ACKNOWLEDGEMENT My most sincere thanks and everlasting gratitude to prof R.VENKATARAMAN, M.tech, FIE, Principal of SRM engineering college for having given me this opportunity to do the course in this college. My special thanks to the Dean, Dr.THAMPI LATIFF, SRM institute of Management studies, SRM Engineering college. I profited immensely by the thought provoking questions, frnak discussions and critical appraisal of my work by my respected guide Shri.T.RAMACHANDRAN, M.Com, M.Phil, MBA, senior faculty, SRM institute of Management Studies, during the course of my project work. I wish to express my whole hearted thanks and heart felt gratitude for his able guidance. I am very much indebted to “THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED” for permitting me to do this project. I am thankful to Shri.R.RAJENDRAN, MA, HDC, secretary and Shri.Pandiyan MA, Manager of Algesa Nagar Branch and all the staff for their kind co-operation in completing the project.
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ACKNOWLEDGEMENT
My most sincere thanks and everlasting gratitude to prof R.VENKATARAMAN, M.tech, FIE, Principal of SRM engineering college for having given me this opportunity to do the course in this college.
My special thanks to the Dean, Dr.THAMPI LATIFF, SRM institute of Management studies, SRM Engineering college.
I profited immensely by the thought provoking questions, frnak discussions and critical appraisal of my work by my respected guide Shri.T.RAMACHANDRAN, M.Com, M.Phil, MBA, senior faculty, SRM institute of Management Studies, during the course of my project work. I wish to express my whole hearted thanks and heart felt gratitude for his able guidance.
I am very much indebted to “THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED” for permitting me to do this project. I am thankful to Shri.R.RAJENDRAN, MA, HDC, secretary and Shri.Pandiyan MA, Manager of Algesa Nagar Branch and all the staff for their kind co-operation in completing the project.
My special thanks to Shri.GOWRI SHANKAR, Internal Auditor of Valliammai Society for his valuable guidance in completing the project.
My special thanks to all faculty members in the SRM Institute of Management Studies for their constant support and encouragement throughout my career.
Last but not least, my sincere thanks to all my family members and friends for their kind co-operation in completing this project.
CONTENTS
ACKNOWLEDGEMENT
LIST OF TABLES
LIST OF CHARTS
ABBREVIATIONS
CHAPTER PAGE NO.
1. AN INTRODUCTION TO HOUSINGFINANCE INDUSTRY - 1
2. INDUSTRY PROFILE - 7
3. BANK PROFILE - 31
4. OBJECTIVES OF THE STUDY - 36
5. METHODOLOGY - 37
6. LIMITATIONS - 40
7. ANALYSIS & INTERPRETATION - 41
8. FINDING AND SUGGESTIONS - 70
9. CONCLUSION - 74
APPENDIX
BIBLIOGRAPHY
LIST OF TABLES
Table No. Name of the table Page No.
1. Census gouses and residential dwelling - 19
2. Distribution of houses by type of
Dwelling – 1989 - 19
3. Tread in urbanization - 19
4. Quality of housing stock - 20
5. Housing shortage - 20
6. Public and private sector investment
In housing - 20
7. Progress of housing society - 30
8. Chengalpattu co-operative urban
bank growth - 34
9. Loans sanctioned occupationwise 1996-97 - 54
10. Loans sanctioned occupationwise 1997-98 - 55
11. Loans sanctioned occupationwise 1998-99 - 56
12. Customer view – interest rate - 57
13. Services/Performance of the bank - 58
14. Loans sanctioned – as per income group - 59
15. Customer view – ranking of priority - 60
16. Customer view – about terms - 61
17. Basis of selecting the bank - 62
18. Customer view – procedural aspect - 63
19. Loans sanctioned – as per quantum of amount - 64
20. Loans sanctioned – purpose wise - 65
21. Outstanding dues – as per installments - 66
22. Customer view – sources of identification - 67
23. Likert sale on services/Performance of the bank - 68
24. Likert scale on interest rate of the bank - 69
LIST OF CHARTS
Chart No. Name of the chart Page No.
1. Chengalpattu Co-operative urban bank growth - 34 (c)
2. Performance of Chengalpattu Co-operative urban bank - 52 (c)
44. NARDCO – National Real Estate Development Council
INTRODUCTION
CHAPTER – 1
INTRODUCTION
Housing is a basic necessity of life, ranked behind only to food and clothing in importance. There is a strong urge in every individual , whether rich or poor, to own a house. House is not a place of dwelling alone, it also satisfies an individual’s social and psychological needs. House by itself is not a productive asset but investement in housing helps in increasing productivity, provision of shelter is thus closely linked with a country’s overall socio – economic development.
According to 1971 census, more than half of the households live in houses made of mud and gross. Nearly 25-30 percent of the urban population live is slums. In 1971, 19.9% of our people 108.8 million live in urban areas. The percentage went up to 21.1 with 128.9 million in 1976, 22.2% with 151.4 million in 1981 and rule of urbanization is estimated to go upto 29.0% with 291 million in 2001.
Number of specialized branches as on 30-06-95 public sector banks totally 681 and private sector banks totally 54 in that no housing finance branch in private sector banks and out of 681 public sector banks only 2 are so tremendous, so huge and they are also getting more and more difficult. We have the problem of rural housing versus urban housing. In urban housing, the problem is that of availability of land and the price of which the land is available. In rural housing land is not the problem average cost of a house in rural areas is also low. A house gives a sense of security to those who own one when one has a house he gets better shelter and security for members of his family.
After 50 years of independence, we are short of 22.9 million housing units (1991 census) 50% of urban population lives in slums, without access to hygienic facilities. More than 90% of this shortage involves the environmentally vulnerable sections of the society. This sector is thus the engine for economic growth and a catalyst for economic recovery. Housing is also imperative for dignified living and needs to be given the status of an essential commodity.
Percentage of housing investment to total investment in economy as per English five year plan budgetary allocation Rs.70, 000 crore. Expenditure as housing (public sector contribution) as percentage of total expenditure up to seventh five year plan 7.80%.
HOUSING FINANCE COMPANIES
Housing finance institutions have two streams-housing finance companies (HFC) and co-operative housing societies. The co-operative housing fiancé system, which is more than 80 years old, is the best example of “self help” in housing. It has two-tier structure – Apex federations at state level and co-operative housing societies at primary level numbering about 70,000 which functions under the Registrar of co-operative societies in various states like co-operative banks and institutions. Housing companies (HFC’s) are comparatively of recent origin.
There are a large number of HFCs but the most prominent among them with sizable equity base and operations are only two viz., The HOUSING URBAN DEVELOPMENT Corporation Ltd. (HUDCO) and the Housing Development Finance Corporative Ltd. (HDFC). During the last 4 years particularly after the establishment of NHB, several HFCs setup sponsored by public sector banks, LIC and GIC have come up.
The Gujarat Rural Housing Corporation, setup by HDFC itself, Can Fin Homes Ltd., sponsored by Canara bank and SBI Homes Finance Ltd., sponsored by State Bank of India, Indian Bank Housing Finance sponsored by Indian Bank.
The housing scenario in India has revealed that more than six lakh people live without a roof on top. The total housing stock in the country is around 142.96 million units and the total demand for housing is more than 170 million units. This shortage is given at a 30 million housing units. This housing shortage requires a whopping Rs.1, 50,000 crore if the gap is to be bridged. The funding of this amount cannot come from the government alone. It needs the co-operation of various agencies and financial institutions
Hasmukh Thakoredas Parekh setup Housing Development Finance Corporation Limited in October 1977 and setup Gujarat Rural Housing Finance Corporation Ltd., in 1986. In 1951 itself H.T Parekh writing about a housing society for the Bombay state and he follows this interest through several initiatives till they end up in HDFC.
It was in recognition of the mutually supportive roles of shelter and development that in mid eighties following declaration of 1987 as the “International year of shelter for homeless” concerted efforts were made in our country to formulate a comprehensive National Housing Policy, encompassing all the elements relevant to shelter development.
People’s housing problem is now receiving serious attention from both the government and the public. It has many facets relevant to different sections of the community. Almost 40% of the people living in urban or rural areas have income below the poverty line. Even among them there are pavement-dwellers, hutment-dwellers, those living in somewhat secured jhopadpatties, old dilapidated houses, old rented premises like chawls, where a majority of tower and middle classes live preciously, housing common toilet facilities.
The financing of houses involves a lot of money which is several times the income of the individual. The housing finance market in India is the growth stage. There are around 96 companies in India out of which only 37 have registered themselves with the NHB. Out of these 37, only 26 have been approved by the NHB for refinancing. Now that more banks andinsurance companies have also jumped into the hand wagon, the competition is getting hot.
BUDGET SPECIAL IMPACT 2000
The extension of infra structure status for housing project by another 2 years up to March 2003. The extension of sec.54 of the Income tax act 1961 investement in second and subsequent houses granting exemption from capital gains. A hike in the limit on housing loans from Rs.10,000 to Rs.20,000.
Government Housing Agencies
Central level State level
NBO Housing Board
CBRI Municipal Corporation
Hindustan Pertab Ltd. Improvement Trust
NBCC Development authority
CPWD Building centers
TCPOs Regional Research Laboratory
National Council for Cement and Slum ImprovementBuilding Materials development method
BIS Rural Housing Bank
BMTPC
Keeping in view of the importance of the infra structure projects like “building ofhouses / plots”. I have selected the topic “Housing Finance in Chengalpattu by Co-operative Urban bank” to prepare project report as per University of Madras and submit to the authorities as a part of my MBA degree. I have identified “Chengalpattu Co-operative Urban Bank Ltd.”, Chengalpattu to prepare my project report. The detailed procedural aspects of the bank, their terms and condition schemes are clearly mentioned in the report. Further, the detailed analysis of data about the perfprmance of the banks is clearly given in both tabulation form and charts. Finally, I have concluded this report with my own views and suggestions accordingly.
THE CONTENTS OF THE PROJECT ARE HEREBY GIVEN IN BRIEF
1. Industrial profile about the subject of the project report2. Bank profile3. Objectives of study
a. To find out procedure for sanctioning house loanb. To study the clear picture of housing societyc. To analyse the bank operation in the field of housing financed. To find out the attitude of customers views about housing financee. To give suggestions for the better performance of the bank
4. Methodology 5. Limitations6. Analysis and interpretation7. Findings and suggestions8. Conclusion
INDUSTRY PROFILE
CHAPTER – 2
INDUSTRY PROFILE
Housing is the key to improve the living standards of the family. The advanced countries have reached their high living conditions among other reasons, by means of providing affordable housing, quantity wise and quality wise. In a study prepared by the International Union of Building Societies and Savings Association, Chicago. The case housing in the developing countries, Harold Robinson writes “Rural or small town housing may be needed at times to slow down an excessive country to town movement”. Lack of housing in rural areas creates a push to the city equal to that of a city’s pull and therby creates additional housing problems. The United Nations General assembly in December 1988 proclaimed the “Global Strategy Shelter to the year 2000” (GSS)
Statistics indicate that, in developed countries, investment is housing as a percentage of GNP varies between 3.5% and 7%, while in India, though no such statistics are available, the percentage of GSP is estimated to be between 1 to 2. This would be a measure of problems in terms of financial magnitudes. Another way of looking at this problem, as indicated in a report is that, while in India for every 1000 persons 3.5 houses are being built, what we need to build is 8 to 10 houses per 1000 persons. This implies that we need to treble our building programmes to take care of population increase and backlog of housing.
HOUSING FINANCE SYSTEM IN SELECTED FOREIGN COUUNTRIES
1. CANADAThe present National Housing Act (NHA) which was introduced in 1954 was the principal
piece of Federal legislation dealing with housing urban developments.The Central Mortgage and Housing Corporation (CMHC) is the crown agency charged with
carrying out Federal housing legislation. The corporation assists construction activity in two ways, by granting the loans made by private approved lenders for house construction and by granting direct house loans under its various schemes.
MORTGAGE INSUARNCE FUND
Federal assistance for ownership for housing projects built by private entrepreneurs are provided for the most part for the system of mortgage insurance introduced in 1954. Under these arrangements loans are advanced wholly by the government to lend under the Act. Most life insurance companies and trust and loan companies as well as charted banks and Quebec savings are lenders under the act. The guarantee on their investment is provided by CMHC through the operation of a mortgage insurance fund built up from fees paid by NHA borrowers. Each borrower must provide from his own resources toward margin may consist of cash, land or his own labor or a combination of these elements. Insured mortgage loans are normally available to individual home-owner applications, to builders constructing houses for sale or for rent and to some special groups such as co-operative housing associations.
2. KOREA
In Korea, there are eight special banks for the specified purposes. These banks play a significant role in the Korean economy. One of these banks, the Korean Housing Bank (KHB) was setup in 1967 under the KHP act with a total paid up share capital of 5.05 million won.
Under the Korean Housing Bank Act, the KHB is required to give loans and manage funds for the construction of houses, purchase of newly built houses and development of housing sites. The KHB also advances loans to the local government and small and medium scale enterprises for the production of low cost housing materials and quipments.
Housing lotteries are issued by the KHB for the purpose of mobilsing funds to finance housing construction on comparatively easy terms. Fiscal and other concessions are offered to the winner of the lotteries. Advances out of the amount collected by way of lotteries are mainly to the bereaved families of war dead and members of the low income group.
The National Housing Bonds are issued in pursuance of the objectives of National Housing Construction Promotion law. The term and conditions of the bonds are governed by the KHB act.
Among the varied savings mobilization schemes, housing installment savings is a contractual savings deposit scheme, directly linked to the housing loan extension, which is offered solely by the KHB. There are two types of housing installment savings deposits. Under one, the subscriber makes monthly installment payment for a certain period to qualify for a housing loan, whereas under the other monthly installments are made for the repayment of the principle and the interest on the housing loan already advanced. Besides there are two other schemes “Welfare housing Installment Deposit Scheme” (WHIDS) and “salary and wage earners fortune formation savings deposit scheme. Under these schemes, depositors are paid an attractive rate of interest on their deposits and they are eligible for housing loans.
3. SINGAPOREAmong the various agencies engaged in developing / financing of housing in Singapore, the most important are Housing Development Board and Housing and Urband Urban Development Corporation – both statutory bodies. In the private sector, finance compnies plays an important role in financing construction of residential properties. Besides these commercial banks, post office savings banks and insurance companies also make funds available to their customer for housing.
The housing and Development Board constituted under housing and development act has been pioneering work in several housing estates with high – rise buildings of flats which are almost in nature of self contained townships. Te board derives the funds from government, through budgetary grants, market borrowings subsidies and rental income from flats.
The housing and Urban Development Corporation develops housing flats in urban areas and central business districts which are in a very luxury flats for upper middle class and higher income groups. Finance companies play an important role in development and financing of residential and
commercial property in Singapore. The sources of funds for their activities are deposits accepted from the public.
The commercial banks play only a marginal role in providing housing finance. They extend housing loans only to their selected customers, who have other business dealings with them. Housing loans are given purely on commercial terms.
Post Office Savings Banks (POSB) gives 90% mortgage loans to its depositors under its ‘home ownership scheme’. The scheme has proved immensely popular. The POSB does not grant loan for buying commercial properties. The insurance companies also advance loans for housing but the amount involved is small and the loans are restricted to the policy holders of the company.
4. SWEDEN
Sweden is one of the few countries in the world, where housing construction has attracted large scale investment since the sixties. In fact, the growth rate of housing construction has slowed down in the last few years. Primarily due to the fact that the demand for new houses could be satisfied form the existing stocks of houses.
HOUSING POLICY
The main foundations of Sweden’s housing policy may be summarized as follows:
1. Well – organized municipal planning.2. Active municipal land policy.3. Rational housing production.4. State aid in the form of loans and grants for the construction and mordenisation of
dwellings.5. Grants to groups of people with limited economic resources or special housing needs.6. Rent legislations.
The implementation of housing policy is based on the co-operation and the division of work between the state and the municipalities.
PLANNING OF HOUSING CONSTRUCTION
EACH YEAR THE Ricksdag (parliament) approves a housing construction plan for the next 3 years, which indicates proportion of total resources of the society that could be allocated for housing construction. The plan stipulated the total amount of dwellings and complimentary facilities, in terms of square meters, for which state housing loans may be granted and the extent to which housing construction, not subject to state loans may be permitted. A similar plan is also approved with regard to state support for renewal and modernization of existing houses.
Thus, public and private sectors, together strive for the ordinarily promotion of housing activities. In this context, the role of Joint Advisory Committee (JAC) established in 1973, with representatives from the building societies, the Bank of England, The Treasury, The Department of the Environment and the Registry of Friendly Societies needs to be mentioned. The JAC’s objectives are to encourage the growth of owner-occupation to maintain sufficient funds to enable
the housing sector to plan for a high and stable level of activities, to work towards the stabilization of house prices and to maintain an orderly housing market.
5. USA
The major financial institutions such as Commercial Banks, Life Insurance Companies, Savings & Loan Association (SLAs) and Mutual Savings Banks provide funds for construction activities, the federal agencies, such as Federal Housing Administration (FHA), the Veteran’s Administration (VA) and Federal National Mortgage Association (FNMA) have made significant contribution in the development of the mortgage market, the first two viz., FHA and VA respectively, insure and guarantee mortgage bonds whereas the last oone sells mortgage bonds and buys from investors/lenders.
FEDERAL HOUSING ADMINISTRATION (FHA)
FHA was established in 1934. Its main objectives are to provide a sound pattern of mortgage lending, to encourage wider home ownership and to upgrade housing standards in the USA. These purposes are achieved by insuring mortgage loans made by lenders in accordance with the FHA housing and credit standards. Such loans are made after a careful scrutiny of the long term value of the security and the prospective borrower’s ability to pay.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
With the establishment of the FHA, the need for an agency to distribute the mortgage money on national basis arose. Accordingly, in 1938 the Federal National Mortgage Association was formed. The FNMA is also authorized to borrow funds privately by issuing debentures and short term discount notes with the approval of the US treasury but they are not guaranteed by the US government.
The FNMA purchases only marketable mortgages from private institution lenders. There are generally two types of purchase contracts. Under the ‘immediate purchase contract’ the seller offers mortgages for immediate purchases, the FNMA purchase them after scrutiny, such contract is known as ‘Over the Counter Transaction’. The ‘Stand-by Commitment’ contract provides for the future purchase of mortgage by FNMA.
VETERAN’S ADMINISTRATION (VA)
In 1940, the congress passed a legislation, which permitted the Veterans Administration (VA), under title III of the Act ,G1 Home loan and the loan guarantee programmes to guarantee mortgage loans. The guarantee is payable by cash. The Veteran is required to repay the loan in full. In case of default, the outstanding is deducted from any future benefits that he may receive from the Veteran’s Administration.
SAVINGS AND LOAN ASSOCIATIONS
In the USA, bulk of the mortgage bonds are subscribed by Savings and Loans Association (SLA) followed by Commercial banks, Life Insurance Companies and mutual savings banks. SLA’s are chiefly concerned with the welfare of the savers and their concern is prompted by the need to secure funds to support home financing and home ownership.
HOUSING FINANCE SYSTEM IN INDIA
The responsibility to provide housing finance largely rested with the government of India till the mid-eighties. The setting up of the Ntional housing Bank (NHB), a fully owned subsidiary of the Reserve Bank of India (RBI) in 1988 as per the apex institution marked the beginning of the emergency of housing finance as a fund based financial service in the country. It has grown in volume and depth with the entry of a number of specialized financial institutions / companies in the public, private and joint sectors, although it is an early stage of development.
NATIONAL HOUSING BANK
The NHB was established in July 1988, under the National Housing Bank Act 1987 as an apex bank, on the lines of IDBI and as a wholly – owned subsidiary of the RBI. It is the principle agency to promote housing finance institutions at the regional and local levels and to provide financial and other support to such institutions connected with housing and human settlements.
OBJECTIVES AND BUSINESS
1. To promote, establish, support or aid in the promotion establishment and support of housing finance institutions.
2. To make loans and advances or render any other form of financial assistance whatsoever to housing finance institute scheduled bank
3. To subscribe to purchase stocks, shares, bonds debentures and securities of every other description
4. To guarantee the financial obligation of housing finance institutions and under write the issue of stocks and share bonds, debentures and securities of every other description of housing.
POWER TO COLLECT CREDIT INFORMATION
The housing finance institutions can be directed by the NHB to submit specified credit information.
1. The amount of laws and advances and other credits facilities2. The nature of security taken for such loans3. The guarantees furnished4. Any other having a bearing on the credit worthiness of the borrower.
NHB GUIDELINES
NHB has spread operating guidelines for the HFCs in India. They must confirm to these guidelines to be eligible for financial / refinance support from the NHB. There are 21 HFCs in the country which are registered with the NHB as the apex institution housing bank with statutory obligation to regulate and supervise the housing finance industry.
SHARE CAPITAL NORMS
The minimum capital of the HFCs registered share with the NHB must be 3 crores. The contribution of the promoters to their share capital should be in conformity with the guidelines issued by the Securities and Exchange Board of India (SEBI) from time to time. According to these, such contribution must be 25% and 20% of the post issue capital up to Rs.100 crore respectively as long as HFCs owe any money to the NHB. In addition, HFCs must offer at least 20% of equity capital to the public as a condition present to listing of shares on stock exchanges. According to NHB stipulations, HFC should list shares on at least one stock exchange. The NHB in its direction and on the merits of each is willing to participate in the share capitl of HFCs to the extenc of 20% of their paid-up capital.
LOANS LENDING NORMS
The main objective underlying the promotion of NHB supported HFC is to extend access of industrial finance to provide a solution to the serious shortage of dwelling units.
TARGET GROUP
The bulk of lending by the HFCs has to be directed to individuals / groups of individuals. In other words, the target group of institutional housing finance is individual households.
FIANACIAL ASSISTANCE FORM NHB TO HFCs
NHB has so far approved 17 HFCs (excluding HUDCO) as eligible to draw refinance from it. As at the end of June 1992 the HFCs which have been approved for the purpose of reference.
1. AB Homes Finance Ltd.2. Akshaya Avas Niraman Villa Ltd.3. Canfin Homes Ltd.4. Cent Bank Home Ltd.5. Cent Bank Home Ltd.6. Dewan housing Development Finance Ltd.7. Fair Growth Gome Finance Ltd.8. Gujarat Rural Housing Finance Corporation Ltd.9. HDFC Ltd.10. Ind Bank Housing Ltd.11. India Housing Finance and Development Ltd.12. LIC Housing Finance Ltd.13. Parshwanath House Finance Corporation Ltd.
14. PNB House Fin Ltd.15. Saya Housing Finance Company Ltd.16. SBI Home Finance Ltd.17. Vysya Bank Housing Finance Ltd.
LOANS AND ADVANCESS GIVEN BY NHB FOR THE YEARS 1991-92 & 1992-93
The National Sample Survey Organisation (NSSO) has been collecting certain data on housing since the mid fifties though not as a regular feature. The latest surve worth mentioning is the comprehensive survey on “Housing conditions carried out by NSSO in both rural and urban areas during its 44th round ( July 1988 to June 1989)
HOUSES AND RESIDENTIAL DWELLINGS
The house list as per 1981 census shows that there were 151 million censuses of houses of which more than three fourth were in rural areas. These census houses includes residential dwelling mixed (resident cum commercial dwellings and commercial houses)
TABLE 1
CENSUS HOUSES AND RESIDENTIAL DWELLING (in million)
Source: Prominent Facts of Housing in India, NBO & UN Regional Housing centre for ESCAP Nirman Bhavan, New Delhi – 1990.
HOUSING AND URBAN DEVELOPMENT CORPORATION (HUDCO)
HUDCO was established on 35thApril 1970, as a fully owned Government of India Enterpirse with the following objectives:
1. To provide long term finance for construction of houses for residential purpose or undertake housing and urban development programmes in the country.
2. To finance or undertake the setting up of new satellite towns.3. To finance or undertake the setting up of the building materials industries.4. To administer the money received from government of India and other such grants for the
purpose of financing or undertaking housing and urban development programmes.5. To subscribe to the debentures and bonds to be issued by the State Housing Board,
Improvement Trusts, Development Authorities etc. specially for the purpose of financing housing and urban development programmes.
RESOURCE BASEHUDCO establishes with an equity base of Rs. 2 crore. Over the years, the equity
base has been expanded by the government. The present paid up of capital HUDCO is Rs.298 crore as against the authorized capital of Rs.385 crore. It has further been able to mobilize resources from institutional agencies like LIC, GIC, UTI banks and international assistance as well as through public deposits.
The cumulative resource of equity Rs.298 crore reserves Rs.367 crore, borrowings Rs.4400 crore. Up to the end of March 95, it has been sanctioned over 11,041 projects worth Rs. 16,577 crore for which HUDCO’s loan committee was Rs.10,116 crore, of which Rs.7432 crore has already been released. The project on completion will help provide over 57 lakh residential units over 4 lakh developed plots 29.3 lakh sanitation with and 319 urban infrastructure projects.
Eighth Plan period, the sanctions are expected to be out of the order of Rs.8230 crore and disbursements would be above Rs.5551 crores. HUDCO vision – 2002 – sanction for Rs.14746 crore and release Rs.12534 crores. HUDCO has extended loan assistance to the co-operatives to the extent of Rs.2162 crores for taking up about a million housing units in our country. HUDCO has contributed an amount Rs. 166 crores for supporting about 6.82 lakh housing units.
HUDCO’s assistance now reaches out to 6.80 lakhs families through the Tamil Nadu co operative Housing Federation, which has availed the highest loan of Rs.1164 crores from HUDCO, vis-à-vis all other housing agencies this represents more than 25% of HUDCO’s loadn sanction of Rs,4271 crores to Tamil Nadu HUDCO slashes interest rates on housing loans to 0.25% - 1.25%. Elaborating on the HUDCO’s yearly performance, the corporation ahs achieved all time high sanctions of Rs.8899.89 crores, making a jump of 33.5% during 1999-2000 over last year’s performance of Rs.6666.67 crores.
As per te provisional results for 1999-2000, the corporation registered a quantum jump of 43.13% in profit before tax and 20.27% in profit after tax. The figures are Rs.115.18 crores and Rs. 83.84 crores respectively against Rs.80.47 crores and Rs.69.71 crores for 1989-99. During 1999-2000 HUDCO mobilized the resources worth Rs.3836.43 crores, up 18% from Rs. 3240 crores in the previous year. This was done through a basket of options covering both domestic and external funding sources. In its maiden effort to raise funds from the US markets, the corporation raised $10 million in the form of bonds under the USAID housing guarantee programme. The funds have been swapped with EXIM bank for a period of 30 year for Rupee funds totally Rs.43.60 crores HUDCO has initiated action for raising the second tranche of $20 million from the US capital market under this scheme.
SBI FINANCE SCHEMESSBIHF provides housing finance to individuals, corporate holders and promoters and
developers. The salient features of the schemes for the three categories are listed as follows.
SCHEME FOR INDIVIDUALSThe loans are granted for construction of houses, purchase of house/flats and repairs,
renovation extension, additional/alteration of existing houses/flats. The quantum of loan is the lowest of 1. Rs. 10 lakh2. 70% - 85% of the cost including the cost of the building3. A sum based on the repayment capital of the borrower as assessed by the SBIHIF. The
repayment period is 5-20 years. In any case, the loan must be repaid retirement of the individual – borrower or 65 years of age whichever is earlier. The mode of repayment is normally Equated Monthly Insurance (EMI) comprising principal and interest.
SCHEME FOR PROMOTERS AND DEVELOPERSThe purpose of housing loans given to this category of borrowers is an additional
sources of finance to supplement their resources, for construction of residential housing projects. The period of loan is based on the cash flow of the project. It however, does not exceed 24 months.
SCHEME FOR CORPORATESThe size of housing loan in all the scheme is the lower of Rs.5,00,000 or 80-85
percent of the project cost including the cost of land.i. The SBIHF has designed 3 alternative schemes for lending for houing to corporate
bodies / for construction / purchase of staff quarters of their own employees (scheme A)
ii. For on – lending to their employee is accordance with their own housing scheme (scheme B)
iii. Loans to their employees nominated by them (scheme C)
LIC HOUSING FINANCEIt has access to low cost funds obtained from its parent – Life Insurance Corporation
of India and has in the 7 year since its incorporation not raised funds through public deposits. As of March 95, out of the total funds of Rs. 1640 crores borrowings from LIC amounter to as much as 90%, with the balance from National Housing Bank (NHB)aand deposits under the NHB home loan account scheme. The company accessed the capital markets with the premium IPO (issue price Rs.60) in September 1994, the performance for 1994-95 has fallen slightly short of projections. For 1995-96 the company had projected a total income if Rs.356 crores and an earnings per share of Rs. 6.81. For the six months ended September 1995, the total income was Rs.150 crores and annualized per share earnings Rs.5.94. The company has a widespread branch network of about 60 offices, the largest in the industry.
IND BANK HOUSING LIMITEDIt was incorporated in 1991. It was a joint venture of Indian Bank and HUDCO. Its
objectives are to carry on the business of providing finance to eract, construct or purchase or upgrade any house, building, flat or any part there of India for residential purpose. Repayment
of housing loans is by way of Equated Monthly Installments (EMIs) comprising of principal and interest. Ind Bank performance highlighted from the year 91-92 to 97-98.
PERFORMANCE OF THE BANK
Year Housing Loans (in crores) 91-92 18.6892-93 42.1293-94 63.4094-95 92.1495-96 136.4296-97 147.3497-98 149.26
CO-OPERATIVE BANKSThe co-operative banking sector consists of state co-operative Banks (SCBS), District Central Co-operative Banks (DCBs) and Primary Co-operative Banks (PUCBs). The first set of comprehensive guidelines for these co-operative banks were issued in 1984 by the RBI co-operative banks finance individuals, co-operative group societies, housing boards etc, who undertake housing projects for EWS, LIGS and MIGS.
REGISTRATION / LICENSING OF NEW PRIMARY (URBAN) CO-OPERATIVE BANKSThe policy towards alowing new Primary Co-operative Banks (PCBs) continued to be
liberal depending upon the necessity and the prospects of achieving viability within a specified time frame. During the period July 1998 – june 1999, 218 fresh proposals including 25 conversion proposals for setting up of new primary Co-operative banks were received by bank. Of these 107 proposals were cleared for registrations, 3 proposals were closed, no response from the proposed banks and 77 were rejected. During the year licenses were issued to 126 new Urban Co-operative bank for the commencement of banking business, licenses issued during the period June 98 – march 99 were 21.
NO. OF OFFICES OF PRIMARY URBAN CO-OP. BANKS
The total of PCBs including salary earner type of banks increased to 1936 as on 31/03/1999 from 1811 as at the end of 31/03/1988. The number of offices increased to 5934 as on 31/01/1998 from 5417 as on 31/03/1998.
CO-OPERATIVE HOUSING SOCIETYTamil Nadu Co-operative Housing Federation has completed 40 years of its useful service to
the public. Their 40th annual general body meeting of federation is being held on 30th March 2000. According to ILO Co-operative is defined as an association of persons usually of limited means, who have voluntarily joined together to achieve a common economic and through the formation of a democratically controlled business organization, making equitable contributions to the capital required and accepting a fair share of risks and benefits of the undertaking.
The total amount distributed by NHB to the Co-operative sector up to the end of 1992 has been Rs.146.77 crores. The share of the 4 different categories of co-operative sector and institutions has been as under:
Category Amount (Rs. In crores) Share in %State co-op. banks 14.00 9.5Urban co-op. banks 2.31 1.6Apex co-op Housing Finance society
58.79 40.1
Agricultural & rural development Banks
71.67 48.8
TOTAL 146.77 100
LOANS DISTRIBUTED TO PRIMARIESA sum of Rs.2763.40 crores have been disbursed upto 15/03/2000 for construction of
10,28,976 houses under urban and rural housing scheme a detailed below. The Tamil Nadu Co-operative Housing Federation is the only federtation in the country disbursing a highest amount in the co-operative sector.
NATIONAL AWARDThe Tamil Nadu Co-operative Housing federation is the only co-operative Housing
Federation in the country to win sixth time: ‘HUDCO NATIONAL AWARD’ for all round excellent performance for the year 1992-93, 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99. In view of the excellence performance, the Tamil Nadu Co-operative Hosing Federation has been adjusted as the “BEST MANAGED APEX COOPERATIVE HOUSING FEDERATION” in the country by the National Co-operative Housing federation and given the “NATIONAL AWARD” for 1994-95. Besides, four more special awards have been bagged by the federation in the “ALL INDIA LOW COST HOUSING COMPETETION”
COST HOUSING COMPETETIONProgramme for 1999-2000
It was proposed to provide financial assistance to an extent of Rs.687 crores as detailed below:
S.No Scheme No. of Units Loans to be Distributed (Rs. In crores)
CO-OPERATIVE HOUSING SOCIETY LTD. – CHENGALPATTU Objects of the housing society are:
To issue land to members for constructions of new house 1st, 2nd floors and additions. On mortgage of the house properties To acquire land and make into house plots
Area of operation of the society is Chengalpattu Municipal limit and upto the area of all village panchayat limits and up to the area of the village panchayats lying within the radius of 10km from the municipal limit. Maximum loan issued to a member is Rs.7 lakhs in the municipal limit and Rs.6 lakhs in the other places. Loans issued to members on the basis of their income, area of the building to be constructed as given below:
LOANS ISSUED ON THE BASIS OF INCOME AND AREA
S.No Group Monthly Income Maximum Loan amount Area of the building
1 EWS Below 2100 25,000/- 35 sq.m377 sq.ft
2 LIG 2101 – 4500 1,00,000/- 55 sq.m592 sq.ft
3 MIG 4501 – 10,000 2,00,000/- 95 sq.m1022 sq.ft
4 HIG – A Above 10,000 6,00,000/-(in village panchayat and municipal area)
190.5 sq.m2000 sq.ft
5 HIG – B Above 10,000 7,00,000/-(corporation and Municipal)
THE CHENGALPATTU CO-OPERATIVE URBAN BANK LIMITED PROFILE
The Bank was registered on 6.05.1910 and it started to function from 26.06.1910. it covered the entire area of Chengalpattu Municipality, Hanumanthaputheri and Pulipakkam villages.OBJECTIVESThe main objectives of the bank are:a. Getting deposits from the members as well as non-members and distributing the
same as loans for productivity purposes among its members.b. Collecting cheques and demand drafts from the members, customers, issuing
cheques and demand drafts to the members and customers.c. Encouraging self-sufficiency, thrift and co-operative spirit among its members.
STRUCTURE OF THE SHARE CAPITAL
The banks is having ‘A’ class and ‘B’ class members and in the case of ‘A’ class category each share value is Rs.25 while for ‘B’ category its value is Rs.10 on 31.01.2000this banks was in possession of Rs.44.11 lakhs as share capital. This indicates the share capital of Rs.42.39 lakhs from 10602 ‘A’ class members Rs. 1.72 lakhs from 21932 ‘B’ class members.
DEPOSITS
The bank received Fixed Deposits, Recurring Deposits, savings Deposits and current Deposits. In the case of Fixed Deposits maximum, the rate of interest is 12.5% and for savings deposits it is 5.5% and for recurring deposits it is from 11% to 12.5%.
It offers loans on jewels subject to a maximum of Rs.1,00,000 at the interest rate of 18%. Similarly, housing loan is granted maximum of Rs.5,00,000 at the rate of 19%. This bank also issuing loans for small scale industries, cottage industries and for businessmen on security. It also offers loans for the monthly income group on personal surety upto Rs.10,000 at the interest of rate of 19%. Further, it gives loans on the deposits invested, subjected to a maximum of 75% of the deposit amount.
SCHEDULE OF LOANS SANCTIONED 31.01.2000 (Rs. In lakhs)
For the depressed classes, salaried people and for business and industrial community loans are given on guarantee basis.
MICRO CREDIT LOANS
Under the loan scheme so far 170 loan are issued to the women during business. The members loan amount is Rs.1000 repayable in 100 days.
The recovery position is very good. We have only 1% of overdue. The president, board od directors and staff are very much interested in collecting the micro credit loan without any overdue amount.
TOTAL INVESTEMENT OF THE BANK AS ON 28.02.2000 WAS AS FOLLOWS:
S.No ITEM Amount (Rs. in lakhs)1. Current account 56.902. Savings account 2.273. Fixed account 43.174. Indra Vikas
Certificate0.50
5. Kissan Vikas Certificate
0.60
6. Reserve fund 3.427. Share capital of co-
op. societies0.63
8. Cash certificate 628.709. Other investments 4.14
TOTAL 740.33
This bank has opened one branch at Alagesa Nagar and another branch at Natham. Both branches are working well on profits and saving the people.
Primary and secondary data were used for the purpose of study.
Primary Data: Survey of customers in Chengalpattu area.
Secondary Data: Bank records, journals, newspapers and Governemnt of India Census reports.
RESEARCH APPROACH
Survey method was used to collect primary data from the customers of the bank.
RESEARCH INSTRUMENTS
a questionnaire method was applied to extract the required information. Since research inferences were of great importance to building and other activities a plot was done on 10 people to design the correct questionnaire contains open ended questions and multiple choice questions. Likert scales were also included so as to measure the attitude and opinion in certain cases.
The pilot survey showed that 3 out of 10 respondents has availed the facility of housing finance.
p = probability of occurrence = 0.3
q = 1 – p = 1 – 0.3 = 0.7
standard deviation σ = √p (1−p )N
= √0.3 (1−0.3 )
10
= √ 0.021
= 0.145
Organization has permitted an error level of 0.02 at 95% confidence level z = 1.96
Z = error / (standard deviation of sample/√n)
√n = Z x standard deviation of sample / error
√n = 1.96 x 0.145 / 0.02
= 14.21
Z = 0.02 / (0.145 / 0.02 )
= 0.02 / 0.0102
= 1.96
So the survey is conducted for 200 samples.
SAMPLING DESIGN
I have selected convenience sampling as my sampling technique. The addresses of the customer were collected from the bank. From the list of the custiomers, the respondents weer selected according to the conveniences of the researcher.
DATA COLLECTED METHOD
The method of contact used in this study is personal interview based on structures questionnaire.
FIELD WORK
The customers were met personally and the answer of the questions were marked by the researcher. The respondents were met at their residence and also from bank.
METHODS OF DATA ANALYSIS
Data collected was analysed systematically. Tables were prepared on the basis of simple percentage Likert scales made with respect to some aspect and presented along with the respected table. Pie diagrams are used for their easy understanding of the analysis.
LIMITATIONS
CHAPTER – 6
LIMITATIONS OF THE STUDY
1. Survey was done to a limited number of dealers which were selected by sampling , there is a chance for the date being biased.
2. This survey need not be representative one for all co-operative urban banks, since it was limited to Chengalpattu urban bank only.
3. The study has limited scope it suffers from certain limitations.4. The conclusions arrived are based purely on the respondent’s responses. 5. Selected sample sizes of customers due to unavailability of time and resources. The difficulty
in gathering information from the respondent.6. Questionnaire has to be translated in Tamil.
ANALYSIS AND INTERPRETATION
CHAPTER - 7
ANALYSIS AND INTERPRETATION
OBJECTIVE I: TO FIND OUT THE PROCEDURES FOR SANCTIONING OF HOUSING LOAN.
PROCEDURE FOR SANCTIONING LOAN.
ELIGIBILITY: Individuals requiring housing loan from bank should satisfy the basic two conditions.
1. The individual should belong to Chengalpattu town.2. He should be the permanent resident.3. He should be the member of the bank
Housing loans shall be granted to the persons for the following purposes by virtue of provisions contained in the co-operative urban bank regulations.
Renovation/repair to the existing house/flat Construction or purchase of a new flat / house within local limits.
Individuals eligible for housing loans from the bank fall into 4 categories namely,
i. Those belonging to Economically weaker sections (EWS), low, middle and high income groups.
ii. Those holding land and capable of liquidating the loan within the stipulated time.iii. Those purchasing residential flats from State Housing Boards / Co-operative Societies /
Private Builders etc.iv. Those belonging to Scheduled Castes / Scheduled tribes who have been allotted land by the
government.
The quantum of the loan is determined on the basis of two different parameters:
i. On the basis of income of the borrower. The eligibility of the quantum of the loan is arrived at in a manner that the installment doesn’t exceed 30% of the net take home income of the borrower.
ii. On the basis of estimated cost of construction on repair
The second parameter is based on the estimated cost of construction less necessary margin requirement. If the quantum of the loan is the lower amount arrived on the basis (i) or (ii), the loan amount is further subjected to a ceiling of 5 lakhs.
The rate of interest is charged to the amount of loan. Presently bank charge exclusive of income tax
Upto Rs.1,00,000 18%1,00,000 to 2,00,000 18.5%2,00,000 to 5,00,000 19%
SECURITY
The normal housing loan as mortgage of property from the proceeds of the loan.
MARGIN REQUIREMENT
In general, bank do not finance the full cost of the house and the owners / borrowers have to bring in the margin from their own resources as part of the cost however the bank will fix the loan money at the discussion of the Board on case to case basis.
REPAYMENT
The loan is repayable in Equated monthly installments (EMI) in a maximum period of 6 years. The term of the loan, the interest rate and the amount of monthly mortgage payments fixed for the entire terms of loan. The monthly installment consists of the principal repayment and the interest on outstanding principal and is
given by: Amount of the fund borrowed
Present value of anannuity of Rs.1 permonth
In case of default additional interest of 2% more than the normal rate of interest shall be charged on the defaulted installment every month.
SCRUTINITY OF APPLICATIONS
The person/individual requires loan from the bank shall submit an application form duly filled along with the necessary enclosures (mentioned in annexure) by paying Rs.400 towards : Application Rs.50 legal & survey etc Rs.350.
ENCLOSURES WITH THE LOAN APPLICATION
Bond Rent recipt Encumbrance certificate Land tax recipt Pay certificate Other sources of income Construction or alteration estimate
After receiving the application, the bank will verify and check the details and forward it to their legal opinions. The legal advisor shall forward and to the end of the bank about the genuine of the application. Then the application shall be put-up to the notice board for discussion and approval. After getting the approval from the board, the bank manager will sanction the loan amount to the customer.
After sanctioning the loan and before the disbursement of the first installment the customer is asked to mortgage the property in favour of the bank as a security against the loans sanctioned. After satisfying the necessary formalities the bank will first disburse 50% of the loans sanctioned. The balance amount will be released once the loan was utilized properly.
The bank will deduct 2.5% towards margin from the loan amount sanctioned and will be kept as a deposit. The interest will be paid on this deposits 14% per annum.
TREATMENT OF DEFAULT CASES
The customer who fails to pay their installment due for continuously more than 6 month or installment which is due more than 6 months, the customer will be treated as a defaulter. Then the bank will send a notice by registered post acknowledgement, reminding repayment of the installment to the customer and will close the customer’s account. For closing accounts the bank will calculate interest as on date and other postal and printing chargers added with principal amount and that the total amount will be treated as principal amount. For this principal, interest rate will be the normal interest + 2% penalty interest. This interest will remain same up to the clearance of the overdue principal. If he cleared the overdue principal amount then the normal interest rate only
applicable. If the customer fails to pay, bank will file a suit for arbitration by sending a notice to the customer.
After due verification of the suite field by the bank the Deputy Registrar will register the case against the customer and send summons to the defaulter for 3 times.
After ARC if the customer pays the interest regularly and cleared all his overdue means the DR will decree the customer. After the decree the interest rate will be the normal rate will be +2% penalty rates and this rate will never change even if he paid his overdue principal.
The next step decree is property attachment. This means that the customer cannot do anything in the property without the banker’s knowledge. Then the customer not paying the overdue for the long time and the customer is not responding means, the next step is Execution Petition (EP).
DR will send sale officer to the customer and they announce the auction of the property and this auction will be informed through advertisement in the newspapers and the bank notice board. Then an on date interest will be calculated and added with overdue principal then from the action sale they will take the money due and the balance returned to the customer.
If the auction sale amount is less than the overdue amount of the customer then recover the whole money for the bank and balance should be collected from the customer.
TERMS AND CRITERIA FOR THE AUDIT CLASSIFICATION OF THE CO-OPERATIVE BANKS IN AUDIT
Audit classifications are to be arrived at on basis of the aggregate marks secured indicated below
1. DEPOSIT MOBILIZATION
Increase in total deposits over the previous year
INCREASE MARKS20% and more 10Between 15% - 20% 8Between 10% - 15% 5Between 5% - 10% 1** increase nil
2. PERFORMANCE UNDER PRIORITY SECTOR
Percentage of priority sector advances to total advances at the end of the year
MARKS60% and more 10Between 50% - 60% 7
Between 40% - 50% 5Less than 40% nil
Percentage of weaker sections advance to total priority sector advances at the end of the year.
MARKS25% and more 5Between 15% - 25% 3Less than 15% nil
3. RECOVERY PERFORMANCE
Percentage of overdue to loans and advances outstanding at the end of the co-operative year.
4. RESERVE/PROVISIONS TO COVER EROSION IN THE VALUE OF ASSETS
MARKS100% 550% 3Less than 50% nil
5. MAINTENANCE OF CASH RESERVATION ASSETS
MARKSCash reserve 5Liquid assets 3
6. MANAGEMENT OF FUNDS1. Maintenance of cash reserve/liquid assets below the optimum level throughout the year.2. Surplus over the optimum level either under cash reserve or liquid assets or both sporadically
observed for a short period not exceeding 10 occasions in a year.
3. If surplus noticed in cash reserve and/or liquid assets over and above the optimum level for a long stretches of period and for more than 10 occasions.
7. LOANS AND ADVANCES
The bank should have certain loan rules properly or its local policy should have been incorporated in its by laws duly approved by the Registrar of Co-operative societies.
8. WORKING RESULT1. The bank has strained norms of viability in respect of
a. Paid up share capital.b. Deposits.c. Loans and advances.d. The banker has earned profits.
2. The bank has made appropriate allocations to various resrves/provisions3. The bank has declared a reasonable dividend 4. The bank cost of management was not more than 2% of its working capital or 30%.
9. OPERATION EFFICIENCY1. Compliance with RBI directions.2. No default in the repayment from higher finance agencies.3. No default in the submission of various returns prescribed under the regulation act 1949
and the state co-operative housing societies act throughout the year.4. Submission of satisfactory compliance on or before due date to the inspection report of
RBI and to last audit report
10. EFFICIENY OF MANAGEMENT1. The modeling of the board/committee/general body held regularly.2. Regularity in interviewing the bank;s working.3. Proper maintenance of books of accounts.4. Proper systems of internal checks and branch control introduced and observed.5. Proper systems for recruitment of qualified staff and their training procedures.
AUDIT CLASSIFICATION
Depending upon the aggregate marks secured by the banks audit classification made on this basis of following
Marks Secured Audit Classification60% and above A45% and above but below 60% B
30% and above but below 45% CBelow 30% D
OBJECTIVE 3
TO ANALYSE THE BANK OPERATION IN THE FIELD OF HOUSING FINANCE
Apart from district and central co-operative banks which provide mainly bridge finance to
primary housing co-operative societies, urban co-operative banks also play useful role in the provision of
housing finance unlike commercial banks. Urban co-operative banks can give loans only to their customers.
The Chengalpattu co-operative urban bank for the last 7 years were analyzed and the details given
below.
Years Housing loans
(Rs. In lakhs)
1992 – 93 17.67
1993 – 94 36.61
1994 – 95 15.52
1995 – 96 31.80
1996 – 97 62.40
1997 – 98 203.65
1998 – 1999 211.24
TOTAL 578.89
Source: compiled from the records of urban co-operative bank
From the table observed that the bank has sanctioned housing loans 17.67 lakhs during 92 - 93. For
the year 93 – 94, it sanctioned about 36.61 lakhs. It shows the tremendous performance of the bank in
sanctioning housing loans. However, there was a competition in the bank in the market. Keeping in view
the competition in the market and the potentiality the bank has received this policy in order to attract the
people and consequent, when there was a sudden jump in the year 1995 – 96 of about 16% more than the
previous year and so on. Due to liberalization in economic policies such as importance and encouragement
of infrastructure projects like housing and other income tax benefits attracts the public more and more.
There was a tremendous response from the public. As a result the bank could achieve substantial jump in
sanctioning the housing loans to the extent of 203.65 during 1997 – 98 and Rs.211.24 crores during 1998 –
It is observed from the table that about 20% of customer option about the performance of the bank is satisfied and 29% customers with no comments and 19% of customers are dissatisfied and 19% of customers highly dissatisfied and only 13% of the customers are satisfied with the performance of the bank.
20%
13%
29%
19%
19%
Highly satisfiedSatisfiedNeither satisfied nor dissatisfiedDissatisfiedHighly dissatisfied
58(C)
TABLE – 14
LOANS SANCTIONED – AS PER INCOME GROUP
Income group No. of persons Percentage
Upto 50,000 56 28
50,001 – 1,00,000 69 34
1,00,001 – 2,00,000 58 29
2,00,001 – 3,00,000 17 9
Total 200 100
INFERENCE
it is observed from the table that the bank had sanctioned the loans to the income group in
between 50,001 – 1,00,000 of about 34% followed by the income group 1,00,001 – 2,00,000 about 29%
and followed by the minimum group of 50,000 about 28% and so on.