Summer Project Report

‘End to End Improvement in Turn around Time in Two-Wheelers Loan’

Project guide- Dr. Anupam varma Submitted by:

Industry guide- Mr. O.P Ojhaa krishan.s.jain

Pgdbm-046

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ACKNOWLEDGEMENTS

I would like to acknowledge with gratitude the sincere and dedicated service of the officers and staff appointed at the HDFC bank. It is not possible to single out any one in particular and so I am refraining from doing so. The collective effort enabled me to work as a team in a harmonious environment, which contributed in no small measure to the fulfillment of the task entrusted to me without any serious impediment.

I would like to record my appreciation to Mr. O.P Ojhaa, state head two wheeler loans, HDFC bank, Rajasthan, for having submitted an erudite analysis on the state of Loan processing. I would like to express my gratitude to Mr. Rohit Sharma, S.M, HDFC bank finance who was instrumental in drafting the report. His services are gratefully acknowledged and his help has really put an insight into the report. My heartfelt thanks to Mr. Hari Om Singh, TSM, HDFC BANK, two wheelers loans, Rajasthan who has shown me the right directions for conducting the workings in the CPA and coordinating in all the activities of the bank.

I would once again like to express my gratitude to Dr. Anupam Varma, Dy. Director, BIMTECH for guiding me and putting his great suggestions into the report.

Table of contents

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S. No. Topic Page No.1 Executive Summary 42 Project objective and problem identifications 63 Data collections and methodology 74 Introduction-evolution of two wheeler industry 85 Two wheeler industry-major players 106 Indian banking history 147 Company profile-HDFC bank 158 Finance market overview 22

9Pamac international-processing house for HDFC bank 26

10 Commercial loan processing 2811 Turn around time- various stages 2912 Flow-chart depicting the loan processing 3013 Analysis and Results 3514 Suggestions and recommendations 60

15 Appendix 63

16 Bibliography 67

Executive SummaryThe financial services sector and capital markets have a significant influence on how Economies develop, principally through their role in allocating financial

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capital between different economic activities, as well as through their own operations, not only do banks Manage their own financial and sustainability performance, they are in a position to influence Socio-economic and environmental performance in client organizations and through their Lending strategies. In this report, we examine whether and how leading banks manage the corporate economic impacts of their core lending activities.The aim of this research is to explore whether banks account for the types of economic Impacts arising from their lending activities. It asks who the real beneficiaries of bank are lending activity and whether banks take this into account in their core business decisions. Specifically, it questions how some banks understand their economic impacts and whether and how this informed the development and delivery of lending products and services. Accountability and BSR have developed a methodology through which companies can begin to articulate and account for the economic impacts of their business activities – siting, employment, Procurement, product and service development and delivery, contribution to taxes, investment And philanthropy.

This report focuses on the bank lending sector’s product Development and delivery business function, and through this explores corporate understanding And accountability of banks. As for all sectors, there is less data on product-related impacts than other for other aspects of business activity, which is a critical impact area for banks.

This study explores whether and how banks understand and manage the economic impacts of their products – through product development, use and delivery of loan products – on the communities that use them. This relates to both production-side economic impacts and consumption side product-related economic impacts. Production-side impacts might include the operations of bank branches, and might include employment, sourcing from local suppliers and environmental impacts. While the impact of these activities is important, the most significant economic impacts are likely to accrue to customers and the wider economy. Consumption-side economic impacts relate directly to the access to finance debate, as well as questions that have arisen over who banks lend to and for what type of economic activity. Most attention on banks in this area has focused on project finance for large and environmentally sensitive projects. Access to finance refers to the lack of availability of finance to specific communities. These issues have largely defined the corporate responsibility of banks in the eyes of some major stakeholders.

This report explores how some banks understand and account for their economic contribution to society. For some, economic impact management is already an important internal management tool and stakeholder engagement platform. For others, the value of managing economic impact is clear, but the challenge is finding ways to do it. Ideally, corporate management of economic impact allows

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company to better inform and engage stakeholders on the broader debate on the role of the sector in society.

The report examines what sustainability principles and standards mainstream banks have adopted around the world, and the extent to which those standards capture the most significant potential economic impacts of bank lending. The report sets out some of the key framework issues and players driving banks to consider sustainability issues

Project Objective

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“Study to reduce the end-to-end Turn around Time in the two-wheeler loan processing“

Problem Identification

Customers

Time becomes the most important aspect looked over by the customer with the changing life style, especially if we talk about service industry, its importance increases by many folds and same applies to TW Loans also. As soon as customer walks down at the dealer points he doesn’t wish to even waste a single minute to get the vehicle financed and with the Multi National NBFC’s entering in Indian Markets, importance of TAT increases even more.

Dealer

They employ huge capital, mainly raised from Banks and interest cost is involved so there have to be faster payments of loan amounts so that there money is rotated in the best and cost-effective direction and he is able to fund his vehicles and get the payouts received from banks according to the no. of vehicle sold.

Banks

Service industry requires a lot of customer focus as customer is also involved in the whole process and needs a special attention as well as fast and quality services if they want to remain in the market. So the same applies to the banking industry as the customer is very choosy in selecting a finance company and which can give him fast and better services as well as good customer interactions is preferred. So the improvement of TAT will ensure that the customer gets fast approvals of loan and get his loans as simple as it can be possible, so a compressed turn around time will lead to better retention of customer and will increase the goodwill of the bank.

Data Collection

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SELECTION OF SAMPLES AND DATA COLLECTION

Sample size

For canvassers

Sample size: 100Types of Sampling: Random sampling.Research area: jaipur and jaipur rural

For customers

Sample size: 200Types of Sampling: Random sampling.Research area: jaipur and jaipur rural

Primary Data: Collected through the questionnaires filled from canvasser, customer and interviews conducted from CPA and HDFC bank staff.

Secondary data: Collected from HDFC bank annual reports, auto and finance magazines, internet and annual reports of other banks and finance companies.

METHODOLOGY OF THE STUDY

RESEARCH METHODOLOGY

Methodology is the most important step, which should be considered while working on any project. The methodology used by us in completing the project report is as follows:

Particulars Stage 1 Stage 2 Stage 3 Stage 4Stage description

Data Collection from Secondary method

Data collection from canvassers

Data collection from customers

Analysis stage

Methodology and tools used

Internet and journals

Questionnaire method and Interview for primary data collection

Questionnaire method for primary data collection

Manual method (MS- Excel)

‘Evolution of the Indian two-wheeler industry

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The two-wheeler industry (henceforth TWI) in India has been in existence since 1955. It consists of three segments viz., scooters, motorcycles, and mopeds. The increase in sales Volume of this industry is proof of its high growth. In 1971, sales were around 0.1 million units per annum. But by 1998, this figure had risen to 3 million units per annum. Similarly, capacities of production have also increased from about 0.2 million units of annual capacity in the seventies to more than 4 million units in the late nineties4.

The TWI in India began operations within the framework of the national industrialPolicy as espoused by the Industrial Policy Resolution of 1956.This resolution divided the entire industrial sector into three groups, of which one contained industries whose development was the exclusive responsibility of the State, another included those industries in which both the State and the private sector could participate and the last set of industries that could be developed exclusively under private initiative within the guidelines and objectives laid out by the Five Year Plans (CMIE, 1990).Private investment was canalized and regulated through the extensive use of licensing giving the State comprehensive control over the direction and pattern of investment. Entry of firms, capacity expansion, choice of product and capacity mix and technology, were all effectively controlled by the State in a bid to prevent the concentration of economic power.

However due to lapses in the system, fresh policies were brought in at the end of the sixties. These consisted of MRTP of 1969 and FERA of 1973, which were aimed at regulating monopoly and foreign investment respectively. Firms that came under the purview of these Acts were allowed to invest only in a select set of industries.This net of controls on the economy in the seventies caused several firms toa) Operate below the minimum scale of efficiency (henceforth MES),b) Under-utilize capacity andc) Use outdated technology.While operation below MES resulted from the fact that several incentives were given to smaller firms, the capacity under-utilization was the result of

i) the capacity mix being determined independent of the market demand,ii) the policy of distributing imports based on capacity, causing firms to

expand beyond levels determined by demand so as to be eligible for more imports. Use of outdated technology resulted from the restrictions placed on import of technology through the provisions of FERA.

Recognition of the deleterious effects of these policies led to the initiation of reforms in 1975 which took on a more pronounced shape and acquired wider scope under the New Economic Policy (NEP) in 1985. As part of these reforms, several groups of industries were deli censed and ‘broadbanding’5 was permitted in select industries. Controls over capacity expansion were relaxed through the specification of the MES6 of production for several industries. Foreign investment

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was allowed in select industries and norms under the MRTP Act were relaxed. These reforms led to a rise in the trend rate of growth of real GDP from 3.7% in the seventies to 5.4% in the eighties. However the major set of reforms came in 1991 in response to a series of macroeconomic crises that hit the Indian economy in 1990-917. Several industries were deregulated, the Indian rupee was devalued and made convertible on the current account and tariffs replaced quantitative restrictions in the area of trade. The initiation of reforms led to a drop in the growth of real GDP between 1990 – 1992, but this averaged at about 5.5% per annum after 1992. The decline in GDP in the years after reforms was the outcome of devaluation and the contractionary fiscal and monetary policies taken in 1991 to address the foreign exchange crisis. Thus the Industrial Policy in India moved from a position of regulation and tight control in the sixties and seventies, to a more liberalized one in the eighties and nineties. The two-wheeler industry in India has to a great extent been shaped by the evolution of the industrial policy of the country.

Regulatory policies like FERA and MRTP caused the growth of some segments in the industry like motorcycles to stagnate. These were later able to grow (both in terms of overall sales volumes and number of players) once foreign investments were allowed in 1981. The reforms in the eighties like ‘broad banding’ caused the entry of several new firms and products which caused the existing technologically outdated products to lose sales volume and/or exit the market. Finally, with liberalization in the nineties, the industry witnessed a proliferation in brands.

A description of the evolution of the two wheeler industry in India is usefully split up into four ten year periods. This division traces significant changes in economic policy making. The first time-period, 1960-1969, was one during which the growth of the two-wheeler industry was fostered through means like permitting foreign collaborations and phasing out of non-manufacturing firms in the industry. The period 1970-1980 saw state controls, through the use of the licensing system and certain regulatory acts over the economy, at their peak. During 1981-1990 significant reforms were initiated in the country. The final time-period covers the period 1991-1999 during which the reform process was deepened these reforms encompassed several areas like finance, trade, tax, industrial policy etc. We now discuss in somewhat greater detail the principal characteristics of each sub period.

Two wheeler industry

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‘Riding on Top Gear’ is what the two-wheeler industry is celebrating in the first half of FY05, wherein the industry volumes had grown over 12% on back of good monsoons. Also, the second half of FY05 has given the industry reasons to celebrate, with strong volume rise of nearly 16% (Apr-Feb) in motorcycles, largely aided by faster growth in the entry level 100 cc segments. Though competition has been on the rise in the past year, with new models and variants being launched every alternate day, the overall market has been growing fast enough to accommodate all of these models.

The most striking feature of the year gone by was the growing volumes in favor of the entry-level segment. Industry leaders Hero Honda and Bajaj Auto have once again kept the other players at bay, and increased their market share during the year. In fact, Bajaj Auto has been outperforming the industry by a good margin for the last few months, courtesy its new launches CT100 and the Discover. TVS Motor on the other hand has been reeling under pressure since the time its Max 100 sales started dipping at the end of FY04 while the new models are yet to taste success in the market. Apart from the big three, the talk of the town in the past year was the entry of Honda Motors into the Indian motorcycle segment through its ‘Unicorn’. Launched in the premium 150 cc category, the bike received spectacular response initially with a waiting period of almost 6 weeks.

Despite the strong volume growth witnessed by the industry, profits have grown at a slower rate or even de-grown in some cases due to the cost pressures and higher sales of economy bikes. Due to growing competition, manufacturers resisted passing on price hikes and instead took a hit on their profits. However, recently the companies have raised prices on most of their models by around 1-3%.

HERO HONDA

Hero Honda, the leader has created another landmark by crossing 2.5 million bikes for the year and in the process improving its market share in motorcycles to 50% from 48% in last year. For FY05, Hero Honda’s sales stood at 2.6 million, a rise of over 27% over the last year’s 2.1 million. Domestic sales were up 26%, while export sales, which form a miniscule part of the overall sales, were up 63%. Sales continued to be heavily stacked in favor of the “Splendor Plus” and “Passion Plus” models, accounting for over 70% of total volumes.

Vehicle Sales Q4FY05 Q4FY04 % Chg FY05 FY04 % ChgTotal Motorcycles 685419 592718 15.6% 2626070 2070154 26.9%Domestic 664845 578477 14.9% 2562003 2030899 26.2%Exports 20574 11492 79.0% 64067 39255 63.2%

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For the second half of FY05, the company’s sales hovered around 2.3 lakh a month with no spare capacity to cater to the additional demand.

Towards the end of the fiscal, Hero Honda unveiled its new offering ‘Super Splendor” in the growing 125 cc class, and costing around Rs 2000-3000 more than the Splendor plus model. The model has nothing new to offer as far as external features are concerned; however considering the strong growth opportunities of 125 cc segments and Hero Honda’s strong brand equity, the model is expected to clock decent numbers. Going forward, for the year FY06, Hero Honda is expected to continue performing well and improve sales through de-bottlenecking of its plants, which will increase the capacity by over two-lakh units. The new Super splendor is hopeful of clocking sales of nearly 30,000 units, largely cannibalizing the sales of previous splendor and passion models, due to its powerful engine and good fuel economy. The company is hopeful of ending the year with a modest growth of 12-15%.

BAJAJ AUTO

Strong growth in the motorcycle segment saved the day for Bajaj Auto, while the other segments de-grew during the year. The company sold a total of 1.8 million vehicles (incl. 3-wheelers), higher by 20% as compared to last year. Motorcycles sales grew 42% to 1.45 million, outperforming the industry hands down and in the process increasing its market share to 28.8% as against last year’s 24.5%.

FY05 FY04 % Chg FY05 FY04 % ChgScooters(G) 20418 49523 -58.8% 102762 178070 -42.3%Scooters (UG) 4818 12039 -60.0% 30931 54709 -43.5%Step thru's 4391 8487 -48.3% 19195 32502 -40.9%Motorcycles 396107 262992 50.6% 1449677 1023650 41.6%Total 2 wheelers 425734 333070 27.8% 1602565 1288960 24.3%3 Wheelers 53725 60409 -11.1% 221987 229154 -3.1%Grand Total 479459 393479 21.9% 1824552 1518114 20.2%

Motorcycle growth was led by the new CT100 model in the entry segment, which clocked sales of almost lakh units a month in just a few months from its launch. Launched in May last year, the bike was an instant hit with the commuters due to its low price, high fuel efficiency and smart looks for an entry level bike. The bike succeeded in acquiring the leadership position in the entry segment from Hero Honda’s CD Dawn and even posed a challenge to the might of Splendor.

Later in the year, Bajaj launched the much-awaited Discover in the 125 cc executive segment. The bike received great reviews due to its superior technology and suave looks and is contemplated to be the biggest contender to Splendor’s title in coming years. The Discover model is clocking around 25,000 units per month currently and commands nearly 40% of the 125 cc segment sales. Apart from these new launches, Bajaj continued its dominance in the

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premium segment, courtesy the Pulsar twins, and firmly stood it’s ground against the Honda’s new entrant ‘Unicorn’, which was expected to affect Pulsar sales. The unexpectedly strong sales performance has forced the company to increase capacities of motorcycles from 1.8 million to 2.4 million for the year.

In the coming year, Bajaj is contemplating launching of two new bike models by June, one each in entry and premium segments. In the premium segment, the market is anticipating Pulsar 200 cc model while the entry-level bike is likely to be a stripped down version of CT100, with a price tag of less than Rs 30,000. Meanwhile, Discover, due to its superior features should attract greater number of buyers. Also, the newly launched scooter Bajaj Wave is banking on niche segments and the company has great expectations from this model. The company will continue to follow an aggressive pricing policy in search of market share.

TVS MOTOR

TVS Motors has been a laggard as regards FY05 was concerned and has disappointed a great deal of its supporters. Overall sales for the year grew just under 2% to 1.16 million, while the motorcycle sales ended the year 4% lower to 6.8 lakh bikes.

Vehicle Sales Q4FY05 Q4FY04 % Chg FY05 FY04 % ChgMotorcycles 176921 181420 -2.5% 679536 706558 -3.8%Scooters 48759 44471 9.6% 224621 189238 18.7%Mopeds 71025 69358 2.4% 263393 251065 4.9%Total Sales 296705 295249 0.5% 1167550 1146861 1.8%

Second half of FY05 was however much better, assisted by the launch of “Star” 100 cc. Scooter sales were up 19% for the year, aided by strong growth in sales of Scooty model and managed to control some on the damage done by faltering bike sales. For the year, the company’s market share in the two wheelers has fallen by nearly 270 bps to 18.7%.

In the motorcycle division, TVS has lost significant market share due to sharp fall in sales of entry-level bike Max 100, with no other model from the TVS stable filling in the gap until the launch of Star in mid November. The company launched the 125 cc Victor GLX in Sept to capitalize on the immense growth prospects of this segment. The bike has met with moderate success due to heightened competition in the segment and sells close to 15,000 units.

TVS has lined up big-ticket expansion of over Rs 400 crore in the next few years which includes a two wheeler plant in Indonesia to strengthen its international presence. The Indonesian plant will have an initial annual capacity of 1.2 lakh units, while another two wheeler plant will be set up in India to enhance the local presence.In the coming year, TVS plans to introduce three new models to provide the much-needed spurt to the volumes, apart from relying on consistently performing

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Victor and Star models. Scooty Pep 100 cc version will be launched in second or third quarter of FY06, while the new Fiero premium model is also expected sometime in the early 2006 to replace the current Fiero model.

Though the growth rates may taper off after growing at a fast pace for the past two years, the market now is nearly 6 billion units and accounts for 20 percent of the global market. Apart from the top three, even the likes of LML and Kinetic have been aggressive in their growth plans, while international players Honda and Suzuki too have evinced strong interest in Indian two wheeler markets.The dream run seen by two wheelers is expected to continue over the next few years even though monsoons continue to remain the biggest driver, and creates an air of uncertainty. Apart from monsoons, low interest rates, increasing purchasing power, low operating cost of a two wheeler and greater choices to customers at varying price points induce confidence for long term growth in the industry.Hero Honda, through its widespread dealer network and fuel-efficient models, continues to remain attractively poised to reap rewards of the growth in industry. Bajaj, the challenger, has clearly demonstrated its ability to out grow the industry and has priced products competitively in an effort to improve market share. TVS despite the promises has failed to deliver and still is an underdog in the race to top.

Honda motorcycles and scooters India Ltd.

Honda is the world's largest manufacturer of 2-wheelers. Its symbol, the Wings, represents the company's unwavering dedication in achieving goals that are unique and above all, conforming to international norms. These wings are now in India as Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI), a wholly owned subsidiary of Honda Motor Company Ltd., Japan. These wings are here to initiate a change and make a difference in the Indian 2-wheeler industry. Honda's dream for India is to not only manufacture 2-wheelers of global quality, but also meet and exceed the expectations of Indian customers with outstanding after sales support.

The HMSI factory is spread over 52 acres, with a covered area of about 85,815 square meters at Manesar, Gurgaon district of Haryana. The foundation stone for the factory was laid on 14th December 1999 and the factory was completed in January 2001. The initial installed capacity was 100,000 scooters per year, which has reached 6,00,000 scooters by the year by 2007 and motorcycle capacity shall be 4,00,000 per annum. The total investment outlay for the initial capacity was Rs. 215 crores and now the accumulated investment is 800 crores

Honda Motor Company, Japan with its headquarters in Tokyo, has manufacturing operations in 32 countries with 109 production bases. It has 3 business divisions

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namely 2-wheelers, 4-wheelers and Power Products. Apart from HMSI that manufactures 2-wheelers, the other business divisions in India include Honda Siel Cars India Limited (HSCI) and Honda Siel Power Limited .The company principal of Honda Worldwide is dedication to supplying products of the highest quality yet at a reasonable price for worldwide customer satisfaction. The Honda Activa and the Honda Dio have been extremely successful in the auto geared scooter market. The Honda Unicorn 150cc motorcycle features unmatched finishing and offers a mono-shock suspension. The Honda Shine 125cc motorcycle offers great value for money and offers optional disc brakes and self start. The Honda Eterno with its 4 Stroke, fuel efficient engine has been instrumental in reviving the geared scooter market in India.

Indian Banking HistoryIn the 1960’s the Indian government set out on a policy of nationalizing all of the major banks, and effectively putting them under the control of the Indian government. The first wave in the late 1960’s consisted of the leading fourteen banks, and the second wave of nationalization occurred in 1980’s which consisted of six additional banks.2 The nationalization of banks significantly alters the priorities of those institutions from profit maximization to doing the will of the Indian government. In 1990’s, the Indian government embarked on a policy of liberalization of banks within the Indian economy. This liberalization finally allowed once again for private banks to operate with little interference from the government. These banks were given the nick name “the New Generation tech savvy banks.”3 The first private bank to begin operation under the new flag of liberalization was HDFC Bank, which began operations in 1995.

The 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 liberalization of the Indian Banking Industry in 1994. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

Company Profile:

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HDFC Bank Limited, a private sector bank, provides financial services to corporations, and middle and upper-income individuals in India. It has three divisions: Wholesale Banking, Retail Banking, and Treasury Operations. In addition, the bank provides telephone, Internet, and mobile telephone banking services. As of March 31, 2005, it operated 467 branches and 1,147 ATMs in 211 cities.

HDFC Unique Positioning

HDFC incorporated without any government ownership, allowing it to have a very unique position within the Indian economy. Even though HDFC did not suffer from government ownership, its major competitors did. Up to this day, nineteen different Indian banks are considered nationalized. Private Banks without any government ownership generally are held liable by their shareholders and generally strive to maximize profits. In addition, without any government ownership these organizations face a real potential for going bankrupt without any help from the government. These realities encompass a hard budgetConstraint, which means the organization, faces a real chance of death. The management will have more of an incentive to grow and expand the business.

The government ownership of these banks conceivable changes the priorities of these banks from profit maximization to abiding by what priorities the Indian government lays down. If the Indian government decides that the additional growth is necessary within small business loans; the Indian banks will feel pressured to issue all loans that are in relation to small business’s even if they may result in a lose. In addition, government controlled banks will fear bankruptcy less because of the fact their organization is owned by the Indian government. This mentality will result in these organizations being run less efficiently as well as less emphasis placed on profit maximization.

Therefore, HDFC, one of the few private banks in India with profit maximization as its sole priority competing against government controlled banks with possibly multiple priorities in one of the premier growth markets.

Further Company Information

The Wholesale Banking division provides loans, deposit products, documentary credits, guarantees, bullion trading, and foreign exchange and derivative products. It also offers cash management services, clearing and settlement services for stock exchanges, tax and other collections for the government, custody services for mutual funds, and correspondent banking services. The Retail Banking division provides various deposit products, as well as loans, bill payment services, gold and silver credit cards, debit cards, third party distribution, investment advisory services, card and automated teller machine (ATM) acquiring transactions, and depositary services. The Treasury Operations

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division offers foreign exchange and derivative products for its clients. The company was incorporated in 1994 and is headquartered in Mumbai, India.

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain a market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities

Critical elements:

·Acquired Times Bank in merger from Times Of India Group (5 – 6% present holding) in 2000.

HDFC owns only 24.4%, rest owned by public and private equity investors JP Morgan Chase (5-6%).

·Large Foreign Institutional Investors (in India) including Putnam, etc. (big vote in Indian equity markets) – 10-11%

·Warburg Pincus has a significant holding in HDFC (its promoter)

On mortgages: HDFC Bank has entered into an Memorandum of Understanding with HDFC Ltd. wherein HDFC Bank will source housing loans for HDFC Ltd. (possible future merger – ICICI and ICICI Bank; didn’t bring in due to very broad-based and industry focus and felt more comfortable with HDFC)

The Growing Indian Middle Class

The central customer base for HDFC is India’s middle class and upper class. In the last ten years the percentage of the population that makes up the middle class has doubled from 7% to nearly 15%. the current economic growth of seven percent will probably be maintained for the foreseeable future allowing for additional growth in the middle class. By all accounts, if the growth rate is maintained then half of India will turn middle class between 2020 and 2040, these potential growth prospects for HDFC are enormous especially with their key client base will experience so much growth over the next two decades assuming that current growth rates are maintained.

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HDFC Present Strategy

Mortgages in India

HDFC present strategy concentrates greatly around the growth of the Indian mortgage market. At present mortgage payments only contribute approximately 3 percent of India’s GDP as compared to other countries with significantly bigger mortgage markets. HDFC believes it can break the cultural barrier and expand into the Indian mortgage market, which has the potential for tremendous growth. Factors working for a good market scenario:- Rising Disposable Income- Low Interest Rates- Generally Stable Property Prices- Increased Urbanization- Housing Shortages

Percentage GDP Paid to Mortgages vs. Individual Countries HDFC has the ability to expand the present Indian mortgage market because of the ideally strong market climate, but also because HDFC has the home court advantage in respect to culture in India. Like most culture, Indians would like to borrow from a “local” bank rather than a foreign controlled bank such as Citigroup or HSBC.

Within the hunters, what’s HDFC’s strategy for increasing market share:Technology:

HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. The entire bank's branches have connectivity which enables the bank to offer speedy funds transfer facilities to its Customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally to build the infrastructure for a world-class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd (no.1 banking software in the world). The systems are open, scaleable and web-enabled.

Among the first and only to offer net banking, mobile banking, universal access, extended hours, large ATM network, electronic collection & payment gateways (bills, payrolls), etc.

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Key differentiators in India.

Lowest Funding Costs: The technology driven customer service attracts a lot ofDeposits due to the services HDFC can offer being leaner and technology driven.

Focus on auto loans: 2-wheeler and car loans are among the fastest growingsegment, likely to be the bank’s largest retail loan segment in the near future.

Expanding portfolio – home loans, possible merger with HDFC: It is has recently signed a MoU with HDFC for home loans. HDFC also has very well respected insurance, securities business (insurance with Standard Life).Will definitely leverage its distribution network.

Geographic Expansion: has gone from 60 cities 2 years ago to over 150 today. Critical as a lot of the untapped market is in the “heartland” of the emerging middle class, i.e., Tier II and Tier III cities.

Market Growth:Scheduled commercial banks touched, on the deposit front, a growth of 14% asAgainst 18% registered in the previous year (2002-2003). And on advances, theGrowth was 14.5% against 17.3 % of the earlier year. Retail finance business is likely to grow at a CAGR of 34% in FY2003-07. ICICI and HDFC best positioned to take advantage. The retail loan portfolios of both the banks are expected by analysts to grow at an annualized 45-60% over FY2003-07. This would increase the share of retail loans in their asset books, contributing to a rise in the margins and RoEs of both.

Wholesale BankingThe Company's principal commercial banking products include a range of financing products, documentary credits (primarily letters of credit) and bank guarantees, foreign exchange and derivative products and corporate deposit products. Its financing products include loans and credit substitutes such as bills discounting, commercial paper and other funded products. Its foreign exchange and derivatives products assist corporations in managing their currency and interest rate exposures. HDFC Bank's principal transactional services include cash management services, capital markets transactional services and correspondent banking services. The Company provides physical and electronic payment and collection mechanisms to a range of corporations, financial institutions and government entities. It was also appointed by the government of India to collect direct taxes.

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The Company's capital markets transactional services include custodial services and stock exchange clearing bank services. HDFC Bank provides custodial services primarily to Indian mutual funds. The Company is a clearing bank for seven major Indian stock exchanges, including the National Stock Exchange and The Stock Exchange, Mumbai. In addition, it provides correspondent banking services, including cash management services and funds transfers, to approximately 20 foreign banks and more than 900cooperative banks.

HDFC bank Retail banking assets

The Company offers an array of retail loans, including loans against securities, auto loans, personal loans and two-wheeler loans. It offers loans against equity securities, mutual fund units and against bonds issued by the Reserve Bank of India (RBI) that are on its approved list. It offers auto loans at fixed interest rates for financing new automobile and used car purchases. HDFC Bank offers unsecured personal loans at fixed rates, repayable in equal monthly installments over a period of 12 to 60 months. It offers loans at fixed rates, repayable in monthly installments typically over a period up to 36 months for financing the purchase of new scooters or motor cycles.

The retail business is the key driver of HDFC Bank’s growth strategy, with the objective of diversifying the asset portfolio and building a low-cost stable resource base. With a complete product suite across both asset and liability products as well as a wide range of banking services, HDFC Bank is today a retail financial supermarket with the ability to cross-sell the entire range of credit and investment products and other banking services to our customers. The key dimensions of HDFC Bank retail strategy are products, channels and processes, underpinned by a strong customer focus.

Changing demographics and the trend towards upward migration in income levels coupled with existing low retail credit penetration levels have created a major growth opportunity in retail finance. HDFC Bank’s retail assets business is capitalizing on this opportunity with a competitive positioning and strategy comprising innovative products, wide distribution, strong credit controls and high customer service standards and rapidly growing volumes in each segment to achieve economies of scale.

In the mortgages business, HDFC Bank expanded its reach to more than 140 locations across the country. HDFC Bank was the first to introduce adjustable rate home loans, with interest rates linked to a floating prime lending rate. This product received excellent response from customers across the country and was

19

a key driver of growth in the mortgages segment. It also enabled HDFC Bank to price loans competitively and achieves better asset-liability management. Other products and product variants introduced this year included loans against existing property as well as several value-added features – retail property services and home insurance policies bundled with the loan. During fiscal 2002 HDFC Bank emerged as one of the leading player in the mortgages business. During fiscal 2002 HDFC BANK consolidated its position as clear market leaders in automobile loans. HDFC has expanded its distribution network to 145 cities and towns across the country. The key drivers of growth were the strength of its corporate relationships with leading automobile Manufacturers, strong distribution capability and customer service focus. HDFC has been rapidly increased its presence in other segments as well. HDFC Bank expanded our two-wheeler business to over 140 locations. HDFC Bank partners manufacturers in distributing their products and therefore enjoys preferred status with them. HDFC Bank were able to offer competitive products to its customers by leveraging economies of scale resulting from the rapid growth in operations.

HDFC Bank now has over one million retail Internet banking accounts. Retail Internet banking customers can view their bank accounts, transfer funds between their own accounts and to any other HDFC Bank account. HDFC Bank also offers the facility of transferring funds to accounts in any branch of any bank, in eight cities through eCheques, India’s first Internet based inter-bank fund transfer facility. Customers can also open a fixed or recurring deposit, make a stop-cheque request and inquire into the status of a cheque online. Customers can write to the account manager through the secure channel and subscribe to account statement by e-mail. HDFC Bank offers its customers the facility of paying utility bills online in over 120 cities in India. All major online shopping services are linked to HDFC Bank’s online payments facility. HDFC Bank has also focused on the call centre as a key channel. HDFC Bank’s call centre can now be accessed by customers in 100 cities, and is India’s largest domestic call centre. The call centre is a single point of contact for customers across all products. It provides various self-service options and also personalized communication with customer service officers for a full range of transactions and account and product related queries. The call centre is now evolving into a complete relationship management channel not only for complaint resolution but also for cross-selling on inbound calls. The call centre uses state-of-the-art voice-over Internet-protocol technology and cutting-edge desktop applications to provide a single view of the customer’s relationship. HDFC Bank’s mobile banking services provide the latest information on account balances, previous transactions, credit card outstanding and payment status and allow customers torequest a checkbook or account statement.

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Additional Key Strategies

HDFC management during late 2005 and early 2006 redefined its business strategy to focusing on high yield loans. The type of loans these consist of are:

- Personal Loans- Credit Cards- Two Wheeler Loans

This emphases has lead to a margin expansion of between 20-30 basis points, but it must be added that this refocusing carries additional risk with defaults on credit cards potentially are higher. In addition to loan growth, non interest income has also seen a tremendous growth pattern and is sure to see similar growth in the future because of Technology. HDFC invests heavily in technology whenever possible to develop an environment of information technology and communications systems. One way HDFC uses technology to increase revenue is through ATM fees. From 2004 to 2005, fee incomes have grown by nearly 83 percent. The fees income growth should maintain a positive growth pattern as HDFC continues to expand and grow in the Indian market. HDFC will continue to look for additional ways to use technology to maximize profits whenever possible.

HDFC Bank offers business loans to address the borrowing needs of the trading community typically around the bank branches by offering them various facilities like credit lines, term loans for expansion/addition of facilities, discounting of credit card receivables, letters of credit, guarantees and other basic trade finance products and cash management services. The Company also offers silver and gold credit cards and loans for commercial vehicles, construction equipment and housing.

The Company's individual retail account holders receive the benefit of a wide range of direct banking services, including a free automated teller machine (ATM) card, access to its growing branch and ATM network, access to its other distribution channels and eligibility for utility bill payment and other services. Its retail deposit products include current accounts, which are non-interest-bearing checking accounts designed primarily for small businesses; savings accounts, which are demand deposits in checking accounts designed primarily for individuals and trusts; fixed or time value added accounts, which offer its customers added value and convenience, and ebroking accounts that are offered as checking accounts to customers of stock brokers where all transactions are routed electronically between the broker and beneficiaries.

It also provides international debit cards, bill payment services, individual

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Depositary accounts, mutual funds sales, investment advice, Internet brokerage, credit cards, electronic data capture terminals and insurance.

ICICI was established by the Government of India in the 1960s as a Financial Institution (FI, other such institutions were IDBI and SIDBI) with the objective to finance large industrial projects. ICICI was not a bank - it could not take retail deposits; and nor was it required to comply with Indian banking requirements for liquid reserves. ICICI borrowed funds from many multilateral agencies (such as the World Bank), often at concessional rates. These funds were deployed in large corporate loans.

All this changed in 1990s. ICICI founded a separate legal entity - ICICI Bank which undertook normal banking operations - taking deposits, credit cards, car loans etc. The experiment was so successful that ICICI merged into ICICI Bank ("reverse merger") in 2002.

At the time of the reverse merger, there were rumors that ICICI had large proportions of Non Performing Loans ("NPA", as they are known in India) on its books - in particular to the steel industry. Since 2002, there has been a general revival in Indian industry (and metal based industry in particular). It is widely believed that the proportion of NPAs has come down to prudent levels (even if it were high earlier).

ICICI Bank now has the largest market share among all banks in retail or consumer financing. ICICI Bank is the largest issuer of credit cards in India It was the first bank to offer a wide network of ATM's and had the largest network of ATM's till 2005, before SBI caught up with it.

ICICI bank now has the largest market value of all banks in India, and is widely seen as a sophisticated bank able to take on many global banks in the Indian market.

The bank is expanding in overseas markets. It has operations in the UK, Hong Kong, Singapore and Canada. It acquired a small bank in Russia recently. It has tie-ups with major banks in the US and China. The bank is aggressively targeting the NRI (Non Resident Indian) population for expanding its business.

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ICICI BANK TWO WHEELER LOANS

Two Wheeler Loans

Leading banks in the public and private sector are providing two wheeler loans, right form mopeds to motorbikes. These loans are available at attractive rates and best prices to attract new customers. Quite a few banks are offering online loan application for the ease of prospective clients. Private sector banks are ahead of their public sector counterparts in terms of efficiency of application and processing of loans. On the spot loan offers are given by various banks and other flexible schemes to suit the needs and pockets of customers.

Maximum Loan offered by ICICI Banks for Two Wheeler Loans

Loans are provided by banks from as low as Rs. 5000 to Rs. 150000. These loans can be paid in easy installments. The installment period can range anywhere from six months to three years, depending on the finance option chosen by the customer. In case of new vehicles, banks generally finance up to a maximum of 90% of the cost of the vehicle. In case of old/second hand vehicles, banks finance up to a maximum of 85% of the value of the vehicle. Repayment is done by Equated Monthly Installments or EMI.

Interest Charged by ICICI Bank on Two Wheeler Loans

Although Public sector banks are offering lower interest rate than their private counterparts but they are lagging behind due to poor quality of service. Interest rates depend on the two wheeler model, loan tenure. Interest is generally calculated on a monthly reducing balance.

Process of Two Wheeler Loans Application in ICICI bank

Customers can contact the bank representative and apply for an auto loans. They can also fill online forms. There is no processing fee for new cars in most banks/finance companies. However, some companies do charge a minimal processing fee for used two wheelers.

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The Centurion Bank of Punjab (formerly Centurion Bank) is an Indian private sector bank providing both retail and corporate banking services. The company was incorporated on 30th June, 1994 and the certificate of Commencement of Business on July 20th. It is promoted as a joint venture between 20th Century Finance Corporation Ltd, and its associates and Keppel Group of Singapore. It has got a network of ten branches. The main equity of the Bank was provided by the promoters, 20th Century Finance Corporation Ltd. & its associates and Keppel Bank of Singapore (now Keppel Tat Lee Bank Ltd.) through Kephinance Investment (Mauritius) Pte. Ltd.

20th Century Finance Corporation Limited has been amalgamated with Centurion Bank Limited. The Bank, set up in a fully computerized environment with ATM facility at every branch and Computer networking between branches can indeed claim to be a `Bank with a difference'. The Bank has introduced, for the first time in the country, the concept of `anywhere banking' which enables to operate the account from any other branch of the Bank. Boards of Directors of Centurion Bank and Bank of Punjab Ltd on June 29, 2005 approves merger of two banks. The combined bank will be called Centurion Bank of Punjab

Centurion Bank of Punjab is a new generation private sector bank that was formed by the merger of Centurion Bank and Bank of Punjab, both of which had strong retail franchises in their respective markets. Centurion Bank had a well-managed and growing retail assets business, including leadership positions in two-wheeler loans and commercial vehicle loans, and a strong capital base. Bank of Punjab had a strong retail deposit customer base in North India in addition to a sizable SME and agricultural portfolio.

Centurion Bank of Punjab Ltd has a nationwide network of 240 branches and extension counters and 388 ATMs. The bank offers a wide spectrum of retail, SME and corporate banking products and services. It has been among the earliest banks to offer a technology-enabled customer interface that provides easy access and superior customer service.

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BAFL is one of India’s leading retail finance companies. It is primarily engaged in providing finance for BAL’s two and three wheeler vehicles, consumer durables, personal computers and consumer loans. For fiscal 2005 the disbursements for two and three wheeler vehicles, consumer durables, personal computers and consumer loans comprised 56%, 28%, 11% and 5% of the total disbursements respectively. For fiscal 2006 the disbursements for two and three wheeler vehicles, consumer durables, personal computers and consumer loans comprised 60%, 24%, 13% and 3% of its total disbursements respectively. For the six months period ended September 30, 2006 our disbursements for two and three wheeler vehicles, consumer durables, personal computers and consumer loans comprised 59%, 22%, 17% and 2% of its total disbursements respectively. As of March 31, 2006 and September 30, 2006 it was approximately 3.44 million and 3.93 million individuals respectively as customers across India.

Bajaj Auto Limited (“BAL”), which is the single largest shareholder, is one of India’s leading two wheeler manufacturers. In fiscal 2005 BAFL funded 17.72% of BAL’s two wheeler sales in India other than exports. For fiscal 2006 it funded 16.79% of BAL’s two wheeler sales in India other than exports. BAFL currently operate in 82% of BAL’s dealerships. As part of there strategy for two wheelers, they have focused on financing BAL’s two wheelers. BAFL will continue to derive significant fiscal and operational benefits by leveraging our relationship with BAL.

BAFL was originally incorporated as a private limited company on March 25, 1987 after which it had became a deemed public company by virtue of section 43 A of the Companies Act, 1956 with effect from October 20, 1987. It is currently registered as a non banking finance company (“NBFC”) in terms of Section 45 IA of the Reserve Bank of India Act, 1934. It commenced its operations by providing finance mainly for two wheelers through its first branch in Hyderabad. As of September 30, 2006 it has a presence in 20 states across the country with a network of 108 branch offices, 270 satellite locations, 47 direct marketing / selling agents.

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Pamac international-The Credit processing house (CPA) for HDFC BANK

Pamac international eliminates the paper headaches from the 2 wheeler loan process and streamlines the business process to generate cost and time savings for HDFC bank.

2 wheeler loan files, in HDFC bank flow in a linear fashion where the file moves from point A to B to C. By incorporating a Pamac imaging solution at the beginning of the process, HDFC bank will improve loan processing times by turning the linear process into a virtual process. The flexibility of a virtual process allows employees to work on any part of the loan process at any time, increasing productivity and reducing costs.

By integrating the data capture solution at the beginning of the loan process, Pamac can assure data integrity in the 2 wheeler loan servicing system as well as reduce bottlenecks in areas like post closing. By combining imaging services and data capture services, you can increase throughput, reduce the costs to process a loan and even reduce the time to sell loans to the secondary market.

The Pamac Business Process

Document, Scanning, Indexing and Audit

Pamac business process outsourcing model involves the following steps:

Preparing the loan files for scanning by uniquely identifying each document type and each loan file.

Scanning the loan files automatically reading the file separator barcode and storing each loan file and all corresponding documents.

Matching a loan database to the scanned inventory to ensure that all files were accounted for in the capture process.

Providing data capture services used to input the key information of a loan file into an origination or servicing system or act as an audit against existing data.

Clerical ProcessingClients may elect to outsource even more of their non-core business by allowing Pamac to provide incoming mail services for their mortgage loans. Pamac can receive inbound loan files, prepare, scan, index and return the digital and paper images with efficient turnaround times and detailed methods that ensure accountability and accuracy.

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Data Capture

Data is keyed domestically or off-shore from the imaged document and returned within 24 hours. Data capture services allow audits against existing data or input of new data into existing systems. By using Pamac for this function, banks can achieve significant savings over existing data entry costs as well as improved processing times.

The Pamac Advantage:

Government Insuring (meet timelines and reduce penalties) End-of-Month peaks (accelerate processing backlogs) Indexing the loan after scanning. Use off-shore data entry services. Shorten window of time to insure and sell a loan or pool of loans. Reduce Processing Complexity Better process for error identification and recovery Off-shore document identification and indexing Eliminate bottlenecks in post closing and servicing. Compress Process Cycle Time

Credit risk evaluation and processing

Document validations and parametric evaluation of 'credit worthiness' of the applicants of retail consumer 2 wheeler loans.

Customer and Corporate profile validations. "CPV" as per industry norms.

Front end credit checks of 2 wheeler consumer loans. Data entry of Retail Loans. Post Disbursal Documents follow-up. Due-diligence and Securitization Audits. Cheque Processing, Encoding and Banking

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How is a Loan processed?

When you submit your business loan application, it may seem like it disappears into a black hole. But understanding how the commercial loan processing system works can help reduce your anxiety while you wait for approval.

Some lenders like to prequalify potential borrowers to determine how much they

can afford. This will also give you and your lender an opportunity to see which

loan program would be most appropriate for your needs. The lender will gather

basic information, such as your income and existing debts. To initiate the loan

process, you must then complete and submit a loan application.

Once your application is received, a loan officer or processor will review your

credit reports, the amount of available collateral, and your income. Your loan

officer will determine if any additional documentation is required, such as

personal financial statements. If you are purchasing real estate, you may also

need to submit preliminary environmental reports, area maps, title reports,

property appraisals, and lease summaries. If you are going through a broker, he

or she will package your loan request and submit it to several lenders for

approval.

After your commercial loan package is submitted to the decision makers — either

a loan committee or underwriter — the processor will present you with a letter of

intent or term sheet. This is a formal document intended to ensure that all parties

involved (the lender and your company) are on the same page. The letter of

intent may include the names of involved parties, amount of financing, type of

security (collateral), and other key terms. During the underwriting process, you

may need to furnish additional documentation.

If you are using a broker, he or she should be helping you negotiate the best

terms, fees, and conditions from various lenders. The next step is choosing the

most attractive offer, and signing and returning the final letter of intent along with

a check, if required, for a deposit, and to pay for third-party reports, such as

appraisals.

After all third-party reports are successfully completed and underwriting

conditions are satisfied, the final loan package is resubmitted to the loan

committee for final approval

At this point the lender will issue a final full loan commitment. If your loan is

approved, your closing agent, who may be an attorney, a title company, or

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escrow company representative, will receive closing documents. Your closing

agent will record or file deed transfers and mortgages, order title insurance,

coordinate the exchange of funds, and arrange for you to sign the loan

documents. Closing can take place within days of approval or underwriting. At

the closing, the lender funds the loan with a cashier’s check, draft, or electronic

wire transfer.

Turn around time ----various stages for loan processing in HDFC bank

a) customer walk-in stageb) Files goes to CPA---- for QDE/DDEc) physical LOG-in and RIC check of pre-documentsd) underwriting forwardede) credit manager call for approval or decline

1. IF declined then:2. Sales department either provides with the documents proof or reduce

the LTV or make a co-applicant from the customers.3. Decision taken by credit manager4. Files moves back again to the CPA5. FI status to be physically attached(CAM approval card)6. IF approved then file straight away moves to CPA7. In worst situations the case may also be rejected.

f) Handover the files to OPERATIONS1. RIC check of post documents.2. Discrepancy in files to be found

IF Ok then PDOC and File is disbursed Then payment is made IF not OK then the sales department to complete post

documents

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Flow chart ---depicting the whole process

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File straight away goes to the CPA

Sales people provide with the additional documents or reduce the LTV amount or make a co-applicant

Decision to be taken by the credit manager

Again RIC check to be done of post documents

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File moves back again to the CPA

FI to be physically attached (CAM CARD)

HANDOVER THE FILES TO THE OPERATIONS

Discrepancy to be found

If discrepancies exists

If discrepancies doesn’t exists

Pre-qualification/customer walk- in stage

"Prequalification" occurs before the loan process actually begins, and is usually the first step after initial contact is made. In a prequalification, the lender gathers information about the income and debts of the borrower and makes a financial determination about how much the borrower may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so to get a prequalification for each type of program you are suited for Becomes an important task for the canvasser who educates the customer about the finance scheme according to his ability to pay now and the rest EMI’S

Application for the QUICK DATA ENTRY (QDE) AND DETAILED DATA ENTRY (DDE)

The "application" is actually the beginning of the loan process and usually occurs at the place where the customer walks into the dealership. The buyer, now referred to as a "borrower", completes a mortgage application with the loan officer and supplies all of the required documentation for processing. In most of the cases borrower is not able to provide all the required documentations which becomes one of the basic reasons for the delays. Various fees and down payments are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) which itemizes the rates and associated costs for obtaining the loan. As the information is being noted down to the canvasser, the same is being referred to the CPA for the QDE/DDE which is basically recording all the necessary information into the system so that any improvements can be seen anytime, anywhere and by anybody (bank officials)

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Sales team to complete the remaining required formalities

PDOC is done and the file is disbursed

Pre-Approval/physical file and RIC check

Once you have made application, your lender will submit your file for automated underwriting.  The automated underwriting systems will review your income, assets, liabilities, credit scores, loan-to-value ratios, and your proposed loan details.  This system will then give an approval or denial within a stipulated period of time and then RIC department which helps in checking the authenticities of documentation and other information regarding the prospective customer

Underwriting

The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into "suspense" and the borrower is contacted to supply more documentation. If the underwriter needs clarification, we will phone call the sales department and if sales department in any case need help in answering the underwriter's question, he will call back the customer for his queries.

"Mortgage insurance underwriting" occurs when the borrower has less than 25% of the loan amount to put towards a down payment. At this time, the sale department either has to increase the down payment or take more documentations or in worst cases make a co-applicant which insure the guarantee for any default made by the borrower and then the credit manager has to give his decision again, if in case he is satisfied with the case then he may approve the case or in the either case may also reject it.

The file then once again moves to the CPA and FI is done once again and CAM card to be attached physically and RIC check is being done once again for further inspections.

Processing

At this time the lender orders a property appraisal, orders title insurance mails out requests for verifications, if necessary, for employment (VOE) and bank deposits (VOD) and any other documents needed for processing of the loan. All information supplied by the borrower is reviewed at this time and a list of items not yet received is compiled. The "processor" reviews the credit reports and verifies the borrower's debts and payment histories as the VODs and VOEs are returned. If there are unacceptable late payments, collections for judgment, etc., a written explanation is required from the borrower. The processor also reviews the appraisal and survey and checks for property issues that may require further

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discernment. The processor's job is to put together an entire package that may be underwritten by the lender.

Closing a loan

At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the selling party in exchange for the title to the property. This is the point at which closing documents are being filled properly and actually title is being transferred to the borrower. The borrower finishes the loan process and actually buys the vehicle

 

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DATA ANALYSIS AND FINDING

The survey was conducted on 200 customers from the dealership points, DSA’s and DST’s.

Demographic Profile of Customers Based on Age Group

age group no. of persons18-25yrs 8425-45yrs 7245yrs and above 44

age group

18-25yrs

25-45yrs

45yrs and above

The survey conducted was comprised more of 18-25 yrs age group which means young generations

Based on Income Level

no. of personsunder Rs.5000 p.m 35Rs.5000-10000 p.m 86Rs.10000-15000 p.m 43above Rs.15000 p.m 36

35

income group

0102030405060708090

100

under Rs.5000 p.m Rs.5000-10000 p.m Rs.10000-15000 p.m above Rs.15000 p.m

no. of persons

The survey conducted constituted more of Rs.5000-10000 p.m income group.

Based on Occupation

occupation no. of personssalaried 78business class 67agri based business 55

occupation

sallaried

business class

agri based business

The survey conducted constituted more of salaried class people out of 200 people.

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Factor affecting finance decisions by different age group people

For 18-25yrs age group

priority Rank

Faster Delivery 58

Low Rate of Interest 16

Executive Behavior 6

Dealer Reference 4

Rank

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 84 people falling under 18-25yrs categories and they mostly preferred fast delivery as there priority which affect there finance decision.

For 25-45yrs age group

priority Rank

Faster Delivery 21

Low Rate of Interest 42

Executive Behavior 7

Dealer Reference 2

37

Rank

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 72 people falling under 25-45yrs categories who preferred Low Rate of Interest as there priority which affects there finance decision

For 45yrs and above age group

priority Rank

Faster Delivery 11

Low Rate of Interest 14

Executive Behavior 8

Dealer Reference 11

Rank

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 44 people falling under 45yrs and above age group categories who preferred Low Rate of Interest , Dealer Reference as well as faster deliveries there priority which affects there finance decision.

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Factor affecting finance decisions by all the age group people clubbed together

priority Rank

Faster Delivery 90

Low Rate of Interest 72

Executive Behavior 21

Dealer Reference 17

priority of the customers age wise

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The graph clearly directs the main motivation of the customers for buying a loan

is the low interest rates, though it may not be true for all of the age groups.

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Factor affecting finance decisions by different income groups

Under Rs.5000 p.m group

priority Rank

Faster Delivery 8

Low Rate of Interest 17

Executive Behavior 7

Dealer Reference 3

Rank

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 36 people falling under Rs.5000 p.m group categories out of which preferred Low Rate of Interest , there priority which affects there finance decision.

For Rs.5000-10000 p.m income group

priority Rank

Faster Delivery 24

Low Rate of Interest 40

Executive Behavior 18

Dealer Reference 4

40

Rs.5000-10000 p.m

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 86 people falling under Rs.5000-10000 p.m income group categories out of which preferred Low Rate of Interest as well as faster deliveries there priority which affects there finance decision.

For Rs.10000-15000 p.m income group

priority Rank

Faster Delivery 11

Low Rate of Interest 12

Executive Behavior 12

Dealer Reference 8

Rs.10000-15000 p.m

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

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The survey conducted constituted 86 people falling under Rs.10000-15000 p.m income group categories were very biased and different sets of people had different preferences which affects there finance decision.

For above Rs.15000 p.m income group

priority Rank

Faster Delivery 11

Low Rate of Interest 7

Executive Behavior 6

Dealer Reference 12

above Rs.15000 p.m

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 86 people falling above Rs.15000 p.m income group categories preferred dealer references and faster deliveries which affects there finance decision

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Factors affecting all the income groups clubbed together

priority of the customers income wise

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The graph shows that most of the customers are more affected by the rate of interests and there decision for buying the finance scheme is majorly motivated by it.

priority Rank

Faster Delivery 54

Low Rate of Interest 76

Executive Behavior 43

Dealer Reference 27

43

Factor affecting finance decisions by different occupation classes group

For salaried group

priority Rank

Faster Delivery 32

Low Rate of Interest 26

Executive Behavior 12

Dealer Reference 8

sallaried

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 78 people falling under salaried group categories preferred faster deliveries which affects there finance decision.

For business class

priority Rank

Faster Delivery 18

Low Rate of Interest 31

Executive Behavior 11

Dealer Reference 7

44

business class

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The survey conducted constituted 67 people falling under business categories preferred Low Rate of Interest which affects there finance decision.

For agri based business

priority Rank

Faster Delivery 2

Low Rate of Interest 17

Executive Behavior 7

Dealer Reference 29

agri based business

priority

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

Agri-based occupational people preferred Dealer Reference which mostly affects there finance decision

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Factor affecting finance decisions by all the occupation classes group clubbed together

priority Rank

Faster Delivery 52

Low Rate of Interest 74

Executive Behavior 30

Dealer Reference 44

priority of the customers occupation wise

Faster Delivery

Low Rate of Interest

Executive Behavior

Dealer Reference

The graph shows that most of the customers are more affected by the rate of interests and there decision for buying the finance scheme is majorly motivated by it.

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Documents brought by the customers when they walk in a dealership to avail two-wheeler finance and time taken to

obtain them

Document day 1 day 2 day 3 day 4 day5 day6 day7 more than 7 daysAddress Proof 91 34 30 15 12 10 8 0

Id Proof 78 54 23 18 14 11 2 0Ownership Proof 35 36 55 32 23 11 6 2

Photo 79 42 31 19 11 7 5 6Income Proof / Agri Proof 19 21 34 47 56 13 9 1

PDC’s 13 24 31 44 34 32 12 10

0%10%20%30%40%50%60%70%80%90%

100%

day 1 day 2 day 3 day 4 day5 day6 day7 more than7 days

documents customers bring when they walk in a dealership to avail two-wheeler finance

PDC’s

Income Proof / Agri Proof

Photo

Ownership Proof

Id Proof

Address Proof

In the survey conducted for the different documents brought and time taken, customers are easily able to bring address proof and ID proof for the two wheeler finance on the very first day and income proof and agri-proof and PDC’s i.e. POST DATED CHEQUE are those documents which takes a lot of time and are very difficult to obtain.

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Time taken by sales executive to explain a customer about TW finance scheme

time taken 5 mins 10 mins 15 mins 20 mins More then 20 mins

no. of customers 34 27 48 54 37

time sales executive has taken to explain you about TW finance scheme

0

10

20

30

40

50

60

5 mins 10 mins 15 mins 20 mins More then 20mins

no. of customers

Most of the sales executives take around 15-20 mins and some of the sales executives are even taking more than 20 mins which is bringing more inefficiencies.

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Time taken by canvasser to collect/fill the following documents

Document 15 mins 30 mins 45 mins 60 mins More then 60 mins

Application Form 23 45 67 37 28Agreement 45 56 47 31 21Address Proof 17 23 25 10 125Id Proof 32 13 7 18 130Ownership Proof 4 15 17 23 141Photo 24 9 14 25 128Income Proof / Agri Proof 15 13 21 3 148PDC’s 14 9 11 13 153

0%

20%

40%

60%

80%

100%

15 mins 30 mins 45 mins 60 mins More then 60mins

time canvasser takes to collect/fill following documents

PDC’s

Income Proof / Agri Proof

Photo

Ownership Proof

Id Proof

Address Proof

Agreement

Application Form

The survey shows that address proof and ID proof doesn’t takes much time and are obtained almost within 45mins whereas all the other formalities like ownership proofs, photos, income proof and PDC’s take a lot of time and are observed to be procured in more than an hour.

49

Time different activities has taken

activities 30 mins 60 mins 90 mins 120 mins More then 120 mins

TVR 86 45 35 26 8FI 21 34 38 45 62

0

10

20

30

40

50

60

70

80

90

30 mins 60 mins 90 mins 120 mins More then120 mins

time following activities has taken

TVR

FI

The survey showed that TVR’s take not more than 30mins and the rest are also procured mostly 60mins whereas FI takes a lot of time and the status is mostly procured after 120mins.

50

Time dealer takes to deliver the vehicle after getting DO from HDFC Bank

time taken 30 mins 60 mins 90 mins 120 mins More then 120 mins

no. of customers 25 28 34 54 59

0

10

20

30

40

50

60

30 mins 60 mins 90 mins 120 mins More then120 mins

time dealer takes to deliver the vehicle after getting DO from HDFC Bank

no. of customers

The survey conducted showed that most of the dealers take more than 120 mins and sometimes due to some pendencies the dealer is not been able to deliver the vehicle even within the same day.

51

No. of times canvasser calls for the pending documents

day 1 day2 day3 day4 day5 day6 day7

2 3 4 5 3 0 0

does the canvasser calls the customer for the pending documents

yes

no

According to the survey 69% of the customers calls the customers for the pending documents and canvasser calls twice a day in first day and increases the frequency as the day pasts for the pending documents and on the 6th and on the 7th day the calls are being completed.

52

Canvasser survey analysis

53

The survey was conducted on 100 canvassers from the dealerships and canopy people.

No. of cases served on daily basis by the canvasser

no. of cases 5 cases 10 cases 15 cases 20 cases more than 20

cases

no. of canvasser 59 26 11 2 2

no. of cases

0

10

20

30

40

50

60

70

5 cases 10 cases 15 cases 20 cases more than 20 cases

no. of canvaser

According to the survey most of the canvassers are able to serve only 5 casesAnd some of them are being able to entertain 10 cases on the busy days.

54

Time taken to serve a customer

time taken 5 Min 10 Min 15 Min 20 Min More then 20 Min

no. of canvasser 17 23 21 32 7

time taken

0

5

10

15

20

25

30

35

5 Min 10 Min 15 Min 20 Min More then 20 Min

no. of canvasser

The graph shows that canvassers take 15-20 mins to serve a customer for telling him about the scheme and all the formalities needed to be furnished.

55

No. of customer able to provide with all the documents at the time of there first visit to the canvasser

yes no

12 88

no. of customer able to provide with all the documents at the time of there first visit to the canvasser

yes, 12

no, 88

yes

no

.

88% of the customers are not being able to bring the necessary formalities for taking the finance and this increase the turn around time.

56

Time taken to convey the queries to the CPA for login the files into the system by different modes of

communication

Mode of communication no. of canvasser

Phone 12

Fax 57

Physically 16

Direct login into the system 5

Mode of communication used by canvassers

0

10

20

30

40

50

60

Pho

ne

Fax

Phy

sica

lly

Dire

ctlo

gin

into

the

no. of canvasser

Fax is the most common mode of communication used by the canvasser to convey the queries to the CPA for login the files into the system.

57

Most basic deficiency found in a case ready to be approved

Document

no. of canvasser

Address Proof 5Id Proof 6Ownership Proof 18Photo 12Income Proof / AgrI Proof 22PDC’s 37

most basic deficiency found in a case ready to be approved

0

5

10

15

20

25

30

35

40

AddressProof

Id Proof OwnershipProof

Photo IncomeProof / AgrI

Proof

PDC’s

no. of canvasser

The most basic deficiency which creates delay mostly are the PDC’s (POST DATED CHEQUES) which are very difficult to obtain from the bank as well as income proof for high LTV cases and agri proof for agriculture based people are also some of the documents which are not easily available with the customers.

58

Time taken by CPA to process different activities

Document 15 MINS 30 MINS 2 HRS 4 HRS 1 Day 2 Days 3 Days 4 Days or more than 4 days

TVR STATUS 49 38 9 3 1 0 0 0

FI AGENCY 14 19 21 37 6 3 0 0

LOS NO. GENERATION 3 9 36 35 15 2 0 0

PHYSICAL FILE LOGIN 3 4 4 8 17 23 28 13

APPROVALS 0 0 0 5 13 24 31 27

DISBURSEMENTS 0 0 0 0 9 12 29 50

0%10%20%30%40%50%60%70%80%90%

100%

TV

R S

TA

TU

S

FI A

GE

NC

Y

LOS

NO

.G

EN

ER

AT

ION

PH

YS

ICA

L FILE

LOG

IN

AP

PR

OV

ALS

DIS

BU

RS

EM

EN

TS

4 Days or more than 4 days

3 Days

2 Days

1 Day

4 HRS

2 HRS

30 MINS

15 MINS

TVR status is available with the CPA within 30 mins in most of the cases. FI status takes a bit time since sometimes the cases belong to rural areas

where it is very difficult to find the address and takes 2-4 hrs in most of the cases,

LOS no. is generated after the file is logged in into the system and takes 2-3 days on an average,

physical files takes minimum 1 0r 2 days and sometimes the time can also exceed to 3-4 days,

approvals also shows the same trend files take a lot of time for disbursements and time can exceed to even

more than 4 days in most of the cases

Recommendations and Suggestions

59

Since most of the people are falling under 18-25 yrs age group the bank should launch different schemes for different age group like for e.g. 15 mins loan approval scheme for youngsters.

Banks should give training to there canvassers to entertain different customers in a different way so that they are satisfied with there services.

For people having strong financial or personal record should be given the loan on a fast and priority basis so that time is not wasted in getting the FI done and TVR.

A good friendly and cordial relationship with dealer should be maintained so that the vehicle is delivered to the customers as fast as possible.

Bank should look for new and innovative ideas for reducing the time required for fulfilling the formalities like agri proof required by the farmers in case of high LTV cases.

Bank must mention some of the common documents required by the bank to be furnished by the customers in the advertisements so that customers are aware of the documents to be submitted and time is reduced in fulfilling such requirements.

Since PDC’s are big problems for the banks and increases the time lag for loan processing, bank should open there customers account in there own bank and try to get the cheque book available for them.

Bank should have there own photographers who can take the customers photo then and there which will reduce a lot of time and authenticity of the photo is also maintained.

Banks should have there PC’s at the dealership points so that files are logged in then and there and time is not wasted in noting down the information.

If a case is sourced through a DSA or DST then a PC should be installed at office which is located between 2-3 DSA’s and DST’s.

Since FI agency takes a lot of time in giving the status of the rural cases so there should be a proper team of special FI people who will take care of the major villages from where cases are in quantity.

60

Canvassers mostly take 20 mins to explain the customer about the scheme, so there should be proper training for the canvassers in which they can explain the customers in not more than 10 mins

Special calling teams should be there for intimating the customers about there pendencies so that cases are being disbursed as soon as possible.

Banks should tie-up with the dealers to open there inventory funding accounts so that money is being transferred through wire and the process is being made more fast.

The system of DELIVERY ORDER (DO) should be closed and it should be changed to a better and fast system which will reduce the time in giving the vehicle to the customers.

61

New process developed for loan processing

1. Fax based approval system should be done.2. As soon as the query is generated the filled form

would be faxed and CPV data is punched automatically on LOS.

3. The same data generated would be made available to the TVR and FI agency online and as soon as the status is made available, the same will be forwarded to the credit manager for the decision to be made.

4. CPV agency completes the CPV within the stipulated period of time and it is forwarded to credit team who will give the decision.

5. If the credit approves the case then the file is disbursed and credited to the dealer online to his inventory funding account.

6. If the file is pending then the sales department to complete the documents required.

TAT for various activities.

Fax based query generation—7 mins TVR status—7 mins CPV done—90 mins Credit manager decision time required –7 mins

By applying this new process the TAT is reduced to 2hrs.

62

Appendix

Canvasser questionnaire

***********************************************************

1. How many cases you serve on a daily basis?

cases cases cases cases cases

5 10 15 20 More then 20

2. How much time you take to serve a customer?

Min Min Min Min Min

5 10 15 20 More then 20

         

3. Is the customer able to provide you with all the documents at the time of there first visit?

yes

no

4. How do you convey the queries to the CPA for login the files into the system and how much time does it takes?

  mins mins mins mins mins

Mode of communication 5 15 25 30More than

30Phone

         Fax

         Physically

         Direct login into the system

         

63

5. Which is the most basic deficiency do you find in a case ready to be approved?

Document

Address Proof

Id Proof

Ownership Proof

Photo

Income Proof / AgrI Proof

PDC’s

6. How much time does the CPA takes to process the file for the following activities?

  MINS MINS HRS HRS Days Days Days Days

Document 15 30 2 4 1 2 3 4

TVR STATUS                

FI AGENCY                LOS NO. GENERATION                

PHYSICAL FILE LOGIN                

APPROVALS                

DISBURSEMENTS                

******************************************************************

64

Customer Questionnaire

***********************************************************

1. Which factors affect your finance decision?

 priority

Rank

Faster Delivery  

Low Rate of Interest  

Executive Behavior  

Dealer Reference  

2. What all documents do you bring when you walk in a dealership to avail two-wheeler finance?

  Day Days Days Days Days Days Days Days

Document 1 2 3 4 5 6 7 More then 7

Address Proof                

Id Proof                

Ownership Proof                

Photo                

Income Proof / Agri Proof                

PDC’s                

3. How much time sales executive has taken to explain you about TW finance scheme?

Min Min Min Min Min

5 10 15 20 More then 20

         

4. How much time canvasser takes to collect/fill following documents?

Min Min Min Min Min

Document 15 30 45 60 More then 60

Application Form          Agreement          Address Proof          Id Proof          Ownership Proof          Photo          Income Proof / Agri Proof          PDC’s          

65

5. How much time following activities has taken?

  Min Min Min Min Minactivities

30 60 90 120More then

120

TVR          FI          

6. How much time does the dealer takes to deliver the vehicle after getting DO from HDFC Bank?

  Min Min Min Min Min

Document30

60 90 120More then

120

TVR          

7. Does the canvasser call you for the pending documents?

yesno

8. How much time canvasser calls you for pending documents?

Day Days Days Days Days Days Days

1 2 3 4 5 6 7

             

Name : Age :Occupation : Income :Address : Phone :

******************************************************************

Bibliography

66

1. A BOOK ON ‘MARKETING RESEARCH’ BY NARESH MALHOTRA, PEARSONS PUBLICATIONS,6TH EDITION(2005-06)

2. HDFC BANK, ANNUAL REPORTS(2005-2006)3. ICICI BANK, ANNUAL REPORTS(2005-2006)4. WWW.HDFCBANK.COM 5. WWW.AUTOMART.COM 6. CENTURION BANK, ANNUAL REPORTS(2005-

2006)7. BANKING INDUSTRY ACT,1949,GOVT. OF INDIA8. BANKER (JOURNAL FOR BANKS)9. WWW.PAMAC.COM 10. KPMG -- 2006 AUTO OUTLOOK RELEASE INDIA

TABLE OF CONTENT

DECLARATION

Certificate of the company

Acknowledgement

Synopsis of the project

Introduction

ICICI Bank – no. 1 financer of car loans in India

New car Loans

67

Used car loans

Loan amount

Repayment

Application process

Documentation

Factors affecting car loan finance

Research Methodology

Research Objective

Research instruments

Sample size

Statistical tools used

Managerial usefulness of the study

Questionaire

Findings

1st stage

2nd stage

Analysis

Results of the project

Recommendations

Limitations of the study

68

Annexures

Bibliography

Declaration

I, Nidhi Chowdhary, a student MBA (Marketing) in Bharati Vidyapeeth’s

Institute of Management & Research (BVIMR), New Delhi, a constituent

Unit of Bharati Vidyapeeth Deemed University , Pune, hereby declare that

the work done on this research project report entitled “Market testing of

Refinance Loan for existing Auto customers in Delhi” has been done by

me under my project guide. No part of this work has been submitted for any

69

other degree of any other university. The data collected is authentic and

sources have been acknowledged.

Nidhi Chowdhary

MBA (Marketing)

BHARATI VIDYAPEETH’S DEEMED UNIVERSITY

Acknowledgement

“Blessed is he who expects no gratitude, for he shall not be disappointed.”

- W.C. Bennet

One of the most pleasant part of writing a report is that, it gives the opportunity to thank

all those, with whose guidance, cooperation and sincere advice I have able to draw and

complete my research report entitled “Market testing of Refinance Loan for existing

Auto customers in Delhi”

70

Today when I am submitting my project report, I would be failing in my duties if I do not

thank various persons without whom this project would never be completed.

I thank Mr. Sanjay, Relationship Manager, Auto loans, ICICI Bank for providing me

an opportunity to be a part of this project. I thank him for making me feel comfortable

and providing me with all the information and tools to make my project successful. This

work would have been impossible, without the valuable help, immense motivation and

true guidance of Mr. Sanjay.

First of all I would like to pay my sincere thanks to Dr. S.S.Vernekar, Director

(BVIMR) for not only giving me the opportunity to work on this project, but also for

providing an excellent infrastructure in the college.

My sincere and special thanks to Mrs. Preety Wadhwa for her insightful guidance and

for being a constant source of inspiration for me throughout the project.

Nidhi Chowdhary

SYNOPSIS OF THE PROJECT

The project undertaken is a research project under the guidance of Mrs Preety Wadhwa

ICICI Bank started its Car Loans business in 1999 which consists of New car Financing

only. In year 2003, Bank started to give loans on Use Cars also. This consists of:

Financing Sale-Purchase deals

Loan against existing vehicles

71

This project deals in evaluating the scope of re-finance on already existing ICICI

Bank car loans.

Questionnaires were used as a mode of primary data and magazines and internet as secondary

data for the collection of information. It aims at finding the customer behaviour and buyer’s

market for refinance loan. In all 200 existing customers were surveyed for this project in Delhi.

The findings and analysis have been made using the data collection through these modes only.

INTRODUCTION

ICICI Bank

The No. 1 Financier for Car Loans in India

ICICI bank is the No. 1 financier for car loans in the country. They  have a  network of  more  than 1800

channel partners in over 1000  locations. Through  their  strong  tie-ups  with all leading  automobile  

manufacturers, the ICIC bank  ensures best  possible deals to their  customers. Well equipped infrastructure

enables hassle-free quick processing of loans with minimal documentation.

The # 1 financier for car loans in the country.

Network of more than 1800 channel partners in over 1000 locations.

Tie-ups with all leading automobile manufacturers to ensure the best deals.

Flexible schemes & quick processing.

Hassle-free application process on the click of a mouse.

All loans at the sole discretion of ICICI Bank Ltd.

72

ICICI Bank, the market leader in Car Loans, offers you flexible schemes to suit your

needs, hassle free documentation & extremely quick processing, so that you can own and

drive your car in the quickest possible time. Also, with their relations with 12 car

manufacturers, we get the benefit of the most attractive deals in the market.

 

Turn your dreams into reality. Get that new car you always wanted with our new car

loans. With loans up to 95% of the ex-showroom price and repayment tenors up to 7

years.

Make the experience of owning a used car a simple, easy & reliable experience with

ICICI bank used car loans. ICICI Bank offer up to 85% funding of the car value for

upto 5 year tenor. You may also avail finance against your existing car.

 

 Get immediate cash up to 90% of the car’s value. Flexible repayment – minimum of

5% of total outstanding every month. Interest is charged only on the amount and time

period utilized for. Roaming current account with privileges like personalized multi-city

cheque book and international HPCL Visa debit card.

ICICI Bank

Loan Amount

To enhance your loan amount, the certified income of the co-applicant

is considered, if requested by the applicant.

The co-borrower can be the spouse or son/daughter living in the same

city. Since the co-borrower is the joint applicant for the loan, he/she

has the obligation to repay the loan along with the main applicant.

73

Similarly, a guarantor can be any relative or director (in case of a

private limited company). The guarantor provides the guarantee that

the customer will repay the loan as per the terms & conditions of the

loan.

However, in both cases, the asset has to be registered in the name of a

single owner, not joint ownership.

New car

ICICI Bank finance up to 90 per cent of the ex-showroom cost of the

car.

The amount financed will depend on the Loan to Value (LTV) ratio. The

LTV ratios are applicable on the invoice value of the cars The customer

has to bear the registration and the insurance costs.

The LTV also depends on the car model. Higher LTV ratios are available

under specific enhanced income eligibility criteria. Please contact our

representative for further details.

Used car

For a used car, finance up to a maximum of 80 per cent of the

valuation amount is provided. You can also avail of a refinance against

an existing car. In this case, the funding will be 70 per cent of the

valuation amount.

Rates & Fees

Interest rates depend on the tenure and the car model selected.

Interest is calculated on a monthly reducing balance and the rate

remains unchanged till the maturity of the loan.

The interest rate for new cars varies between 14.5 per cent to 16 per

cent.

The interest rate for used cars 18.5 per cent for loans greater than Rs

1 lakh and 20 per cent for loans less than Rs 1 lakh.ICICI Bank charge a

74

processing fee of Rs 1000 only in the case of loan amounts for used

cars that are less than Rs 1 lakh

Repayment

The repayment tenure extends from 1 to 7 years The maximum loan

tenure for a used car or is determined by the age of the car. In the

case of a used car, the tenure cannot be more than 5 years and the

used car cannot be more than 8 years old at time of maturity of the

loan.

ICICI Bank charge a "swap" charge of Rs 500 for exchange of cheques.

Once the loan is sanctioned, you can change the tenure. If you do so,

the interest rate and the EMI will change accordingly. If a new car has

been selected, then the loan amount will change accordingly.

Repayment due dates are the 1st or 7th of every month. Payments

have to be made through post-dated cheques (PDCs) only, neither cash

nor cards are accepted.

Payment due dates cannot be changed.

Once you submit the PDCs, the dates of the cheque cannot be

changed.

You can change the PDCs only in the case of a change in bank

accounts. However, ICICI Bank would require a signature verification by

the new banker and ICICI Bank would be charging a nominal fee to

replace your set of cheques.

ICICI Bank charge Rs 500 per bounced cheque.

The repayment schedule and amortisation chart will be given to you

after the loan has been disbursed.

Full pre-payment is accepted, part pre-payment is not allowed.

The prepayment fee is 2 per cent on the outstanding principal amount.

75

Should you change your residence during the tenure of the loan,

please intimate us through a letter of the same.

In addition, you are required to fund the nominated local account. If

you have shifted to a city where ICICI Bank have a branch, you can do

a PDC swap (issue a new set of PDCs from the new bank account) for

the remaining instalments.

Repayment Terms of your Car Loan

ICICI Bank Car Loans offers flexible schemes, attractive interest rates, and quick &

hassle-free  application  process  at the  click of a  mouse. At the same time, ICICI Bank

ensure that the repayment terms are equally convenient for you.

ICICI   Bank   Car Loans offers multiple schemes and repayment options for your car loan.

Repayment tenure ranges from 1 year to 7 years for new car loans.  Six  year and seven

year  loans are available for  specific  models. Maximum  loan tenure  for used car  would

depend on  the age  of the car. The car should not be more than 8 years  old at the time of

maturity of the loan.

Car Loans 

Repayment tenure ranges from 1 year to 7 years for New Car Loans. Six Year and

Seven year loans are available for specific models.

Maximum loan tenure for used car would depend on the age of the car. The car

should not be more than 8 years old at the time of maturity of the loan.

You may change the tenure of the loan before the loan is disbursed. The interest

rate & EMI would change accordingly.

The repayment due dates are 1st and 7th of every month and would depend on the date of

disbursement. Payment due dates cannot be changed.

You can make the Payments through post-dated cheques (PDCs)

Repayment option through Direct Debit Mandates is also available for all ICICI

Bank account holders.

76

Option of repaying through ECS is also available in select cities.

Payments through cash or credit cards are not accepted.

You may change the PDC's in case your Bank Account is changed . However,

ICICI Bank would require verification of signatures by new banker. A nominal fee of

Rs.750/- (Swap Charges) would be charged for exchange of cheques.

A full pre-payment of the loan is accepted. Part pre-payment is not allowed.

Service Tax will be charged as applicable.

ICICI Bank charge pre-payment fee of 5% on the outstanding principal

amount,Service Tax will be charged as applicable.

ICICI Bank charge Rs.250/-per bounced cheque.

  Note: All charges are subject to Service Tax as applicable.

Application Process of your Car Loan

Car   Loans from  ICICI Bank  are  extremely convenient, flexible and quick. With more

than 1800 channel  partners  in over 1000  locations, ICICI Bank reach out  to   millions

of  customers  and   help  them  realise  their  dream  of possessing a car.

Keep  It Simple  and  Swift. That's  the  idea behind  the  easy  and  quick application

process of ICICI   Bank   Car Loans . ICICI Bank have multiple channels for  you  to

access  our car loan  services. You can call us on the contact numbers  given   below,

apply  online,  send  us  an   email,  call  for  our representative to visit you, visit our bank

centre or SMS us your interest.

Documents required for your Car Loan

At ICICI   Bank   Car   Loans , ICICI Bank offer  the most  convenient, flexible & quick car

loan at the  click of a  mouse. Keeping  your convenience in mind, ICICI Bank ask you

for minimal  mandatory  documents for the sanctioning of your car loan.

Car Loans 

Car Loans

77

Salaried

IndividualSelf-

Employed

Individual

Partnershi

p Firm

Private / Public

Ltd Co

Application

form

Application

form

Application

form

Application

form

Photograph Photograph Photograph of

signing partner

Guarantor's

photograph

(for private

limited

company only)

Proof of bank

account

continuity

One proof of

income (ITR

for the last two

years )

Last two years'

income proof

(audited

account or

ITRs + CA

certified

financials)

Last two years

audited

financials

One income

proof for the

last two years

(ITR, Form 16,

salary slip)

One proof of

residence

(driving

license /

voters' identity

card / ration

card /

passport /

utility bills for

the last 3

months)

Partnership

deed

Certified true

copy of the

MOA & AOA

One proof of One proof of Partners Board

78

identity

(driving

license / voters'

identity card /

passport / PAN

card / photo

credit card /

photo ration

card)

residence

(driving

license /

voters' identity

card / ration

card /

passport /

utility bills for

the last 3

months)

authority letter resolution

(format

available on

request)

One proof of

residence

(laminated

driving

license / voters'

identity card /

photo ration

card /

passport

/utility bills for

the last 3

months /

company ID -

limited

company or

government /

PAN    card)

One proof of

office address

(utility bill /

lease deed /

excise or sales

tax receipt /

Shops and

Establishment

Act

Registration)

Service Charges for Car Loans

79

If  you  are looking  for flexible  schemes,  quick  processing of your loans, attractive  interest  rates at  the

click  of a  mouse, then  your search ends here. ICICI   Bank   Car   Loans is  the No. 1 financier 

for  car  loans  in  the country.

Our car loan interest charges differ according to the car model, the tenure of the loan,  the  customer and

his location. For  the Car   Overdraft   Loan scheme, interest is charged only on the amount  drawn

and for the period that  it  is  utilized.  The rate  of  interest  would  depend  on the  scheme selected by the

customer.

Service Charges

Description of Charges Car Loans

Loan Processing Fees Charges

/ Renewal Charges Rs 650/-

Stamp Duty Actuals

Prepayment Charges5% on the principal

outstanding

Charges for late payment

(loans)2% per month

Cheque Swap Charges Rs. 500/-

Cheque bounce charges Rs. 200/-

Note : Service Tax and other govt. taxes, levies, etc. applicable as per

prevailing rate will be charged over and above these charges at the

discretion of ICICI Bank.

 

Factors affecting your Car Loan Amount

Car Loans  from  ICICI  Bank are extremely  convenient, flexible and quick. With more  than 1800

channel  partners in over 1000 locations,  ICICI Bank reach out  to  millions  of  customers  and  help  them

realise  their  dream  of possessing a car.

ICICI Bank offer Car Loans  for new  as well as  used cars as  per your  need. ICICI Bank offer a

minimum of Rs. 75,000  for a used car  and Rs. 1,00,000 for a new car. Higher car loan amounts are also

disbursed according to the model of the car.

80

Car Loans 

New car

ICICI Bank finance upto 95% of the ex-showroom cost of the car.

The Loan amount also depends on the car model. Higher loan amounts are

available under specific enhanced income eligibility criteria.

Minimum loan amount for new car Loan is Rs.1 lac.

Used car

For a used car, ICICI Bank finance up to a maximum of 90% of the valuation of

the car

Minimum loan amount for a used car loan is Rs. 75000/-

Loan Enhancement

To enhance your loan amount, the certified income of the co-applicant can be

considered, if requested by the applicant.

The co-applicant can be the spouse or son/daughter living in the same city.

Similarly, in case of a partnership firm or a limited company one of the partners

or a director can be taken a co-applicant / guarantor for increasing the loan amount

However, in both cases, the asset has to be registered in the name of a single

owner, not joint ownership.

 

81

RESEARCH OBJECTIVE

To know the percentage of customers willing in taking a re-finance option

on their existing loan in the given sample of 200.

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MANAGERIAL USEFULNESS OF THE STUDY

This study was very much useful for me. During this research i interacted with different

customers personally and observe lot of things and must say learnt a lot of practical thing

from them. But as we are talking about managerial usefulness of this study so, as we

conduct survey with the help of well-formatted questionnaire, all feedbacks are kept by

the me for future studies as secondary data.

So, finally overall research was really enjoyed by me.

The usefulness of this study for manager is as follow: -

This study would help manager to find out the market response of Refinance

loans before its launch.

It provides a feedback to the company about their product, which is refinance

loans.

It provides the information about the company’s stand in the market.

It helps the manager to apply the various activities, which is useful to increase the

market share of its product.

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It helps the manager to know about the preference and choice of the customers so

that they can plan out their future analysis and strategies on that basis.

RESEARCH METHODOLOGY

Every project work is based on certain methodology, which is a way to systematically

solve the problem or attain its objectives. It is a very important guideline and lead to

completion of any project work through observation, data collection and data analysis.

According to Clifford Woody,

“Research Methodology comprises of defining &

redefining problems, collecting, organizing & evaluating data, making deductions &

researching to conclusions.”

Research Instruments

Primary data

Primary data are those, which were collected afresh & for the first time and thus happen

to be original in character. However, there are many methods of collecting the primary

data; all have not been used for the purpose of this project. The ones that have been used

are:

Structured questionnaire

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Secondary data

When an investigator uses the data that has been already collected by others is called

secondary data. The secondary data could be collected from Journals, Reports and

Various Publications. The advantages of secondary data can be economical, both in the

term of money and time spent. In this report the secondary data was collected through:

Textbooks

Magazines

Articles

Websites

It is understood that a thorough descriptive research design lays the foundation of

good research. For research we have stressed upon conclusive research and have been

carried out by personal survey.

For this research work more stressed is given on primary data. Primary data will

not only be relevant for research project but it is also reliable, accurate and dependable.

QUESTIONNAIRE

A questionnaire is a set of questions printed or typed in definite order on a form or set of

form. There are two type of questionnaire, the first one is standard questionnaire and the

second one is un-standard questionnaire. The authority or expert sets the standard

questionnaire. In the other hand un-structured questionnaire is set according to objective

of the study by researcher. In this research work we used un-structured questionnaire with

my best ability and under the guidance of the company guide.

The questionnaire was formulated by keeping in mind the following points.

Giving the respondents clear comprehension of the question.

Including the respondents to co-operate.

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Giving instructions as to what is wanted.

Identifying the needs to be known.

After floor acing the questionnaire, the respondents were personally contacted.

Each respondent was requested to answers the question with appropriate answer

genuinely. All the questions were made very clear to them. The questionnaires

were duly filled with the responses of all the respondents in the current project

work.

INTERVIEW METHOD

There was a fact to face interaction with most of the samples. They were directly

questioned and accordingly personal and professional information were collected from

them. In this project work I have made interview with almost respondent to know some

extra data or fact, which was used in this project work.

OBSERVATION METHOD

In the observation method, the researcher himself collects necessary information by

observing the phenomena under this method. Observation may be conducted on in the

natural field or in the form of experiment.

After the observation, the data is carefully noted in the questionnaire format. We

used uncontrolled observation in this observation which takes place in the natural setting.

Consumers were free to express their feeling about their choice of fuel . The observation

method give us an idea about the Consumer market and buyer’s behaviour on Petrol

and Diesel.

Sample size

Sample size refers to the number of items to be selected from the universe to constitute

the sample. The sample size neither be too small nor be too large, but it must be sufficient

enough to properly analyze and to achieve the objectives of the study. Hence, here the

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sample size is of 200 customers through questionnaire, which is sufficient to analyze and

also to achieve the objectives of the study.

STATISTICAL TOOLS USED

The main statistical tools used for the collection and analyses of data in this project are:

Questionnaire

Pie Charts

Tables

Questionnaire

Q.1. Do you require any additional loan on your existing vehicle?

1. Yes

2. No

If answer to Q.1. is Yes, then following questions are asked:

Q.2. What is the model of the vehicle (in terms of year)?

Q.3. What is your loan requirement (approx)?

Q.4. For how much duration do you want the loan?

If answer to Q.1. is No, then again try and pitch the customer

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FINDINGS

A sample size of 200 has been given by the two Direct Selling Agents (DSA), DSA1 and

DSA2, with sample size 100 each. These sample have been chosen in accordance to their

ladel number as per the records of ICICI Bank.

1st Stage

Findings of the first stage show that initially out of 200, almost 75 were ready to give

refinance loan a thought. 40 were ready from DSA1’ sample and 35 were ready from that

of DSA2.

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2nd Stage

Then the final i.e. 2nd stage findings show that out of 75 customers, 35 are wiling to take

the refinance loan.

ANALYSIS

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ICICI earns a business of Rs. 300 Crores/month on car loans.

So, if 35 customers are ready to take the refinance loan, then it means out of a sample

size of 200, 17.5% people are interested.

This means that:

17.5% * Rs. 300 crores/month = Rs. 52.5 crores/month will be the income earned per

month on refinance loans, if they are taken out in the market.

Secondly, following are the reasons which came out during the refusal of final offer:

Higher EMI of the Re-finance loan.

Higher cost of interest

Personal loans are available at 12-13-14% interest, then why to go for 15-16%

interest of Re-finance loans.

Maturity of the loans

RESULTS OF THE PROJECT

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With a sample size of 200 existing Auto customers, 35 agreed to take the

loan. This means if the product is introduced in the market it will be a good

source of income for the organization and will add to the portfolio of the

organization Thus the product should be introduced in the market as soon as

possible.

Results of this research study are given as follows:

Introduction of the Re-finance loan is a good way to increase the

portfolio

When 12% of the people are wiling to take new car loans, then 15%

are willing to take Re-finance loans. The balance 3% will be the

company’s extra revenue

A difference point is there between personal loans and Re-finance

loans

Thus the product should be introduced in the market as soon as possible for

earning the portfolios and hence the market share. This will help maintaining

the position of ICICI in the market and it will remail a leader as such.

RECOMMENDATIONS

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Based on the data collected through the questionnaire and interactions

with the students the following recommendations are made for

consideration:

EMI on Re-finance loan should be reduced a bit so that a customer

doesn’t leave it for the personal loans.

The Re-finance loans should carry certain other advantages so that

a customer is motivated to take it.

It will be a good portfolio earner so it should be introduced as early

as possible.

LIMITATIONS OF THE STUDY

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No study is an ultimate effort. It always leaves room for improvement and it

is the limitation of one study, which serves as the bases for further research

ventures. Even though, sincere efforts are taken to ensure that an exact

picture can be arrived at, still there may be some limitations related to the

study. These are listed as below:

The work has been carried out in a limited time, which acts as a

constraint while doing a thorough research work

The sample size was small and hence the results can have a degree of

variation

Questionnaire is subjected to errors

Consumer may have manipulated their responses

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