govt. agencies(like post office, small savings, LIC etc.), mutual funds, corporates bodies etc.Resourses mobilization needs to have innovative stratigies and methodologies and require active marketing of client-friendly schemes, which will have to take care of changing saving pattern, liquidity, returns, demographic changes etc.

INTRODUCTION ABOUT TOPIC

In this course of my project I made a comparative study of property overdraft facility and open cash credit facility provided by different private banks and nationalized banks (viz. Bank of India, Bank of baroda, Punjab national bank, Canara bank, ICICI bank, HDFC bank) with respect to different schemes, Rate of interest, Eligibility criteria, Documentation required by them, tenure, quantum of advance.

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Property overdraft facility is the act of overdrawing from the bank in which property is kept as a security.

Cash credit facility is an arrangement by which customers are allowed to borrow money upto a fixed limit against a bond or credit by one or more sureties or certain other securites usually by hypothecation of stocks in trade.This facility is provided to meet the working capital requirement of business unit.

I designed 2 questionaire (one for customers and other for bank executives) for the purpose of –

1. Testing their awarness about these facilities2. Benefits of property overdraft and cash credit facility (to customers and as well as

to banks)3. Which bank is more favoured by customers (in regard to these facilities)4. Which bank offers maximum advantage to their customers

In a nutshell, my project dealt with overall study of property overdraft and cash credit facility offered by different banks, for which I visited different banks, contacted existing and prospective customers, and discussed with bank executives of different banks about property overdraft facility and cash credit facility provided by them to the borrowers.

RESEARCH METHODOLGY

To carry out this research project was in itself a cumbersome job &hence it required systematic approach considering the important points first & then leading to the secondary aspects. the research was carried out by following the under mentioned methodology.

A: SAMPLE SIZEBANKS NUMBER NAMES

1.Private 2 ICICIHDFC

2.Public 4 Canara bankPunjab national bank

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Bank of IndiaBank of Baroda

B: DATA COLLECTION

PRIMARY DATA Questionnaires Personal interview

SECONDARY DATA Websites Banks brochures &manuals

C: STATISTAL TOOLS

Graphs , Pie charts & tabular representation

D: SAMPLE TECHINQUE Deliberate technique

E: SAMPLE AREA Agra

PROPERTY OVERDRAFT

MEANINGThe word property overdraft means the act of overdrawing from the bank account.In other words, the account holder withdraws more money from a bank account that has baan deposited in it.Property overdraft is that wich is secured against property.

Main featureIt access to a bigger line of credit because property value is substantially higher.

CUSTOMERS FAVOURED

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Benefits of property overdraft are available only to existing customers ,who are already having account in that particular bank. This facility is provided on the trust basis.An individual can overdraw upto the limit as allowed by the bank & in turn bank charges interest on the amount utilized by the individual.

INVESTIGATION BY BANKS

Firstlythe banks asks the valid reason for overdrawing the account ,if its for some valid reason other than speculative purpose then limit is allowed by banks after certain investigation like –Tracing past record of customerHis behaviour towards repaymentDemandsfor proof

There are certain features that differenciate property overdraft facility provided by private banks to that of nationalized bank, like property mortagazed, fees charged, eligibility criteria etc.

CASH CREDIT

MEANING

A cash credit is an arrangement by which customers are allowed to borrow money upto a fixed limit against a bond or credit by one or more sureties or certain other securites usually by hypothecation of stocks in trade.It is a major part of working capital requirement of any unit would consist of maintenance of inventory of raw materials, semi finished goods, finished goods, stores and spares etc. In trading concern the requirement of funds will be to maintain adequate stocks in trade. Finance against such inventories by banks is generally granted in the shape of cash credit facility where drawings will be permitted against stocks of goods. It is a running account facility where deposits and withdrawals are permitted. Cash credit facility is of two types (depending upon the type of charge on goods taken as security by bank.)

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(i) Cash credit - pledge: when the possession of the goods is with the bank and drawings in the account are linked with actual movement of goods from/to the possession of the bank. The physical control of the goods is exercised by the bank.

(ii) Cash credit- hypothecation: when the possession of the goods remains with the borrower and a floating charge over the stocks is created in favour of the bank. The borrower has complete control over the goods and the drawings in the account are permitted on the basis of stock statements submitted by the borrower.

Under this system borrower pays interest only upto the extent to which he uses the credit.Usually this facility rovided is payable on demand ,but the borrower can pay back any time any surplus available with him for the time being.Cash credit is normally used for long terms &is most favoured method of borrowing by the commercial &industrial enterprises doing regular business.

MAIN FEATURES 1. Payable on demand .these are therefore counter part of demand deposits of the

bank.2. It runs like current account.3. Cash credit facility is for meeting the working requirement of business units.

NEED FOR CASH CREDIT

As we know that there is always the time lag from the enterpreneure putting in the money for acquiring raw material for production of the product &finally getting the maoney by sale proceeds from the time he manufactures in case of manufacturing units.In case of trading units the time lag is between accquring the items as such &finally realizing the sale peoceeds by cash.

Digramatically it can be explained as –

Cash Raw material Goods in progress

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Sundry debtors Finished goods

Hence the money invested remains in different stages for a specific period to time till he gets back the money after sale. This is called operating cycle. But the unit cannot wait until the completion of operating cycle ,for further production. As such to enable the unit to function continuously assistance is required by the banks to finance their capital assets blocked in different stages. A part of current assets is financed by current liabilities such as creditors, short term loans etc.(other than bank borrowing).The remaining portion of current assets which requires financing is called the working capital gap.Net working capital representing excess of current assets over the current liabilities (including bank finance) is called the

margin or long term sources provided by the borrower for financing a part of the current assets.This should be minimum of 25%.

VARIOUS METHODS OF ASSESEMENT OF WORKING CAPITAL

Generally nationalized banks adopt these method for assesement of working capital/cash credit limit, given to borrowers.

1.Traditional method2. Current methods

TRADITIONAL METHOD

Method 1. : PBF is equivalent to a maximum of 75% of the working capital gap. The minimum current ratio = 1.17 Method 2 : Borrower to provide a minimum of 25% of the total current assets .The minimum current ratio 1.33:1Method 3 : Borrower to provide a minimum of 25% of the total current asset excluding crore current assets (which should also financed out of long term funds).

CURRENT METHOD

1. Turn over method or the method recommended by PR Nayak committee

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2. Modified Maximum Permissible Bank Finance method.

Turnover Method

This method was recommended as per the nayak committee.All borrowers seeking working capital fund based facility upto & including 2crores ,in case of SSI units upto 5.00 crores are to be brought under this system.Under this system 25% of the projected sales turnover accepted by the bank should be computed as the working capital requirement, of which at least 4/5 (20%) should be provided by the bank & the balance 1/5 (5%) should be by way of promoter’s contribution towards margin requirement.It is clarified by RBI that norm of 20% of the projected turnover prescribed by them is the minimum limit and the banks are free to sanction higher working capital limits at their discretion.

MODIFIED MPBF SYSTEM

This system is applicable for borrowers seeking working capital fund based facility more than 2.00 crores, in case of SSI over 5.00 crores and upto 25.00 crores.The minimum current ratio for extending any credit facility shall not be below 1.14.In this system bank shall review the operating cycle of the borrower, projected level of build up of CA/CL liquidity, profitability &when these parameters are acceptable, the projected bank borrowing will automatically become the MPBF.

INTRODUCTION TO DIFFERENT BANKS

BANK OF INDIA BANK OF BARODA

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PUNJAB NATIONAL BANK CANARA BANK ICICI BANK HDFC BANK

BANK OF INDIA HISTORY

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalised banks.

ACHIEVEMENT

The Bank has been the first among the nationalised banks to establish a fully computerised branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio.

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SERVICES PROVIDED

1.Star insta remit2.star cash management services3.depository service4.safe deposit vault5.safe custody service.6technology/product&services.7.government relief bond8.multi city cheque facility

CHAIRMAN AND MANAGING DIRECTOR

Shri M. Balachandran

BANK OF BARODA

HISTORY

It has been a long and eventful journey of almost a century across 21 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial prudence and corporate governance.

Our new logo is a unique representation of a universal symbol. It comprises dual ‘B’ letterforms that hold the rays of the rising sun. We call this the Baroda Sun.

ACHIEVEMENT

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SERVICES PROVIDED

1.Anywhere banking


Dr. Anil K. Khandelwal

PUNJAB NATIONAL BANK

HISTORYEstablished in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital.The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present.

ACHIEVEMENTPunjab National Bank is serving over 3.5 crore customers through 4062 branches and 447 extension counters - largest amongst Nationalized Banks. The Bank was recently ranked 21st amongst top 500 companies by the leading financial daily, Economic Times. PNB's attempts at providing best customer service has earned it 9th place among Indias Most Trusted top 50 service brands in Economic Times- A.C Nielson Survey. PNB is also ranked 368 amongst the top 1000 banks in the world according to "The Banker" London.

SERVICES PROVIDED

1.Internet banking

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2.Safe deposit vaults(lockers)

3.Electronic fund transfer

3.Issue of draft and cash orders

4.Immediate credit of collection cheques

5.PNB rupee traveller’s cheques(RTC)

6.PNB gift cheques

7.Gold business

8.Tele banking

9. Credit cards, debit cards, ATM’s

10. Mobile banking


shri sc gupta

CANARA BANK

HISTORY

Founded as “Canara bank Hindu Permanent Fund” in 1906, by late Sri. Ammembal Subba Rao, a philan thropist, ths small seed blossomed into a limited company as “Canara bank Ltd.”in 1910 and became Canara Bank in 1969 after nationalization.

Canara Bank is one of the premier banks in the country, accredited with umpteen distinctions.The present status of bank is due to its strong fundamentals and quality customer orientations. Profit making since inception, the bank today epitomize a perfect blend of commercial and social banking.

ACHIEVEMENT

The bank was first among banks to launch networked ATMs and obtain ISO certification.

SERVICES PROVIDED

1.ATM’s

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2.Tele banking

3.Remote customer terminal

4.Merchant banking

5.CMS

6.Debit cards, credit cards

7.Computerized information counter


Sri. M. B. N. Rao Chairman & Managing

HDFC BANK

HISTORY

Incorporated in August 1994 as HDFC Bank Limited, the bank now has a wide network of over 531 branches across 228 cities in India, and over a thousand networked ATM's.

Incorporated in August 1994 as HDFC Bank Limited, the bank now has a wide network of over 531 branches across 2The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

ACHIEVEMENTS

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank".

2005

Asiamoney Awards Best Domestic Commercial Bank

Asiamoney Awards Best Cash Management Bank - India .

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The Asian Banker Excellence

Retail Banking Risk Management Award in India for 2004

Hong Kong-based Finance Asia magazine

Best Bank - India

The Asian Banker Excellence

Retail Banking Risk Management Award for 2004

Hong Kong-based Finance Asia magazine

"Best Bank in India"

Asiamoney Awards Best Domestic Commercial Bank Best Cash Management Bank - India.

Economic Times Awards

"Company of the Year" Award for Corporate Excellence 2004-05.

SERVICES1. ATM card2. International banking3. Personal banking4. Bill pay5. Phone banking6. Mobile banking7. Sweep-in-account8. Super saver account9. Deemat account10. International debit card

ICICI BANK

HISTORY

ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a network of about 614 branches and extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally.

ACHIEVEMENTS

At June 5, 2006, ICICI Bank, with free float market capitalization* of about Rs. 480.00 billion (US$ 10.8 billion) ranked third amongst all the companies listed on the Indian stock exchanges.

SERVICES PROVIDED

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1. Internet banking2. Forex online

3. Cash management

4. Bill payment

5. Trade services

6. Debt online

7. Mobile banking

8. Anywhere banking

9. Phone banking

10. STEPS

CHIEF EXECUTIVE DIRECTOR AND MANGING DIRECTOR

K.V KAMATH

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http://www.icicibank.com/pfsuser/aboutus/newsroom/executivebio/kvkresume.htm

POINTS CONSIDERED BY ALL BANKS

BEFORE EXTENDING LIMIT TO THE

BORROWER

All banks look in for the same things before they sanction limit to borrowers, some of which are described below:

Processing new proposals is more tricky, as banks have to gather many details from the prospective borrower. The following points are considered before by extending limit to the borrower.

1. Whether the applicant is the customer of bank. If so, nature of the account & whether the operations are satisfactory.

2. If already the customer, how was he managing the funds for his business earlier.

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If borrower was not the customer of bank then they see where he is presently banking. And if banking with other bank, the reason that made him to approach their bank for the facilities.

3. An interview with the borrower covering many aspects such as his line of trade/industry, his experience, his partners, requirement of specialized skills in the business, availability of professionally qualified people with him, to be ascertained.

4. Interview also to elicit details of availability of basis infracture , such as power, water, raw material, labour to carry on the production.

5. Whether the party has compiled with the licensing formalities of the government.

6. Location of the place of the business and the profitable nature of business.

7. Presanction inspection to ascertain various aspects, including making market enquires about the party to be made.

8. The case of new industrial units, the technical/managerial aspects with viability & profitability of the unit.

MONITORING OF ADVANCES:

Compliance of sanction condition:

Proper documentation as applicable to the loan should be ensured that allthe sanction condition are complied before disbursing the loan/making available the limit.

STOCK STATEMENTS AS A TOOL TO MONITOR:

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Stock statements should be submitted before 7th of every month. It should be properly signed by the authorised signatory of the unit.

To be scrutinized for the arthemetical accuracy, additions, tallying of opening stock with the clsing stock of previous month’s stock statements.

To ensure that the items included in the stock with the items permitted as per the sanction.

To ensure old/obsolete stocks are not included. To ensure unpaid stocks are properly declared. By watching items placed & taken out, to come to reasonable conclusions

regarding working of the unit To arrive at the drawing limit.

STOCK INSPECTION:

To be done without any prior information to the party. To watch for the unit name board and also hypothecation board in the unit. Before inspecting the stock, a few minutes interaction with the party. Verification of the stock book /purchase vouchers /sale bills to be made. Verification of stocks to be made with all niceties and circumspection as well. In bigger industrial units, the bin cards showing stocks placed in/out will help I

verification. To ensure that the insurance cover is available for the goods stored at the place,

which you are inspecting. Godowns to be inspected on rotation basis.

COMPARISON OF CASH CREDIT LIMIT &

PROPERTY OVERDRAFT FACILITY BY

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VARIOUS BANKS

BASIS OF COMPARISON

1. Product availability2. Eligibility3. Security4. Rate of interest5. Repayment6. Quantum of advance7. Documentation required8. Loan loss cover

PRODUCT AVAILABLE

BANKS PRODUCTS For property for cash others Overdraft credit

1. Canara bank Can mortage Traders finance Can mahila loan scheme scheme scheme

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Home improvement Loan Can mobile

Can carryCan budgetCan rentCan cashCan pension

2.Bank of India Star mortage loan Star education loanscheme Star autofin

Star holidayStar share@tradeStar home loanStar personal loan

3.Bank of Baroda Agricultural finance Line of creditTrade finance (new scheme)Manufacturing &Industrial financeTransport finance

4.Punjab national PNB krishi card bank Composite cash

credit scheme Crop loan PNB kisan sampuran rinYojanaLaghu udyami credit card

5.HDFC Bank corporate credit card forSME’sKisan gold card scheme

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mailto:share@trade

ELIGIBILITY

These facilities of overdraft &cash credit are available to those who fit in the eligibility criteria of different banks which are described as follow –

BANK OF INDIAFOR PROPERTY OVERDRAFTPeople engaged in trade, commerce &business, Professionals, self Employed, prop.firms, patnership firms, HUFs (excluding partnership firms where HUF is a partner), companies, NRIs, individuals with higher net worth, salaried people, agriculturists, staff members.

BANK OF BARODA

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FOR PROPERTY OVERDRAFTIndividuals, Proprietor or Partnership concern and Limited Companies. For transport overdraft - All Transport Operators, Travel AgentsFor agriculture overdraft - Farmer having an existing leases (except "J" Class Lease) with an unexpired period minimum ten years and clear title is available.

FOR CASH CREDIT FACILITYCash Credit facilities can be considered for traders who are established in their line of business preferably for 2 years.


FOR PROPERTY OVERDRAFTEmployees of Central/State Govt./Schools/Colleges/Public Sector Undertakings (PSUs)/Reputed Corporates for meeting their personal/business needs. FOR CASH CREDIT FACILITYAgricultural financing-Progressive literate and illiterate farmers who are owner cultivators, tenants, lessee or allottee farmers with recorded occupancy rights or farmers with ancestral/perpetual rights of cultivation.

CANARA BANK

FOR PROPERTY OVERDRAFTSalaried person, professional, businessman, existing customers with satisfactory dealings, new customers well introduced and credit worthy.Applicant should have regular sourses of income/adequate means to repay the loans.

ICICI BANK FOR PROPERTY OVERDRAFT Eligibility criteria should be minimum 3 years running Business.the person should have sound financial record.

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CASH CREDIT

To avail of cash credit, all you need is a satisfactory credit rating, and preferably a working capital cycle of up to 6 months.

SECURITIES

For providing property overdraft facility & extending cash credit limit bank keep some securities.

SECURITY IN ACSE OF PROPERTY OVERDRAFT

BANK OF INDIAEquitable/Legal Mortgage charge over property in the name of applicant of his/her spouse or parents or third party. The person in whose name the property is to be mortgage stands should either be borrower/co-borrower or a guarantor.

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Note : The property offered should be residential or commercial

building or plot of land (residential/commercial). THE PROPERTY SHOULD BE self occupied or leased

out to acceptable individuals, governments agencies, PSUs, Corporates,etc.

Agricultural land is not acceptable as security for this facility.

BANK OF BARODA

Tangible collateral Securities in the form of mortgage of land (not agricultural land) and building is acceptable as security.

National Savings Certificates, Government Bonds, our Bank's Term Deposits, Assignment of Life Insurance Policies, approved shares & bonds standing in the name of the borrower/proprietor/partner/director only, are also acceptable as security.


Equitable mortgage of non-encumbered residential house/flat, commercial or industrial property, in the name and possession of the borrower. The property should be of value equal o 150% of the loan amount.

ICICI BANK

Self occupied property, approved by government authority, constructed,

HDFC BANK

Security in case of Existing customerExtension of the mortgage already created on the property financed and/or other security as may be required by HDFC.

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For New Customer For others, security for the loan is a mortgage on the entire property being improved and/or other security as may be required by HDFC.

SECURITY IN CASE OF CASH CREDIT

For providing cash credit facility generally nature of security is same in all abnks as cash credit facility is provided to meet working capital requirement hence assets created out of this facility are kepy as security by baks.

Nature of Security

Hypothecation of stock in trade, receivables, machinery,office equipment etc.

INTEREST CHARGED

Interest is charged on the amount and the number of days there’s a debit balance in your account. the interest rate on the overdraft is slightly higher than a regular loan, as the hypothecation fees make it more costly. overdrafts are convenient tools, if used prudently. But run the overdraft too long or mismanage and miscalculate cash flows, and you could wring cash from your business.In case of HDFC &ICICI bank, the interest is charged upon the amount that is drawn from the account and not the amount of loan that is sanctioned.The interest is charged on Average daily outstanding balance.

IN CASE OF PROPERTY OVERDRAFT

BANK OF INDIA This bank charge interest @BPLR, at present

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10.75% p.a at Monthly rests. Interest concession for women beneficiaries 0.25%p.a.

BANK OF BARODA BPLR +1.00

PUNJAB NATIONAL BANK BPLR +1.50%

CANARA BANK Upto 2 lacs -- 13.5% p.a Above 2 lacs -- 14.5% p.a

ICICI BANK ICICI bank charges interest on 2 basis a) Income basis 10.75% b)Commercial property 11.05%

IN CAES OF CASH CREDIT

BANK OF INDIA Interest depends on the amount of cash withdrawn & the type of security hypothecated by the bank.

BANK OF BARODA For bills having tenure upto 180 days 2% below BPLR

For bills having tenure more than180 At BPLRDays but upto 1 year ( 11% )For bills having tenure more than 0.75% over1 year BPLR(11.75%)

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CANARA BANK

PUNJAB NATIONAL BANK Advance upto Rs 50,000 at BPLR minus 2%.Advance above Rs 50,000 & upto Rs 2 lakh at BPLR minus 1%.Advance above Rs 2 lakh & upto Rs 10 lakh at BPLR

ICICI BANK Interest is available at both Fixed and Floating rates, with a 12-18 month review period.

REPAYMENT

Repayment period for property overdraft facility& cash credit facility provided to the borrower differs from bank to bank. Repayment period of banks are given below –


BANK OF INDIA Ranges upto 20 years.

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BANK OF BARODA Maximum 10 years with 10% reduction in the Operating limit every year.

PUNJAB NATIONAL BANK Overdraft facility is to be renewed / reviewed Annually.

CANARA BANK Repayment period ranges upto 20 years.

ICICI BANK Repayment is on the basis of MAD (minimum amount due) in order to avoid NPA(non performing assets).

QUANTUM OF ADVANCES


(Amount to be sanctioned depends upon the repaying capability of the borrower).

(Rs.in lacs)BANK OF INDIA minimum maximum

For agriculturists 0.50 2.00

For others : Individuals/prop. Firms/ 1.00 100.00

patnership firms/co.

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BANK OF BARODA1.00 5.00

(in case of rural branches) 100.00

(for other branches)

PUNJAB NATIONAL BANK2.0 100.00

ICICI BANK limits available upto 10 lakhs – 3 crore

In case of Residential property 60% of M.V In case of Commercial property 45% of M.V

HDFC BANK limits available upto 50,000 – 10 lakhsIn case of residential/ commercial property 60% of M.V

DOCUMENTATION

Documentation for availing property loan is simple & lucid.Documentation required by various banks are as follow –

NATIONALIZED BANKS

Docunentation required by nationalized are almost same, differing in some respects. The Documentation is generally required in the form of three proof -

Income proof - Salaried 2 monnth salary slip 2 years from 16 &income tax rteturn 6 months bank statement

Self employed –

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3 year balance sheet/profit & loss account3 year income tax return6 month bank statement

Residence proof - Besides the above you also need to provide your identity, signature Proof, age &address proof.

Proof of identity - Passport, PAN card, voter’s id, Bankers verification, utility bill, Insurance policy.

PRIVATE BANKS

Documents required by private banks are:

ICICI BANK

Passport size photograph of all the applicants Residence and age verification, which may be established from the PAN card, Election

ID, Passport, Driving License or Ration card Bank statements for the last six months Latest salary slip/statement showing all deductions in case of employed applicants Certified copies of Balance Sheets and Profit and Loss accounts, IT acknowledgments,

advance tax challans (for both company/firm and personal account) for the last three years in case of self-employed applicants

Memorandum/ Articles of Associations for companies, partnership deeds for firms and a brief profile of your company/ firm in case of self-employed applicants

Property Documents (as and where applicable) :

Application form duly filled and signed. Draft sale agreement. Previous sale agreements. NOC to mortgage from society/ builder as per our format. Society Share certificates. Occupancy certificate (Ready property or U/C property). Original stamped receipts for the payments already made to the builder/ seller,till date 37 I Clearance form the appropriate Income Tax authorities, if applicable List of additional amenities from builder where applicable

HDFC BANK

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Salaried Customers Self Employed Professionals Self Employed Businessman

Application form with photograph



Identity and Residence Proof

Identity and Residence Proof Identity and Residence Proof

Latest Salary-slipEducation Qualifications

Certificate and Proof of business existence

Education Qualifications Certificate and Proof of business

existence

Form 16Last 3 years Income Tax returns

(self and business)Business profile

Last 6 months bank statements

Last 3 years Profit /Loss and Balance Sheet

Last 3 years Income Tax returns (self and business)

Last 3 years Profit /Loss and Balance Sheet

Processing fee cheque

Last 6 months bank statementsLast 6 months bank statements

(self and business)

Processing fee cheque Processing fee cheque

Detailed cost estimate from architect/engineer for the property to be extended.

LOAN LOSS COVER

(In percentage)

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HDFC BANK - 86.20%

PNB BANK - 84.20%

ICICI BANK - 44.60%

CANARA BANK - 47.60%

BANK OF BARODA – 52.10%

BANK OF INDIA -44.80%

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FINDINGS ON THE BASIS OF SURVEY CONDUCTED

Response by customers Response by bank executives

Response by customers

1. Awareness 2.6 = Agreed –Neutral

2.6

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2. Benefits 1.9 =Stro. Agreed –Agreed

1.9 3. Co-operative &efficient staff 2.6= Agreed –Neutral

2.6 4. Many formalities 1.6=Stro. Agreed –Neutral

1.65. Favourable ROI 3.3 =Neutral –Disagreed (rate of interest)

3.36. Easier repayment 2.7=Agreed - Neutral

2.7

7. Update information provided 2.5= Agreed -Neutral

2.58. Property overdraft &cash credit 1.6= Stro.agreed -Agreed facility fits requirement

1.6

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9. Full utilization of limit 1.5= Stro. agreed -Agreed

1.5

10. Trransparency in dealings 2.5= Agreed -Neutral

2.5

Response by executives

1. Beneficial 1.4=Stro.agreed -Agreed

2. Easy recovery of cost 3.6=Neutral –Disagreed & profitability

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3.6 3. Customers more inclined 1.7=Stro.agreed -Agreed

1.7

4. Higher risk 1.3=Stro.agreed -Agreed

1.3

5.Transparency in customer dealing 2.1=Agreed -Neutral

6. Repayment in time 3.0= Neutral

7. Provide update information 1.4= Stro.agreed -Agreed

1.4

8. Privilage given to some customers vary from bank to bank

9. Negotiable interest rates vary from bank to bank

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ANALYSIS

Analysis on the bais of comparision

Analysis on the basis of survey conducted

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ANALYSIS ON THE BASIS OF COMPARISON MADE

After analysis of different private banks viz. ICICI bank, HDFC bank and different nationalized banks viz. Bank of India, Bank of baroda, Canara bank, PNB bank in regard to property overdraft and cash credit facility offered by them the following conclusion was drawn

1. Banks offer many new schemes to attract customers towards property overdraft &cash credit facility.2. Rate of interest are of competitive nature, and in some banks interest rates are negotiable.3. In case of nationalized banks (Punjab national bank) enjoyes an edge over other banks in regard to property overdraft facility, in a way of attractive star home loan scheme with favourable rates of interest. 4. In case of private players ( ICICI bank) enjoys an edge over other bank in regard to

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these facilities.

5. Property Overdrafts are convenient tools, if used prudently. But run the overdraft too long or mismanage and miscalculate cash flows, could wring cash from business.

If borrowers are unable to meet the debits in their account, then they could get trapped in a vicious borrowing cycle.

RETURN ON CAPITAL EMPLOYED

(RANKING)

3 - HDFC BANK 4th4 – PNB BANK 1st5 – ICICI BANK 2nd6 – CANARA BANK 3rd7 – BANK OF BARODA 5th

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8 – BANK OF INDIA 6th

NPA (non performing assets) GROWTH RATE

ANALYSIS ON THE BASIS OF SURVEY CONDUCTED

The main reason of flourishing business of the private banks (ICICI & HDFC bank) are:

Services of private banks. Increasing awaeness among people. Speedy transaction. Banks environment and staff response Large amount of advance extended to borrower. Lesser formalities in comparison to nationalized banks.

BEST PROPERTY OVERDRAFT FACILITY AS PER CUSTOMER RESPONSE

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CONCLUSION

There are too many banks competing for the same share of the pie, giving neck to neck competition. A growing economy, greater consumer confidence and appetite for credit, and greater thrust on technology have helped the more aggressive Public and Private banks not just to grow their business, but drum their balance sheet into shape.

ICICI BANK at Rs. 62,063 crore, has the largest retail portfolio and is the leader in home loan. The most diversified universal banks, ICICI boasts of more than 15 million customers accounts, 600 branches and a network of 2000 ATMs across the country.

The Property overdrafts are convenient tools, if used prudently. But run the overdraft too long or mismanage and miscalculate cash flows, and you could wring cash from your

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business. If you are unable to meet the debits in your account, you could get trapped in a vicious borrowing cycle. If used sparingly and for emergencies only, the overdraft facility can actually curtail your interest outflows. That’s because in an overdraft, you pay interest only on the amount you utilise and are charged interest only for the time you have utilised it. Also, once you have paid back your overdraft, you can use it again as and when required.

With the economy surging, things are getting better and better in the banking industry. NPA’s are shrinking, retail loans are growing and the bottomlines are turning a darker shades of black.

RECOMMENDATIONS

In order to get an edge over other banks, I would recommend that –

1. The banks can perform at their best if they adopt the fund raising capability of PSU’s and the service culture of foreign banks.

2. Banks should penetrate in the areas and services they are already present in.

3. A large portion of India’s savings is not coming into the banking system. Much of that chunk of savings is caught up in unproductive areas therefore, in order to spread awarness about property overdraft and cash credit facility and the benefits available to customers, Banks could tie up with micro finance institution, this will benefit bank to expand their network in smaller towns.

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4. Banks should prepare for change and should adopt a structured approach towards assessing the implications of changes in the landscape and preparing for what may lie ahead, as many of the foreign banks have already step in, giving tough competition.

5. Major focus should be laid on financing SME’sbecause-

There is lot of money to be made from SME’s.

SME’s have a repayment record comparable to the best borrower.

Large corporates are increasingly outsoursing work to SME’s.

APPENDIX

QUESTIONNAIRE (Customers)

Kindly circle the right rating against each of the following

1. You are well aware about the new schemes introduced by banks. 1 2 3 4

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2. Property overdraft and cash credit facility offered by banks are 1 2 3 4 quite beneficial to you.3. Bank staff providing services are very co-operative and efficient. 1 2 3 44. Too many formalities to be performed before enjoying property 1 2 3 4 overdraft and cash credit facility.5. Rate of interest charged are favourable. 1 2 3 46. Mode of repayment is easier. 1 2 3 47. You are kept update with the recent changes in the rate of interest 1 2 3 4 & other changes in schemes.8. Property overdraft limit and cash credit limit fixed by banks fits 1 2 3 4 your requirement.9. You fully utilize the limit given to you. 1 2 3 410. Bank staff are transparent in their dealings. 1 2 3 4

11. Property overdraft facility is best provided by public/ private bank

12. Cash credit facility is best provided by public /private bank

QUESTIONNAIRE(Bank executive)

1. Property overdraft and cash credit facility provided to 1 2 3 4 borrowers are beneficial to banking business.2. Cost invested in providing these facilities is easily 1 2 3 4 recoverable with profit.3. Customers are more inclined towards these facilities. 1 2 3 44. Higher risk is involved in providing these facilities. 1 2 3 45. Customers are transparent in their dealings. 1 2 3 46. Borrowers repay the amount in time. 1 2 3 4

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7. You keep the customers update with all the recent 1 2 3 4 changes in the scheme.8. Privilage given to some customers in regard to these 1 2 3 4 facilities.9. Interest rates are negotiable. 1 2 3 4

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