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SUMMARY:

This project report is on retail advances of Bank of India. In today’s competitive environment and

after entry of many private and foreign players in banking industry, makes the scheduled commercial

banks to pull up their socks and not only retain their existing customers but also attract new client

base by providing them various value added services. Bank of India’s growth is very promising and

noticeable in the last few years and Bank built up its own brand image in the mind of customers.

Bank always look forward at the customer by providing them hassle free advances with less interest

rates then other scheduled commercial banks.

Retail advances are the main source of bank’s profitability. If bank markets its loans products

aggressively in the market and also take care of customers it adds a huge revenue base to banks profit

and loss account. this report focuses on various retail advances of Bank of India with its salient

schemes and rate of interest. This project also focuses on KYC norms, which are made mandatory by

Reserve Bank of India.

Retail advances not always adds to the profitability on Bank but sometimes create serious problems

for Bank when higher loan accounts becomes NPA and recovery is not made up to that extent of the

amount sanctioned. Recent examples are Goldman sach’s and Lehmen brothers. So due diligence is

required by Bank’s officials while sanctioning loan to the borrowers. With the improvement in

technology the fraudsters are using various methods to cheat Bank.

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OBJECTIVES:

1.To study about various retail advances of Bank of India.

2.To know how loans are processed and sanctioned.

3.To know about calculation of quantum and judging repayment capacity of

prospective borrower.

4.To Study recovery methods.

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INTRODUCTION:

History-

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from

Mumbai. The Bank was under private ownership and control till July 1969 when it was

nationalized along with 13 other banks. Beginning with one office in Mumbai, with a paid-up

capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and

blossomed into a mighty institution with a strong national presence and sizable international

operations. In business volume, the Bank occupies a premier position among the nationalized

The Bank has 3101 branches in India spread over all states/ union territories including 141

specialized branches. These branches are controlled through 48 Zonal Offices. There are 29

branches/offices (including three representative offices) abroad. The Bank came out with its

maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008.

. Total number of shareholders as on 30/09/2009 is 2, 15,790. While firmly adhering to a

policy of prudence and caution, the Bank has been in the forefront of introducing various

innovative services and systems. Business has been conducted with the successful blend of

traditional values and ethics and the most modern infrastructure. The Bank has been the first

among the nationalized banks to establish a fully computerized branch and ATM facility at

the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of

SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for

evaluating/ rating its credit portfolio. The Bank's association with the capital market goes

back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to

manage the BSE Clearing House. It is an association that has blossomed into a joint venture

with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock

broking community. Bank of India was the first Indian Bank to open a branch outside the

country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974. The

Bank has sizable presence abroad, with a network of 29 branches (including five

representative office) at key banking and financial centers viz. London, New York, Paris,

Tokyo, Hong-Kong and Singapore. The international business accounts for around 17.82% of

Bank's total business.

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MILESTONES ACHIEVED:

The Bank crossed milestone of Rs.4,00,000 Cr. of Business Mix.

CASA Deposits grew by Rs.13,206 Cr. (a growth rate of 27%) touching a level of Rs.61,843

Cr.; improved from 30.70% to 31.75%.

As many as 31.5 lakh S/B accounts and 1.17 lakh current accounts opened during the year.

Customer base improves by over 10%.

Domestic network touched 3207 branches and 820 ATMs. 186 branches and 320 ATMs were

inaugurated during the year.

28 specialized Mid Corporate Banking Branches were opened.

Syndication desk reactivated and projects involving outlay of close to Rs.10,000 Cr.

processed.

To aid credit delivery, online Credit Application Processing System(CAPS) introduced.

Bank achieved 100% CBS status.

1000 branches of the Bank were refurbished with the Bank’s standard

design.

MTN programme of US$ 500 million concluded at a fine rate amidst immense investor

enthusiasm.

Global Remittance Centre for facilitating NRE remittances from across the world was opened

in Mumbai.

To facilitate control and monitoring Computer Aided Audit Tool (CAAT) launched.

Manpower planning put on fast track and as many as 2650 employees promoted and 27200

staff members trained. Plans for recruitment of over 4500 staff finalized.

RESULTS AT A GLANCE

Q4 : FY2010

Net profit declined by 47% to Rs. 428 Crore compared to Rs.810 Crore in Q4 2008-09

mainly on account of higher provisions. On sequential basis, net profit recorded growth of

5% over Quarter ended December,09.

Operating Profit decreased from Rs. 1408 Crore to Rs. 1275 Crore. .

NIM improved from Rs. 1433 Cr for Q4 FY2009 to Rs. 1,552 Cr.

Cost of Deposits brought down sharply from 6.07% in Q4 2009 to 4.79% in Q4 2010.

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FY 2010

Total Business went up by 20%, from Rs. 334440 crore to Rs. 401078 crore.

Deposits increased by 21% to Rs.229762 crore and advances increased by 18% to Rs.171317

Crore.

Operating Profit for the year 2009-10 amounted to Rs. 4705 crore as against Rs. 5457 crore

during 2008-09. The decline in operating profit by 15.7% was due to drop in yield on

advances, cost of liquidity, non booking of interest income on slippages and slower growth in

non-interest income due to subdued Treasury income.

Net Profit stood at Rs.1741 crore for the year 2009-10 as against Rs. 3007 crore for the year

2008-09 mainly due to higher provisions specially for NPAs.

Net Worth of the Bank increased to Rs. 12456 crore from Rs.11144 crore in March, 2009.

The CRAR under Basel II stood at 12.94 % as on March 31 ,2010 against 13.01% as on

March 31 2009.

Return on Assets stood at 0.70 % and Return on Equity at 14.76 %.

Cost to Income Ratio has risen to 43.81% from 36.18%.

PERFORMANCE HIGHLIGHTS

Business Growth

Global deposits recorded a growth of 21% to reach 229762 crore and Global advances, with a

growth rate of 18% reached Rs.171317 crore.

Domestic Deposits went up from Rs. 159487 crore to Rs.196585 crore.

CASA deposits registered a growth by 27.15%, which improved from 48637 crore in

March,09 to 61843 crore in March,2010.

Domestic Advances increased by 17.70% from Rs. 115354 crore to Rs.135194 crore.

Priority Sector advances constituted 46.38% of Adjusted Net Bank Credit.

Advance to MSME increased by 16.22 % to Rs. 29567 crore.

Business per employee has risen from Rs.8.33 crore in March, 2009 to Rs.10.11 crore in

March,2010. Similarly, Business per Branch improved from Rs.109.72 crore to Rs. 123.94

crore during the same period.

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The Bank’s Clientele base has increased from 32.17 million as on March 31, 2009 to 35.65

million as on March 31, 2010. Total customer acquisition during FY 2010 has been 3.48

million, thus indicating growth over 10 percent.

Income & Expenses

Total income of the Bank for the entire year 2009-10 grew by 5.7 % to reach NRs.20494

crore.

The Interest income increased from Rs.16347 Crore to Rs.17878 Crore recording a growth by

9.50%.

Non-interest income declined from Rs.3052 Crore to Rs. 2617 Crore on the back of subdued

treasury income.

Total expenses recorded an increase of Rs 574 crore i.e. 18.50%,

Net Interest Income went up by Rs. 257 crore, showing a 4.70% rise.

The comparatively lower income growth was because of slow advances off-take during the

year and high cost of deposits during the initial part of the year as well as higher NPA during

the year.

Net Interest Margin for the year stood at 2.51% as against 2.97% for FY2009.

Cost to Income Ratio improved to 43.81 % from 45.33% in December,2009.

Profitability

Operating Profit for Q4 FY2010 stood at Rs 1275 crore as against Rs. 1130 crore for Q3

FY2010 and on sequential basis, profit in quarter ended March was higher than that during

the quarter ended December,09 by 5.50 %.

For the Full year 2009-10, the Bank posted operating profit of Rs. 4705 crore compared to

Rs.5457 crore during 2008-09. Decline in operating profit was due to pressure on margin on

account of high cost of deposits for the initial period and slow growth in other income.

Return on Assets stood at 0.70% and Return on Equity stood at 14.50% for the 12 months

ended March,2010. Earning Per Share and Book Value per Share worked out to Rs.33.10 and

Rs.236.84 respectively.

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Asset Quality

The Bank’s Gross NPA Ratio stood at 2.85% and Net NPA ratio at 1.31%. The Provision

Coverage ratio is at 65.51%. Amount wise,

Gross NPA stood at Rs. 4882 crore and Net NPA at 2207 crore.

The Bank effected Cash Recovery and Upgradation to the tune of Rs.825 crore.

Capital

The Bank is well capitalized with Capital to Risk Weighted Ratio under Basel II of 12.94%

against 13.01% in March, 2009.

Tier I capital constituted 8.58%. The Bank’s Net Worth increased to Rs.12, 456 crore as

against Rs.11, 144 crore as on March 31, 2009.

Social Objectives and Financial Inclusion

Advances to the Priority Sector touched Rs.52,125 crore, constituting 46.38% of the Adjusted

Net Bank Credit.

Credit to Agriculture Segment went up by 10.75 % to Rs.18035 crore and advances to Micro,

Small and Medium (MSME) went up by 16.21% to Rs.29567 Cr.

146 villages have been made as money lender free villages under Debt Swap Scheme.

Under Financial Inclusion Initiative, the Bank has so far opened 32.63 lakh No Frill accounts

with outstanding amount of Rs. 116.44 Cr. 12000 GCCs have been issued. Bank has so far

enrolled 412000 accounts for issuance of smart cards and issued 291000 cards to the

customers up to March 2010.

Bank is also using IT enabled solution on end-to-end basis using handheld device terminals

and biometric smart cards by adopting Business Correspondent/Business Facilitator model as

prescribed by RBI.

Technology Initiative

All the branches of the Bank are under CBS and are RTGS enabled.

ATM network has been expanded to 820 as against 500 in March,09.

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Mobile Banking Services has been extended to all retail internet banking customers. To make

internet banking safe and secure, the Bank implemented 2 Factor Authentication (2FA) – Star

Token for both Retail and Corporate internet banking customers as an additional security

measure. In recognition of various technology initiatives taken, your Bank has been conferred

Winner award in the Best Business Enablement Initiative Category by IBA.

Bank has launched the web-site in Marathi and is planning to roll out in other regional

languages also.

In order to make credit processing activity faster and more objective, Credit Application

Processing Systems (CAPS) was introduced which covers all major credit segments – Retail,

Corporate, MSME and Agriculture.

Awards & Accolades

The second Most Trusted Brands” (MTB), 2009 under PSU category 2009

NDTV Profit Business Leadership Awards 2009 for Best PSU Bank

Outlook money NDTV Profit Awards 2009 –Best Education Loan Provider Runner up

Best Bank under Banking Category by Dun & Bradstreet – Rolta Corporate Awards 2009

FE-EY Most Efficient Public Sector Bank Awards 2010 by Dalal Street

Second best performance award in lending to Micro & Small Enterprises sector by the

Government of India.

Way Forward

Customer Acquisition on a wider scale and Inclusive Banking.

Higher profitability and accent on asset quality

Leverage technology to a large extent.

Focus on Mid Corporate segment for higher returns.

To have a branch network of over 3500 branches and 1500 ATMs by Mar 2011 and enlarge

our presence abroad.

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STAR AUTOFIN SCHEME

ELIGIBLITY:

Salaried Employees 24 times of monthly Gross Salary.

Professionals/Businessman 2 times of Avg. Annual Income as per last 3 yrs.

ITR

Prop. /Partner Firms/Co. 2 times of Avg. Annual cash accruals as per last

3 B/S.

Pensioners 24 times of Monthly Pension.

Farmers Depending upon his income/Repay. Capacity.

Staff (Retired Employees) Both Pension/CPF Optee as per income criteria.

NOTE: Advance can be granted jointly to two individuals combining their entitlement provided they

are close relatives and vehicle is registered in the name of one of the co-borrowers.

PURPOSE:

For purchase of Two/Four Wheelers (incl.jeeps & vans); NEW/SECOND HAND (up to 3 years

Old). In

case of electronic/battery operated vehicles these must be registered with RTO. If registration with

RTO is

not required then with collateral security up to Rs.50000/- for two Wheelers & up to Rs. 4 lakhs for

four

Wheelers

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LIMIT:

Max. limits for finance: Individual (Resident in India):-

For India make vehicle: Rs.25 Lakhs, for Imported vehicles: Rs.75 Lakhs

For companies and corporate entities Rs. 100 Lakhs (can be a fleet of vehicles)

For non-resident Indians Rs.25 Lakhs

NOTE: more than one vehicle can be considered within the above limits, provided the 1st a/c

in order, charge registered with RTO & repayments are regular.

INTEREST: Existing Loans’ NO CHANGE’, (Revised with effect from 01.04.2009)

2/4 Wheelers For Loans upto Rs. 10 Lacs For Loans over Rs. 10 Lacs

a. New Vehicle-Repay. Up to

3 Yrs.

2,25% below

BPLR

9.75% 1.25% below

BPLR

10.75%

b. New Vehicle- Repay. Over

3 Yrs.

1.75% below

BPLR

10.25% 0.75% below

BPLR

11.25%

c. Second hand Vehicles 1.25% below

BPLR

10.75% 0.25% below

BPLR

11.75%

For all existing Loans:0.50% below earlier applicable Rate. Interest concession to women beneficiary

0.25%. p.a.

MARGIN:

Upto Rs. 2 Lakhs: 5%;>2 Lakhs to Rs.10 Lakhs:10%>10 Lakhs to Rs.25 Lakhs:15%;>25 Lakhs:25%

for

corporate /firms etc.:25% SECOND HAND- 30% of depreciated Value/assessed by Valuer/sale

consideration- whichever is lower.

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REPAYMENT

New vehicle: Individuals: 4 wheelers-Imported max.7 years (Indian-6years)

2 Wheelers-Max.5 Years

Corporate/firms: Max. 5 Years

Second Hand vehicle: Max. 3 Years.

PROCESSING CHARGES:

For Individuals:

Rs.1000/-one time for loans up to Rs.25000/-

>25000/- to 25 Lakhs one time 1.10% Min. Rs.1500/- Max.Rs.5000/-

>25 Lakhs one time 0.25% max.15000/- plus service tax as applicable.

Waived for Senior citizens, staff members, retired staff, pensioners drawing pension from Bank.

Will be 50% of the normal charges for individuals of rural areas and from rural branches only.

For partnership firms & corporate borrowers: P.P. charges will be double that of applicable to

individuals.

SECURITY:

Hypothecation of the vehicle, charged to be registered with RTO

Comprehensive insurance of the vehicle with Bank clause

Collateral security is desirable for loans to individuals>25 lacs

GUARANTEE:

Not required/can be waived:- finance to individuals up to Rs.25 lacs with RTO charge, & Financed

to and regd. In the name of corporate with RTO and ROC charge regd. And if to be regd. In the name

of director than his guarantee to be obtained. In other cases tangible collateral security of acceptable

value can be obtained in lieu of guarantee.

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DOCUMENTS REQUIRED FROM CUSTOMERS:

Photograph; proof of Income; Proof of Address; third party Guarantee; proforma Invoice.

DOCUMENTS:

1. Application-cum-proposal

2. OD-194 (Guarantee Deed)

3. L-512, L-516, L-515

4. Comprehensive insurance policy with Bank clause

5. Letter addressed to insurance company

6. Transfer form in bank in duplicate

7. Registration of Bank’s charge on the vehicle with Regional transport Authority

8. Valuation certificate for second hand vehicle from approved Valuer.

9. Registration of charge with ROC in case of finance to companies

10.A letter of authority by the borrower to debit the loan/SB a/c with interest/ service charge/

insurance premium

11. Where guarantors vehicle as taken as collateral security, obtain another CHA-2 with modification

12. Employers undertaking for recovery of installment, or post dated cheques towards EMIs

Tie-up with TATA MOTORS: only concession is in PPC:- Flat Rs.1000/- for all single vehicle loan.

Normal charges for multiple vehicle applications.

Tie-up with HYUNDAI MOTORS (LOAN Rs.10 lacs only): only concession is in PPC:-flat

Rs.1000/- for all single vehicle loans. Normal charges for multiple vehicle applications.

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STAR HOLIDAY LOAN

CLEAN LOAN OR SECURED LOAN-

For Tour expenses- like fair, expenses for accommodation, sight seeing

Obtain declaration from the borrower stating the purpose and undertaking regarding utilization of

advance

QUANTUM:

Min. amount Rs.10000/- at Metro/Urban centers only. No minimum amount clause for Rural/SU

centers.

Maximum amount at any center is subject to

Clean Max. Rs.2,00,000/-

Secured Loans Max. Rs. 5,00,000/-

(if collateral Security is offered up to 50% of Loan Amt.)

Secured loans Max. Rs.10,00,000/-

(If liquid collateral security is offered up to 100% of Loan Amt.)

Salaried Employees -10 times of Monthly Net Emoluments

All Others -50% of Gross Annual Income as per last ITR

Pensioner - 10 times of monthly pension maximum up to 1.00 lakh

Branch manager is competent to assess the income up to Rs.1.00 lakhs, where salary certificate/ITR

is not available.

INTEREST: For new loans w.e.f. 01.04.2009

Fully secured 1% below BPLR (11.00%)

Partly secured 0.50% below BPLR (11.50% p.a.)

Clean loans 0.25% over BPLR (12.25% p.a.)

For women beneficiaries concession of 0.50% in all above cases.

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For senior citizens/pensioners loan 1.25% below BPLR (10.75% p.a.) up to Rs.50,000/-

Penal Interest 2% p.a. on the overdue amount.

REPAYMENT:

The net take home salary/pension should not less than 40% of gross income/pension

24 EMI one month after first disbursement

In exceptional cases it can be extended up to 36 EMI

SECURITY:

ledge of NSCs/ KVPs/ IVPs/ TDRs/ Assignment of LIC policy if secured

PROCESSING CHARGES:

All accounts @1.10% - Minimum 1000/- Maximum 5000/-

Pensioners @1.10% of loan minimum Rs.500/- Maximum Rs.1100/-

No processing charges for senior citizens (60 years % above)

DOCUMENTS REQUIRED FROM CUSTOMER:-

Photo; salary certificate; ITR; Guarantor if stipulated

DOCUMENTS:-

1. Demand promissory note (for demand loan)

2. Bearer letter (L-435)

3. Installment letter (L-440)

4. Guarantee letter, wherever applicable O/D-194

5. L-515

6. L-516

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7. Irrevocable authority letter addressed to Employer for deduction of installment/interest from the

salary and remitting the same to Bank (wherever applicable)

8. Post dated cheques wherever possible

9. Charge on collateral security as proposed/stipulated (pledge/lien etc)

10. Letter from customer authorizing bank to debit admissible service charges/interest etc.

BANK HAS ENTERED IN TO TIE UP ARRANGEMENT WITH CLUB-7 HOLIDAYS &

KESARI TOURS PVT. LTD.

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STAR EDUCATION LOAN

Eligible Courses:

(A) Studies in India

Graduation courses: BA, B.Com., B.Sc., etc.

Post Graduation courses: Masters & PhD.

Professional courses: Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management,

Computer, etc

Computer certificate courses of reputed institutes accredited to Department of Electronics or

institutes affiliated to university.

Courses like ICWA, CA, CFA, etc.

Courses conducted by IIM, IIT, IISc, XLRI, NIFT, NID and other Institutes set up by

Central/State Govt.

Evening courses of approved institutes.

Other courses leading to diploma/degree, etc. conducted by colleges/universities approved by

UGC/Govt./AICTE/AIBMS/ ICMR, etc.

Courses offered by National Institutes and other reputed private institutions with prior approval

of Head Office.

Note : 1. Professional courses not approved by AICTE and conducted by Institutes not recognised

by State Universities is outside the purview of the eligibility under the scheme.

2. Special scheme for students admitted to IITs, at concessional rate of interest.

(B)Studies abroad

Graduation : For job oriented professional/technical courses offered by reputed universities.

Post Graduation : MCA, MBA, MS, etc.

Courses conducted by CIMA - London, CPA in USA, etc

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STUDENTS ELIGIBILTY:

Should be an Indian National;

Secured admission to professional/technical courses in India or Abroad through Entrance

Test/Merit based selection process.

Good academic career.

The student should not have outstanding education loan from any other Institution.

Father/Mother should be co-borrower.

Branch nearest to the permanent residence of student will consider the loan.

PARTIES TO LOAN:

Father/Mother should be a co-borrower for the loan.

The loan documents should be executed by both the student and the parent /guardian as joint

borrower. In case of minor student, security documents are to be executed by parents/guardian and

upon attaining majority, fresh set of documents to be executed by the parent/guardian and student

jointly. An undertaking to be taken from the parent/guardian to that effect.

EXPENSES CONSIDERED FOR LOAN:

Fee payable to college/school/hostel*

Examination/Library/Laboratory fee.

Purchase of books/equipments/instruments/uniforms.

Caution deposit/building fund/refundable deposit supported by Institution bills/receipts.

Travel expenses/passage money for studies abroad.

Purchase of computers - essential for completion of the course.

Insurance cover for the student.

Any other expense required to complete the course - like study tours, project work, thesis, etc.

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Life Insurance Premium for life cover of student/co-borrower for total tenure of loan.

* As per brochure/ demand letter from the institution.

* Whenever hostel accommodation of the institution/college is not available, branches may consider

need based loan for expenses on lodging/boarding arrangement made by the student.

QUANTUM OF FINANCE:

Need based finance subject to repaying capacity of the parents/students with margin and the

following ceilings:

Studies in India - Maximum Rs.10.00 lakh

Studies abroad - Maximum Rs.20.00 lakh.

MARGIN:

Upto Rs.4 lakh: Nil

Above Rs.4 lakh - Studies in India: 5%

Studies Abroad: 15%

Scholarship could be included in margin.

Margin to be brought in on year-to-year basis as and when disbursements are made.

SECURITY:

Up to Rs. 4 lacs No security

Above Rs.4 lacs & upto Rs.7.50 lacs Security in the form of suitable 3rd party

guarantee.

Above Rs.7.50 lacs Collateral security of suitable value or at

discretion of the Bank suitable 3rd party

guarantee with the assignment of future income

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of the student for payment of installments

Notes:

The security can be in the form of land/ building/ Govt. Securities/ public sector bonds/ units

of UTI, NSC, KVP, LIC policy, gold, shares/debentures, bank deposit in the name of the

student/parent/guardian or any other third party with suitable margin

Whenever the land/building already mortgaged, the encumbered portion can be taken as

security on 2nd charge basis provided it covers the required loan amount

In case the loan is given for purchase of computer, the same to be hypothecated to the Bank

In case of educational loans to the kin of staff members, no collateral security is required

irrespective of limit of loan within the scheme norms. The parent/staff members should join

as co-borrower. His/her P.F. Nominee should also guarantee the advance for loans above Rs.4

lacs and appropriate documents obtained from employees/ P.F. Nominee for recovery of dues

from term benefits.

RATE OF INTEREST:

Up to Rs.4.00 lacs – 2.50% below BPLR., Min. 9.50% p.a.

Above Rs.4.00 lacs up to Rs.7.50 lacs – 2.00% below BPLR, Min. 10.00% p.a.

Above Rs.7.50 lacs - 1.25% below BPLR, Min. 10.75% p.a.

Simple interest during the repayment holiday/moratorium period. Penal interest @2% for

loans above Rs.4 lakh for the overdue amount and overdue period.

Int. Concession of 0.50%p.a. for woman beneficiaries for limits upto Rs.50,000/- and 1% for

limits over Rs.50,000/-

1% int. concession if interest is serviced during moratorium period, where repayment holiday

is specified for interest/repayment under the scheme (concession available for moratorium

period)

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PROCESSING CHARGES:

No Processing Charges/

One time charges for any deviations from the scheme norms including approval of courses outside

the scheme

Up to Rs.4.00 lacs - Rs.500/-

Over Rs.4.00 lacs up to Rs.7.50 lacs - Rs.1000/-

Over Rs.7.50 lacs up to Rs.20.00 lacs - Rs.2000/-

In respect of loans availed by borrowers from rural areas from the Rural Branches – Charges Nil

APPRAISAL/SANCTION/DISBURSEMENT:

Application for education loan may be considered pending declaration of results of previous

exam, provided the student has a meritorious academic record in the previous exams.

However, loan to be disbursed only after successfully completing the eligibility exam.

In the normal course, while appraising the loan, the future income prospect of the student

should be looked into. However, whenever required, the means of parent/guardian could also

be taken into account to evaluate repayment capability.

The loan is to be sanctioned as per delegation of powers

No application for educational loan received should be rejected without the concurrence of

the next higher authority-minimum AGM at Z.O.

Time frame for disposal of applications

Sr. No. Loan Amount Disposal time

A. For studies in India

1 Up to Rs. 4.00 lacs One week

2 Above Rs. 4.00 lacs & up to Rs.

7.50 lacs

Two weeks

3 Above Rs. 7.50 lacs Four weeks

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B. For studies abroad Four weeks

The loan to be disbursed in stages as per the requirement /demand directly to the

Institutions/vendors of books/equipments/instruments to the extent possible.

REPAYMENT:

Repayment holiday/Moratorium: Course period+1 year or 6 months after getting job,

whichever is earlier

The loan is to be repaid in 5-7 years after commencement of repayment

If the student is not able to complete the course within the scheduled time, extension of time

for completion of course may be permitted for a maximum period of 2 years

If the student is not able to complete the course for reasons beyond his control, sanctioning

authority may at his discretion consider such a extensions as may be deemed necessary to

complete the course

FOLLOW-UP:

The student and request due information to the Branch upon successful placement of the student. On

Banks to communicate with institutions/universities authorities to advise/forward the progress report

at regular intervals in respect of students who have availed loans and advise the college/university

that in case the student discontinues the studies, refund of fees, if any, to be sent directly to the Bank.

CAPABILITY CERTIFICATE:

Banks can also issue the capability certificate for students going abroad for higher studies. For this,

financial and other supporting documents may be obtained from applicant, if required.

OTHER CONDITIONS:

Bank shall offer specially designed “single premium Life Insurance Policy” ‘SHIKSHA

SURAKSHA’ in tie-up with SUD Life Insurance Co. insurance premium for life cover of

student/borrower to be included in items of finance and recovered alongwith normal

repayment of loan.

Progress of implementation of the scheme is to be reported periodically to the Z.O/H.O.

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Scheme for financing to students of IIT as regard to Interest concession

Highlights:- concession in @ of interest-1.50% below applicable Rate of Interest under

education loan scheme. No further concession available for servicing of interest and women

beneficiaries.

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STAR MITRA PERSONAL LOAN

(A SPECIAL LOAN SCHEME FOR PHYSICALLY CHALLENGED

OBJECTIVE: To help physically challenged persons to function independently.

PURPOSE: To purchase durable and sophisticated aids / appliances that promotes their physical and

social rehabilitation

ELIGIBLITY: All Physically Challenged Individuals – both salaried and self-employed, All

Physically Challenged Minors through their Parents/Legal Guardians.(No advances to middle-men

and NGOs).

TYPE OF ADVANCE: Demand / Term Loan - Secured

AMOUNT: Max. Rs.1 lac (No minimum stipulation)

ELIGIBLE AMOUNT: 10 times of net salary for salaried persons and 50% of net annual income as

per latest Income Tax Return for Self-employed/Professionals.

Net take home income should not be less than 40% after availing this loan.

(In case of Minors, the income of the Parents/Legal Guardians would be the deciding criteria for

eligibility).

Margin 10%

REPAYMENT: 12 to 60 months, commencing one month after full disbursement/ three months after

first disbursement, whichever is earlier.

24 | P a g e

RATE OF INTEREST: Fixed Rate compounded monthly on daily reducing balance - 8.00% p.a.

SECURITY: Hypothecation of the Equipment purchased out of Bank Finance

INSURANCE: Waived. However, Borrower is advised to obtain insurance at his own cost.

PROCESSING CHARGES: Waived

OTHER TERMS & CONDITIONS:

Doctor’s Certificate to be obtained regarding the extent of handicap and the need for the

equipment.

Quotation/Invoice in respect of the equipment to be purchased.

Stamped receipt to be submitted after purchase of the equipment.

ALL OTHER TERMS & CONDITIONS INCLUDING DOCUMENTATION OF STAR

PERSONAL LOAN SCHEME WILL APPLY.

25 | P a g e

STAR PENSIONER LOAN

ELIGIBILITY:

Regular Pensioners/Family Pensioners drawing regular monthly pension through the branch.

Retired Employees(other than dismissed/compulsorily retired) of the bank.

TYPE OF ADVANCE:

Advance can be way of D/L; T/L; O/D.

PURPOSE:

Clean loan:-

For marriage expenses of son/daughter or near relatives dependent on the applicant

For medical expenses of son/daughter or near relatives dependent on the applicant.

For Education of self/spouse/children/near relatives.

Repairs/renovations/extension of existing house/flat(where EQM cannot be created same

property and no finance against this property).

Any other personal expenses of bonafide nature as approved by the bank.

Secured loan:-

For repayment of existing housing loans from other banks/FIs

For purchase of consumer durables/computers/Professional equipments.

QUANTUM:-

Regular Pensioner Family Pensioner

Unsecured/Clean 10 times of monthly pension 10 times of monthly pension

Max. Rs. 100000/- Max. Rs. 50000/-

Secured Loans 20 times of monthly pension 20 times of monthly pension

26 | P a g e

Max. Rs. 100000/- Max. Rs. 50000/-

Note: Two accounts may run simultaneously-one for secured and other for unsecured Loans.

MARGIN:-

Secured Loans Suitable Margin.

Unsecured Loans No Specific margin norms.

CO-CORROWER:-

In case of regular pensioners, nominee/legal heir entitled to family pension and in case of loan to

family pensioner, legal heir will be Co-borrower.

GUARANTEE:-

Third party guarantee including that of other pensioner drawing regular pension from branch.

Collateral security in lieu of personal guarantee for the amount of loan can be accepted.

INTEREST:-

Unsecured At BPLR (12.00% p.a.)

Secured 0.50% below BPLR Presently 11.50% p.a.

For Senior Citizens 1.25% below BPLR (10.25% p.a.)

For existing old Loans 0.50% below earlier applicable rate.

SECURITY:-

Hypothecation charge over assets financed, wherever applicable.

Pledge of Gold/NSCs/KVPs.

Equitable/Legal Mortgage of House/commercial property valued by Bank’s approved valuer.

Pledge of Demat shares, units etc. of market value not less than 200% of loan amount.

REPAYMENT:-

27 | P a g e

The net take home pension should not be less than 40% of the pension amount.

Clean loans- 36 EMI one month after first disbursement (Sanctioning authority may consider

up to 60 months).

Secured Loans- 60 EMI one month after first disbursement.

In case of O/D limits, reducible as per payment schedule.

PROCESSING CHARGES:-

NIL for senior Citizens.

For others – 1.10% of Loan amount Min. Rs.500/- Max. Rs. 1100/-

DOCUMENTS:-

Application cum proposal form

D.P. Note, installment letter(as per nature of advance)

Bearer letter

An undertaking from the pensioner that he/she will not shift the pension a/c to any other

Bank/branch during the currency of Loan without NOC from Bank. This letter should be

obtained in duplicate and original forwarded to the concerned treasury office/employer for

reg./nothing.

A NOC from legal heirs entitled for family pension for recovery of loan installment/ amount

from their a/c in which family pension amount is credited, if necessary.

L-516 & L-515.

Letter from customer authorizing bank to debit the account with Loan/installment amount.

Deed of Guarantee (OD-194) with statement of asset and liabilities of guarantors.

EQM of the property, wherever stipulated.

Charge on principal/collateral security proposed.

DISCRETIONARY POWERS:-

SCALE I II III IV V to VII E.D &

abo

28 | P a g e

ve

Clean 0.25 0.50 0.75 1.50 2.00 Full

po

wer

s

Secured 0.75 1.00 1.00 - - Full

po

wer

s

STAR MAHILA GOLD LOAN SCHEME.

PURPOSE OF LOAN:

For purchase of Gold Ornaments, preferably Hallmarked, from reputed jewelers and/ or Gold Coins

of Bank

of India.

TARGET GROUP:

Resident Indian Women:

Working women:-Women permanently employed in Central/ State/ PSUs/ Scheduled Banks/

Teachers of

Govt. Aided Institutions; and include professionals like Doctors/ CAs/ Chartered Engineers, etc.

Non Working women:-Not having income proof. Spouse other close relatives who satisfy income

criteria ti

join as Co-Borrower.

29 | P a g e

AGE:

18-60 years.

RATING EXERCISE:

Rating exercise, as applicable in Star Personal Loan Scheme, to be undertaken. Applicant should get

minimum 20 marks to be eligible for loan under this scheme.

DUE DILIGENCE:

The genuineness/ identity of the prospective borrower should be established beyond doubt. Branch

should verify existing credit history of borrower with CIBIL databases. The genuineness of PAN

number and Income tax paid challan submitted by the borrower to be verified.

TYPE OF LOAN:

Demand/ Term Loan.

QUANTUM OF ADVANCE:

Working/ non working women:- 10 times of monthly net emoluments (take home salary of

self/spouse, in case of non working women)

Professionals:- 50% of Gross Annual income as per latest Income Tax Return.

Minimum Rs.50000/- Maximum Rs.2 lacs.

MARGIN:

20% of the cost of Jewellery/Gold.

30 | P a g e

INTEREST:

1.75% less BPLR, presently 10.75% p.a. at monthly rests.

REPAYMENT:

Maximum 60 EMIs. However period not to exceed the age of 65 or retirement age of the borrower,

whichever is earlier. Repayment through salary deductions/ post dated cheques for entire repayment

period (24 cheques initially. To the extent of utilized cheques to be replenished at the end of every

year).

NET TAKE HOME PAY:

It should be ensured that net take home pay/income (net of EMI of proposed advance) is not less

than 50% of the gross income of the applicant/spouse in the case of non-working women.

SECURITY:

For loan up to Rs.50000/- no security.

For loan over Rs.50000/- liquid securities [ NSC/KVP/Insurance policies-surrender value] only for

the amount exceeding Rs.50000/-.

DOCUMENTATION:

Application-cum-proposal

Demand Loan: D.P. Note(L-434), L-435, L-440

Term Loan: Term Loan Ag:IFD-1; L-515; L-516-Revised.

Documents to perfect collateral security, as per existing instructions, wherever applicable; Performa

Invoice wherever required and invoice as well as Stamped Receipt.

31 | P a g e

THIRD PARTY GUARANTEE:

Waived

DISBURSEMENT:

By demand draft/ pay order favoring the seller (with the name of the Bank and account number).

Stamped receipt/ invoice for the total cost of the Jewellery (i.e. loan amount plus margin) to be

obtained. Proforma invoice required for a loan of amount RS.1.00 lac and over.

PROCESSING CHARGES:

For loan up to Rs.50000 Rs.500

For loan over Rs.50000 1.10% of the loan amount Min. Rs.500.

DISCRETIONARY POWERS:

SCALE I II III and above

Limit Rs. In Lacs 0.50 1.00 2.00

COTROL RETURN:

Branches should report to Zonal Office the details of accounts sanctioned under the scheme and after

sanction of every 20 accounts as per provisions of Star Personal Loan scheme..

32 | P a g e

STAR MORTGAGE LOAN

This scheme provides loan/overdraft facility against mortgage of property at low rate of interest. The

scheme is for people engaged in trade, commerce & business and also professionals & self

employed, Prop. Firm, partnership firm, companies, NRIs and individuals with high net worth

including salaried people, agriculturists and staff members. The product provides an opportunity to

customers to borrow against a fixed asset (mortgage of property) at a short notice without much

paper work/attendant hassles.

PURPOSE:

To meet the credit needs of trade, commercial activity, other general business, Profession as

also for their bonafide requirements.

To meet marriage or medical or educational expenses of family members including near

relatives.

To undertake repairs/renovation/extension to the residence/commercial property.

Purchase of consumer durables.

To purchase/construct house/flat, purchase of plot.

To purchase 2/4 wheeler vehicles.

For going on pilgrimage/tours/ excursions, etc. Repayment of existing loans from other

Banks/FIs.

TARGET CUSTOMERS (ELIGIBILITY):

People engaged in trade, commerce and business, Professionals, Self-employed, Prop. Firms,

partnership firms, HUFs (excluding NBFC, Trade, partnership firms where HUF is a partner),

companies, NRIs, individuals with high net worth, salaried people, agriculturists, staff members.

33 | P a g e

TYPE OF ADVANCE:

Demand/Term Loan/Overdraft (reducible as per repayment schedule). Overdraft facility (not

reducible asper repayment schedule) can also be permitted to eligible customers (other than salaried

people).

MARGIN:

Salaried Employees 30%*

Others 50%*

On value of property [Lower of Market Value /Distress Sale value/Registration Value as on date of

valuation] assessed by Bank's approved valuer.

QUANTUM OF ADVANCE:

(Rs. in lacs)

Min. Max.

For agriculturists 0.50 2.00

For Others :

Individuals/Prop. Firm/ 1.00 50.00

Partnership firm/

Company :

Prop./Partnership 1.00 100.00

firm/company 1.00 100.00

CALCULATION OF QUANTUM OF ADVANCE:

(Branch Manager is competent to assess the income up to Rs. 1.00 lacs)

34 | P a g e

For salaried class-48 times of net emoluments

Non salaried class-4 times of net annual inc. (average 2/3 years)

Prop./Partner/Prof./Company-4 times of cash accruals as per audited Balance Sheet.

EQUITABLE MORTGAGE FEES:

General. :

• Limits exceeding Rs.25 lacs up to Rs.50 lacs - Rs.6,000/-

• Limits exceeding Rs.50 lacs – Rs.100 lacs - Rs.15,000/-

SME :

• Limits exceeding Rs.25 lacs upto Rs.50 lacs - Rs.3,500/-

• Limits exceeding Rs.50 lacs – Rs.100 lacs - Rs.7,000

CHARGES FOR DEVIATION FROM SCHEME NORMS:

For every item of deviation from the scheme norms –

One time 25% of the applicable processing charges min.Rs.3, 000/-; max. Rs.10, 000/- per a/c.

RATE OF INTEREST:

For loans/overdrafts – 1% over BPLR, 13.00% p.a. Interest concession for woman beneficiaries

0.25% p.a.[All borrowers to be women].

REPAYMENT:

In accounts where regular Overdraft facility is not proposed. :-

Within a period of eight years by way of EMIs.

35 | P a g e

The repayment shall commence from the month Subsequent to the month in which final

disbursement is made or 6 months from the first disbursement, whichever is earlier. In case of

agriculturists: The repayment will be related to the generation of farm income from crops and other

subsidiary activities.

SECURITY:

Equitable/Legal Mortgage charge over property in the name of applicant or his/her spouse or parents

or third party. The person in whose name the property to be mortgaged stands should either is a

borrower/co borrower or a guarantor

Note:

a. The property offered should be a residential or commercial building or a plot of land

(residential/commercial).

b. The property should be self occupied or leased out to acceptable individuals, government

agencies, PSUs, Corporate, etc.

c. Agricultural land is NOT accepted as security for this facility

PROCESSING FEES:

1. Accounts repayable as per Stipulated installments :-

• One time @ 1% of Loan amount. Min.Rs.3000/- and max.Rs30000/-.

2. Overdraft Limit ( not reducible as per repayment schedule ) :

• 0.25% of the sanctioned limit, Min. Rs.3,000/- and Max. Rs.10,000/- on annual basis.

• Documents charges, advocate fee, architect fee etc. on actual basis.

Loan agreement copy charges: As applicable

For Partnership firms/Corporate –

Processing charges will be double that of applicable to individuals

For Rural areas –Processing charges will be 50% that of applicable to individuals in respect of loans

availed

By borrowers from rural areas from the Rural Branches.

36 | P a g e

Additional charges for deviations from the scheme norms –One time 25% of the applicable

processing Charges min. Rs.500/- max. Rs.3000/-

37 | P a g e

STAR HOME LOAN

Maximum loan amount is Rs.300 lacs and repayment ranges up to 20 years, with reasonable

margin

Nominal processing charges. No commitment /administrative charges.

The loan is available at very competitive rates of interest, currently available in the industry.

Option for different EMI amounts for different periods during tenure of loan to suit

customer’s repayment capacity.

Prepayment of Loan permitted

Interest is calculated on daily balance basis which is of great advantage to customer as it

results in low interest amount.

Loan to NRIs as well as Persons of Indian Origin.

Simplified application form/procedures for convenience of customers, and speedy approvals.

Free Personal Accident Insurance cover

Life Insurance Cover to borrowers for Loan Protection (optional)

ELIGIBILTY:

Salaried employees, Professionals like Doctors, Lawyers, Engineers, Chartered Accountants, Self-

employed persons. Requests are also considered in special cases from Group of individuals, NRIs,

PIOs, HUF, Prop. Firm, Partnership firms and corporate.

PURPOSE:

To purchase/construct house/flat

To renovate/extend/repair existing house/flat.

To purchase a plot of land for construction of house.

To acquire household articles along with the house/flat-for furnishing the house/flat.

38 | P a g e

QUANTUM OF LOAN:

For construction/purchase of a house/flat-Rs.300 lacs

Repairs/renovation/extension/addition to house/flat - Rs.20 lacs

Purchase of a plot - Rs.30 lacs

Purchase/acquire household articles for furnishing the house/flat - Rs.1.00 lac. (15% of Home

Loan amount)

Minimum size of Housing Loan:-

At Metro and Urban Centres :-Rs. One Lakh

At Rural and Semi Urban Centres :-No minimum size of loan.

PROCESSING CHARGES:

• For loans upto Rs.30 lacs One time @ 0.55% of loan amount min. Rs. 3000/- and max.

Rs.10000/-

• For Loan over Rs.30 Lacs upto Rs.50 lacs – One time flat Rs.15,000/-

• For Loan over Rs.50 Lacs upto Rs.1.00 crore – One time flat Rs.20,000/-

• Loans over Rs.1.00 crore – One time flat Rs.25,000/-

• Loans over Rs.3.00 crores – One time flat Rs.50,000/-

For Partnership firms & Corporate Borrowers –

Processing charges will be double that of applicable to individuals

For Rural areas –Processing charges will be 50% that of applicable to individuals in respect of loans

availed by borrowers from rural areas from the Rural Branches.

COVERSION CHARGES:

Switch over from:

• Fixed to floating ROI- @0.25% p.a. on o/s balance for the remaining maturity of loan

• Floating to Fixed ROI - @ 0.40% p.a. on o/s balance for the remaining maturity of loan.

39 | P a g e

• For i & ii above : max. Charge: 2.10% of o/s balance.

CHARGES FOR DEVIATION FROM SCHEME NORMS:

For every item of Deviation from the scheme norms –

One time additional processing charges min .Rs.3000/-; max. for set of deviations Rs.10,000/-

MARGIN:

• For Loan up to Rs.10 Lacs – 15%

• For Loan over Rs.10 Lacs – 20%

Note :

Cost incurred by the proponent in the form of land already purchased/acquired by him/her (from their

own sources) can be accepted as part of above said margin at the request of proponent. Liquid

securities such as Banks TDR, NSC, KVP etc., can also considered as Margin, ensuring higher

quantum of loan.

REPAYMENT:

Highly flexible - maximum 20 yrs. including moratorium period of 18 months (max.) in monthly

installments. Repayment will start on completion of construction/purchase of house/flat or 18 months

after first disbursement, whichever is earlier.

CALCULATION OF QUANTUM OF LAON:

Salaried class 48 times of Gross Monthly Salary

Others/professionals/individuals 4 times of Gross Annual Income as per ITR

Chartered Accountants 5 times of Gross Annual Income as per ITR

Doctors 6 times of Gross Annual Income as per ITR

40 | P a g e

Prop./Partner firm/Co./HUF 4 times of Cash Accruals (PAT + Depreciation)

FEES/CHARGES:

No administrative fees

No commitment charge

Prepayment charges :

i) No charges, if pre-payment is made from own sources of the borrower

ii) ii) 0.65% p.a. on the outstanding loan amount for remaining maturity of the loan, subject to

max.2.25% of outstanding loan amount in case of take over by other bank/FI.

Other Charges : Legal Expenses/Valuation Charges/Stamp Paper

Charges At actual –Loan Agreement copy charge : as applicable.

RATE OF INTEREST|:

Up to 5 years 5-10 years 10-15 years 15-20 years

For limit up to 30 lacs 8.75 9.00 9.25 9.25

30-50 lacs 9.50 9.75 10.00 10.25

For limit over 50 lacs 1.025 10.50 10.75 11.00

DISBURSEMENT IN ADVANCE:

Request for 100% disbursement before completion of house/flat can be permitted subject to

availability of additional security of 125% of the unsecured portion of loan amount to be disbursed.

SECURITY:

• Equitable Mortgage (1st charge) on land/flat/house.

• Third Party guarantee (if mortgage could not be created at the time of disbursement ).

41 | P a g e

ADDITIONAL BENEFITS:

Free Personal Accident Insurance cover for the borrower (covering accidental death as well as

permanent total disablement) as per terms of insurance policy covering loan outstanding as on the

date of accident.

Loan amount of Rs.100,000/-(15% of home loan - max.Rs.1 lac) for furnishing the house/flat at a

rate of interest as applicable to housing loan under the scheme. Life Insurance cover to housing loan

borrowers against risk of death during tenure of loan under Group Insurance Scheme in tie up with

ICICI Prudential Life Insurance Co. Ltd.

• Insurance cover is optional. Low/ affordable premium rates.

• Insurance cover at a discounted rate in case of younger joint borrower.

• Bank will grant loan for meeting the premium amount payable upfront (single premium).

Loan for premium will increase EMI only marginally.

• Avoids home loan burden on the family as home loan comes with Life Insurance cover.

Protection against loan amount.

• Scheme is simple and hassle free.

• Higher non-medical limit: Age up to 45 years : Rs. 10 lacs, Age above 45 years : Rs. 8 lacs.

• Insurance premium is eligible for tax benefit u/s 80 C and claim proceeds are tax free u/s

10(10D), as per prevailing Income-tax laws.

DOCUMENTS:

Term loan agreement L-513

L-515

Bearer letter

Affidavit cum undertaking L-517

Letter of guarantee duly signed by guarantors.

Original title deed/share certificate.

Search/title investigation report from an approved advocate for 30 years.

42 | P a g e

Extract of record of rights and plan specification of property as approved by local authority

(copy of approved plan)

Estimate of construction/valuation report from approved architect/valuer.

For salaried persons, authority letter to employer, for deduction of install, from his/her salary.

Or post dated cheques.

In case of self employed persons, an undertaking to deposit with bank 24 post dated cheques

every two years.

A letter from the builder/promoter/vendor that all advances and dues of similar nature on the

property have been paid, necessary permission from the concerned authorities for developing

the property have been obtained.

Insurance policy for the cost of house/flat above plinth level duly endorsed in favour of Bank

EQM of the property by deposit of title deeds and recording of oral assent/ Legal mortgage.

VARIOUS MOUs AND TIE-UPS OF BANK OF INDIA:

Tie-up with Hero Honda motorcycles under Star Autofin Loan scheme.

Tie-up with TVS motorcycles under Star Autofin Loan scheme

Tie-up with Hyundai motors under Star Autofin Loan scheme

Tie-up with Tata motors under Star Autofin Loan scheme

Tie-up with Maruti Suzuki India Ltd. under Star Autofin Loan scheme

Tie-up with Intel computers under Star Personal Loan Scheme.

Tie-up with LG and Philips Electronics Under Star Personal Loan scheme.

43 | P a g e

Table: 1 Details of Advances by Ajmer Branch of Bank of India

Particulars/Year 2005-06 2006-07 2007-08 2008-09 2009-10

Number of

Accounts

04 07 10 06 12

Amount

Disbursed

20.23 30.76 46.34 23.45 54.29

NPA Accounts 0 01 0 0 02

(Source: BOI Internal Database/Finnacle)

44 | P a g e

Table:2 Profile of Bank of India

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09 Average

No. of

Offices

2670 2687 2760 2846 2934 1968

No. of

Employees

42220 42206 41511 40557 40155 23303

Business

per

Employee

320.00 381.00 498.00 652.00 833.00 778.06

Profit per

Employee

0.80 1.66 2.71 4.95 7.49 4.83

Deposits 78821 93932 119882 150012 189708 105285

Investments 28686 31782 35493 41803 52607 32752

Advances 55529 65174 85116 113476 142909 76027

Interest

Income

6032 7029 8936 12355 16347 9212

Net NPA

Ratio

2.80 1.49 0.95 0.52 0.44 0.68

(Source: RBI

Website)

45 | P a g e

46 | P a g e

RETAIL ADVANCES/LOAN PROCESS:STEPS

Customer approach to the Bank.

Asking of queries related to interest rates, quantum of finance and repayment terms etc. by

customer to concerned authority.

Details provided by the concerned authority to the customer.

The concerned authority asks necessary documents from customer like PAN card, Voter ID,

Passport etc.

Checking the documents and judging the eligibility of customer.

Duly compliance KYC/AML norms.

Taking duly filled application-cum-proposal form.

Generate CIBIL report and credit rating.

Send the original title deeds of property mortgage to the approved advocate for search report.

Send the mortgage properties document to the approved Valuer for valuation of property on

the basis of its Distress value and DLC value.

Enquiry from existing bankers.

The bank official does a pre-sanction inspection.

After satisfying with the customer’s position and genuineness, the customer is call by the

concerned authority for interview and asking him to signed the Loan documents like Bearer

letter, D.P. Note, undertaking letter, L-515, L-516 and also post dated cheques.

Fixation of EMI and disbursement of loan after opening loan account.

Conducting a post-sanction inspection.

Periodically review of respective loan account and checking for any irregularity.

If irregularity found call customer and ask him to settle his account.

If account slips into NPA give notice to customer to pay his all dues within 60 days time.

After 60 days, start recovery process through SARFAESI Act and take possession of property

mortgaged.

47 | P a g e

Case Study: 1

Mr. Ashok sharma is a salaried employee in Rajasthan public service Commission(RPSC), as a upper

deputy clerk. He aged 42 years and his monthly salary is Rs.28000. he Pays following as deductions

from his salary.

P.F. Rs.3000 Monthly

Premium towards L.I.C. Policy Rs.12000 Yearly

E.M.I. towards a personal loan Rs. 800 Monthly

The assets details are as follows:

House Rs.22,00,000

NSC Rs.20,000

Balance in Banks

Bank of Baroda Rs.15,000

State Bank of India Rs.50,000

Mr. Ashok sharma approached Bank of India for a Star Autofin Loan to purchase a new Honda City

car as he requires it for his family. Since, Mr. Sharma doesn’t have any account associated with Bank

of India, he is a new customer to Bank. The on road price of Honda City Ivtec is Rs.9,00,000.

Calculate Quantum of Finance Mr. sharma is eligible for.

Calculate his repayment capacity.

(A) Calculation of Quantum of Finance.

Since Mr. Sharma is a salaried person his quantum of finance under Star Autofin scheme can be

calculated as under.

24 times of Gross Salary= 24 * 28000= Rs.672000

So Mr. sharma can be availed maximum Rs672000 towards Star Autofin scheme.

(B) Repayment capacity.

The net take home salary should not be less than 40% of gross salary.

48 | P a g e

Table:3

In this case the Net take home salary percentage to Goss salary is 37.06% which is less

than standard 40%. So Mr. sharma is not eligible for the loan amount.

Gross salary 28000

Deductions:

PF 3000

LIC 1000

Loan 800

Total Deductions 4800

Net salary (Gross-Deductions) 23200

Less: EMI of proposed Loan @ 10.25% 12822.16

Net take home salary( Net salary-

EMI of proposed loan)

10378 (10378/28000*100=37.06%)

49 | P a g e

Case Study:2

Doctor vikas soni and his wife Doctor payal Soni working in Leelawati hospital,

Mumbai. Both are in the same department i.e. Cardiology department. They have two

children’s, yash soni aged 8 years, and Raksha soni aged 12 years. The salary structure

of Both are as follows:

Dr. Vikas Soni Dr. Payal Soni

Gross salary Rs.55000 Rs.50000

Deductions

P.F. Rs.5000 Rs.4000

Insurance policy Rs.60000 annually Rs.12000 annually

Net Salary Rs.45000 Rs.45000

The assets details are as follows:

Bank balance Rs.180000

Gold Rs.500000

IVP Rs.200000

NSC Rs.200000

Land in Bandra Kurla Rs.2000000

Doctor vikas soni and Dr. payal soni decided to purchase a 2BHK flat in khandala

which was project of DLF. The cost of this flat is Rs.60,00,000. Both approached bank

for a housing loan as joint borrowers. They produced the original title deeds of land,

IVP, NSC and gold as security towards loan amount.

50 | P a g e

The prevailing rate of interest is 10.25% and both decided to repay loan in 20 years.

Calculate Quantum of finance.

Repayment capacity

Necessary diligence while disbursing Loan

Quantum of finance can be calculated under star home loan scheme as follows:

48 times of gross salary.

48 * 55000 + 48 * 50000 = Rs.50,40,000

so maximum they can availed loan amount is Rs.50,40,000. Since the cost of project is

Rs.60,00,000 the remaining amount may be adjusted as margin money.

Repayment capacity:

Gross salary

(55000+50000)

Rs.1,05,000

Deductions:

(9000+6000)

Rs.15000

Net salary(Gross salary-deductions) Rs.90000

Less: EMI of proposed Loan 44173

The net take home salary is 43.64%, which is more than 40%. Hence primary

requirements of eligibility are fulfilled by both the borrowers.

51 | P a g e

Next Step:

Generation of CIBIL report:

When banker generate CILBIL report of both the borrowers, it is found that Dr. vikas

soni availed a vehicle loan in 2001 amounting Rs. 900000, and the current status is

showing that the loan account is closed in 2007. Another finding is that Dr. payal has a

credit card and repayment is standard for the last 5 years.

Credit rating:

In the credit rating sheet both get 26 marks , where minimum marks for eligibility is

20.

Enquiry from Existing bankers:

Both have their salary accounts in ICICI bank and savings account in Bank of India,

nariman point Branch and the account status is satisfactory.

Pre-sanction inspection:

A inspection is carried down by credit manager of BOI to inspect both the land offers

for security and the flat in khandala.

Search report by panel advocate for the security offered(Land)

Valuation report by panel Valuer of land offered for security.

52 | P a g e

SARFAESI ACT

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act,

2002 (SARFAESI) empowers Banks / Financial Institutions to recover their non-performing

assets without the intervention of the Court. The Act provides three alternative methods for

recovery of non-performing assets, namely: -

• Securitization

• Asset Reconstruction

• Enforcement of Security without the intervention of the Court

The provisions of this Act are applicable only for NPA loans with outstanding above Rs. 1.00 lac.

NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible

to be dealt with under this Act.

Non-performing assets should be backed by securities charged to the Bank by way of hypothecation

or mortgage or assignment. Security Interest by way of Lien, pledge, hire purchase and lease not

liable for attachment under sec.60 of CPC, are not covered under this Act

The Act empowers the Bank:

• To issue demand notice to the defaulting borrower and guarantor, calling upon them to

discharge their dues in full within 60 days from the date of the notice.

• To give notice to any person who has acquired any of the secured assets from the borrower to

surrender the same to the Bank.

• To ask any debtor of the borrower to pay any sum due or becoming due to the borrower.

• Any Security Interest created over Agricultural Land cannot be proceeded with.

If on receipt of demand notice, the borrower makes any representation or raises any objection,

Authorized Officer shall consider such representation or objection carefully and if he comes to the

conclusion that such representation or objection is not acceptable or tenable, he shall communicate

the reasons for non acceptance WITHIN ONE WEEK of receipt of such representation or objection.

A borrower / guarantor aggrieved by the action of the Bank can file an appeal with DRT and then

with DRAT, but not with any civil court. The borrower / guarantor has to deposit 50% of the dues

before an appeal with DRAT.

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If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the

following measures:

• Take possession of the security

• Sale or lease or assign the right over the security

• Manage the same or appoint any person to manage the same

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CIBIL (CREDIT INFORMATION BUREAU OF INDIA LIMITED)

CIBIL (India's first credit information bureau) is a repository of information, which contains the credit

history of commercial and consumer borrowers. CIBIL provides this information to its members in

the form of credit information reports.

As on September 2009, CIBIL has an information base on over 140 million consumer trades, and 4 million

commercial trades which continues to grow at a fast pace and shares credit information with its 175

member base on the principle of reciprocity. CIBIL’s members include all leading banks, financial

institutions, non-banking financial companies, housing finance companies, state financial

corporations and credit card companies

History and origin

The Need of credit information system was increasingly felt in order to enable informed credit decisions

and aid fact based risk management. It was also imperative to arrest accretion of fresh NPAs in the

banking system through an efficient system of credit information on borrowers as a first step in

credit risk management. In this context, the requirement of an adequate, comprehensive and reliable

information system on the borrowers through an efficient database system was keenly felt by the

Reserve Bank of India Government as well as credit institutions. A Working Group with

representatives from select public sector banks, IDBI, ICICI, Indian Banks' Association and Reserve

Bank was constituted by the Reserve Bank in the year 1999, to explore the possibilities of setting up

a Credit Information Bureau (CIB). The Working Group had recommended setting up a CIB under

the Companies Act, 1956 with equity participation from commercial banks, FIs and NBFCs

registered with the Reserve Bank. As per the recommendations made by the Working Group, Credit

Information Bureau (India) Ltd., (CIBIL) was set up in January 2001

CIBIL was promoted by the State Bank of India, Housing Development Finance Corporation Limited, Dun

& Bradstreet Information Services India Private Limited and TransUnion International Inc. The

shareholding pattern was as follows:

• SBI 40%

• HDFC 40%

• Dun & Bradstreet 10%

• TransUnion 10%

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TransUnion and Dun & Bradstreet are the technical and equity partners of CIBIL. TransUnion is one

of the largest consumer credit bureaus in the world. Dun & Bradstreet is world’s leading source of

commercial information and insights on businesses.

In 2004, SBI and HDFC divested a part of their stake in CIBIL to other shareholders comprising of

leading banks and financial institutions in the country

Aid in improving credit in India

According to the World Bank over the last few years several reforms have improved the environment

for getting credit in India. Credit Information Bureau (India) Limited, a private partnership between

several commercial banks and credit information service providers, has started to increase the

amount of credit information available in the country. CIBIL’s coverage has more than doubled in

the last few years.

Trivia

• Consumer Bureau was launched in 2004 with 4 million records.

• Commercial Bureau was launched in 2006 with 700,000 records.

• CIBIL houses credit histories on over 140 million trades across individuals and businesses.

• Members: CIBIL’s has over 175 members that includes all leading banks, financial

institutions, non-banking financial companies and housing finance companies.

• Security Standards: CIBIL is ISO 27001:2005 certified- the most recognized security

standard in the world. CIBIL is one of the 1000 companies in the world which have achieved

ISO 27001 certification, and one of the first few in India.

• CIBIL's headquarters are located in Mumbai

Rapid industrialization, An expanding economy, Growing aspirations, Increased incomes, Improved

lifestyles, Availability of high quality products and services, An expanding market, these factors

have created an atmosphere conducive to rapid credit off take. While the demand for credit has risen

exponentially, there has been a parallel increase in competition, and credit delinquencies. In such an

environment, risk assessment is of critical importance. Not only, in deciding on what business to

book and the speed at which a credit grantor does so, but also in determining the appropriate pricing.

Comprehensive credit information, which provides details pertaining to credit facilities already

availed of by a borrower as well as his payment track record, has become the need of the hour.

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The answer took shape when the Credit Information Bureau (India) Limited (CIBIL) was

incorporated in 2000. CIBIL’s aim is to fulfill the need of credit granting institutions for

comprehensive credit information by collecting, collating and disseminating credit information

pertaining to both commercial and consumer borrowers, to a closed user group of Members. Banks,

Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit

Card Companies use CIBIL’s services. Data sharing is based on the Principle of Reciprocity, which

means that only Members who have submitted all their credit data, may access Credit Information

Reports from CIBIL. The relationship between CIBIL and its Members is that of close

interdependence.

The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of

India to improve the functionality and stability of the Indian financial system by containing NPAs

while improving credit grantors’ portfolio quality. CIBIL provides a vital service, which allows its

Members to make informed, objective and faster credit decisions.

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KNOW YOUR CUSTOMER (KYC) AND ANTI MONEY LAUNDAERING (AML)

MEASURES

Offence of money laundering:

Section 3 of prevention of money laundering (PML) act 2002 defines-“whosoever directly or

indirectly attempts to indulge or knowingly assist or knowingly is apart or is actually involved in any

process or actively connected with the proceeds of crime and projecting it as untainted property shall

be guilty of offence of money laundering.”

Money launders use the banking system for clearing ’dirty money’ obtained from criminal activities

with the objective of hiding/disguising its source.

Obligation under PML act-2002:

Section 12 of PML act-2002 places certain obligations on every Bank/FIs as follows:

Maintaining a record of prescribed transactions.

Furnishing information of prescribed transaction to specified authority.

Counterfeit Currency Report (CCR) by branch to ZO within 3 days of transactions which in

turn report to FIU-IND

Verifying and maintain records for 10 years from date of cessation of transactions.

Objectives:

To prevent criminal elements from using the Bank for Money Laundering activities.

To enable Bank to Know the customers and their financial dealings better.

To put in place appropriate control for detection and reporting of suspicious activities.

To comply with applicable laws and regulatory guidelines.

To take necessary steps to ensure that the relevant staff are adequately trained in KYC/AML

procedures.

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Customer:

A customer for the purpose of policy is defines as-

A person/ an entity that maintains an Account and / or has a business relationship.

One of whose behalf the account is maintained.

Beneficiaries of transaction conducted by professional intermediaries.

Any person or entity connected with a financial transaction.

Key elements:

Submission of CR-12- monthly by branches to ZO by 7th of next month.

Customer acceptance policy:

Classify customers into various risk categories; verify their identity, no account of Benami,

anonymous.

Customer identification:

This is to certified while establishing the business relationship/ Banks feels necessary to obtain

additional information for existing/ new customers such as Address/ DOB etc. if photo id is available

no introduction is necessary. In case of joint accounts, current accounts, company’s or trust accounts

photo id of individual person should be obtained and verified. In case of NRI, copy of passport and

residence visa duly verified to be obtained. Customers are to classified as

High risk

Medium risk

Low risk customers.

Maintaining of transactions:

Special attention to be paid on all complex unusually large transactions/ unusual patterns.

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Risk management:

Bank’s internal audit and compliance functions will provide as independent evaluation of KYC/AML

policies and procedures.

Customer education:

Bank recognizes the need to spread awareness on KYC/AML measures and rationale behind these

among the customers.

Introduction to new policy:

Bank will take necessary steps to prevent misuse of technology, innovations for money laundering

activities. The PML rules come in to effect from 1st July 2005.

Risk perception:

Bank is exposed to following risks:

Reputation risk: Risk of loss due to severe impact on reputation.

Compliance risk: Risk of loss due to failure of key regulations.

Operational risk: Risk of loss due to inadequate or failed internal process, people and systems

or from external events.

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KYC NORMS

Verification of one’s identity through one of the following:

Ration card

Driving license

Valid passport

PAN card

Photo ID card issued by Central/ State government offices or by Central/State undertakings

etc.

Verification of one’s present address through one of the following:

Electricity bill

Telephone bill employer certificate regarding residence proof

Rent receipts

Ration card, etc.

KYC (Know Your Customer) verification procedures:

1.APPLICANT:

Residential/office address.

Educational qualifications/ experience/ skills.

Employment/business details.

Source/ details of income for last 2-3 years.

Details of Bank account/ borrowings, if any

Family background/ social standing.

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2.PROPERTY:

physical verification of the property proposed to be purchased/financed including its present

condition, marketability.

Verification of mortgage charge if any.

3.BUILDER:

Antecedents, reputation/ standing/ duration in the business projects completed etc.

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VARIOUS FRAUDS INITIATED BY FRAUDESTERS UNDER RETAIL LOAN

SEGMENT.

Modus operandi adopted by Fraudsters.

Case1.

A proprietorship firm was sanctioned Star mortgage overdraft of Rs. 85.00 lacs to meet

working capital requirement of the firm, which was reported to be engaged in trading of

marble and cement. The advancewas proposed to be secured by equitable mortgage for five

immovable properties owned by proprietor of thefirm located at Jaipur. Search and valuation

reports were obtained from the lawyer/Valuer empanelled withthe Bank.

When interest servicing in the account became irregular, branch initiated follow up for

recovery of theoverdue amount from the borrowers. In this process, branch officials visited

the mortgaged properties. During this process, there were feelers given to the officials by

people living in the adjoining areas thatpeople have visited the properties of borrower for

sale/purchase transactions. With a view to stallregistration of sale/purchase transactions of

these properties, the branch addressed letter to JDA, in formingof bank’s charge on all five

properties. On receipt of bank’s letter, JDA addressed a letter to buyers statingthat Bank is

having a charge on the properties and they would have to seek the Bank’s NOC before

JDAcould consider the request for recording the sale of the properties in their names. A copy

of this letter was endorsed were other than our Bank’s branch borrowers. Thus, branch came

toknow that their mortgagor was not the owner of the property. Later on, it was revealed to

the branch that theoriginal title deeds of all the properties tendered to the branch for creation

of mortgage were not tallyingwith the records of office of sub-registrar/JDA. On further

investigation, it was found that the title deeds tothe properties mortgaged to the bank were

fake. The borrowers managed to avail finance from variousbank’s mortgaging by fabricating

many fake title deeds of same properties. (ZO/115/12.06.2007)

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Case2.

A borrower was sanctioned SRTO loan for purchase of 3 Ashok Leyland tusker turbo trailers.

Apart fromthe primary security by way of hypothecation of the three trailers, the account was

collaterally secured by ahouse property belonging to one of the guarantors. The conduct of

the account was not satisfactorily and theaccount was ultimately classified as “NPA”. Upon

verification of the title deed it was observed that the titledeeds mortgaged in the account were

fake. . (ZO/115/12.06.2007)

Case3.

The limit of the borrower who was sanctioned a term loan and cash limit were collaterally

secured by EQM of the land. The advance was sanctioned under KVIC-RGEP (Rural

Employment Generation Programme). The account became sticky and slipped into NPA. The

recovery certificate was filled under U.P. Public money recovery Act. It was informed by the

Tehsildar that the Guarantor already sold the land mortgaged years back. A fresh title report

was obtained from the Bank’s approved panel Advocate which stated that the title deeds

mortgaged in the account were fake. The original search of the title deeds and the valuation of

land was done by Bank’s approved panel advocate and approved Valuer respecting. .

(ZO/115/12.06.2007)

Case4.

A home loan as sanctioned at Pune for purchase of an independent row house. Disbursement

was made asper the progress of construction of work to the Builder. The borrower tried to

avail another house loan fromCitibank with another set of documents on the same property.

However, Citibank officials enquired with theBranch and did not disburse the loan.

Thereafter the title deed was verifiedwith sub-registrar where ir wasrevealed that the title

deed with the branch does not match with the certified copy issued by the subregistrar. This

underlines the specific assignment of verification of title deed by advocate. .

(ZO/209/07.09.2008)

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Case5.

Partnership firm was developing a building in Mumbai. The partners get separated and one of

the partners took over the responsibility of completing the building. After taking over, the

building was renamed and developed. However, the old name board of the building was on

display on front of the building. Imposters took advantage of the same and opened a separate

office utilizing the old name near the building and started selling flats in the building not

owned by them. The imposters also had access to the building since they were managing pre-

sanction verification exercise of some of the Banks. This opportunity was misutilised and

enable sale of the flats. One of the Mumbai branches, who has financed, only to find that the

property is already registered in someone else’s name.this underlines need for builder KYC

verification. . (ZO/234/09.11.2009)

Case6.

A Branch in Bhubneshwar sanctioned Home loan and disbursed through an Advocate for

payment to suppliers. Branch collected the sale deed and kept with the security documents.

However no EQM was created. Subsequently during takeover of the Branch by the new

incumbent it transpires that the sale deed contained amount far less than the amount

disbursed. The sale deed described the property as vacant land, while the loan was for

purchase of house. Revenue authorities Subsequently collected additional stamp duty

claiming under valuation. No house is in existence and the property is only a vacant land.

This underlines importance of pre-sanction inspection and valuation report apart from due

diligence during the registration of property. . (ZO/234/09.11.2009)

Case7.

An agricultural Hi-tech Branch entertained a request for home loan. After sanction of the

loan, EQM was created with the property documents. During subsequent inspection by Zonal

Office officials, it was observed that the sale deed was bearing different signatures of sub-

registrar at different places. Borrower confirmed that he had not gone to the sub-registrars

office for registration. It transpired that the sale deed submitted to the Bank was not at all

registered with the sub-registrars office and the number in the sale deed does not tally with

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that of the title deeds thus proving that the sale deed is a fabricated document. This reflects

the professional deficiencies in the Advocates search report and the diligence while

disbursing loans and registration of property. . (ZO/234/09.11.2009)

SOME PREVENTIVE MEASURES:

Frauds by using Fake title deeds. Preventive vigilance measures:

TITLE CLEARANCE REPORT:

1. Branches must call for title clearance report from their approved lawyers by addressing a letter to

them. The lawyers report must be in accordance with the format prescribed by Zonal Office.

2. Advocate should produce the original receipt of fees paid for search along with title clearance

report to the Bank. The search report should be addressed to the Bank giving therein the reference

No. of the letter issued by the Branch to them.

3. For obtaining the title report, the Branch should collect the original title deeds and other

documents from the parties and the same should be directly sent to the advocate in

confidence/personally handed over to the advocate at the branch. The advocate also should be

advised to return the documents along with the title report directly to the Branch.

4. Branches must ensure that advocate states in his opinion-cum-non encumbrance report that he has

received and examined the original title deeds and verified their genuineness from the concerned

office of the registrar/registration authority concerned and JDA/UIT/Nagar Nigam etc.

5. Advocate should also compare the contents of the latest deeds by which title has been passed on

in favor of the mortgagor (Borrower/Guarantor) with the documents maintained in the office of the

sub-registrar. So as to ensure authenticity of the same. In the event property offered as security is

being purchased out of Bank’s finance and the sale deed is yet to be executed, the lawyer should

inter-alia, compare the contents of the latest deeds by which the seller has acquired the title with the

documents maintained in the office of Sub-registrar’s so as to ensure the title of the seller and that

the buyer (mortgagor) would get a perfect title upon execution of the sale deed. A confirmation in

this regard should inter-alia be made in the title clearance report of the lawyer.

6. Search report and valuation report must be checked/approved by the specified Branch authority to

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ensure that these reports meet the requirements of the Bank. The Branch manager/ Credit officer

must ensure compliance with the stipulations made by the advocate, if any before releasing the loan.

The report must be approved as under:

o By the chief incumbent of the Branch in case the branches headed by officials below the rank

of Chief Manager.

o By credit in charge of the Branch in case of Branches headed by officials of the rank of chief

manager & above.

7.IMPORTANT: In addition to above, Branches are also advised to arrange for verification of the

Nagar Nigam/UIT/JDA and other development authorities to ensure that property stands in the name

of the mortgagor in their records. The lease deed/Patta submitted by the mortgagor in their records.

Bank should be verified with the copies on record of Nagar Nigam/UIT/JDA and the Branch

advocate should confirm having done so.

8. Based on advocate opinion, after creation of mortgage in Bank’s favor, UIT/JDA/Nagar Nigam

and other authorities should be informed about Bank’s charge on the said property. This letter should

be sent by registered post. This letter should also contain that the mortgaged property should not be

transferred in than me of other than the owner/ mortgagor without Bank’s prior approval.

9. Advocate report must specify whether any permission is a to be obtained under any act or from

any authority whatsoever for creation of EQM by deposit of title deeds in favour of the Bank. In case

any such permission in required, retails of it should be given and necessary permission should be

obtained by the Branches before creation of mortgage.

VALUATION REPORT:

1. Branch must call for approved valuer report by addressing a letter to him.

2. Valuation report should be addressed to the Bank giving reference number of the Bank.

3. Bank’s approved valuer needs to confirm in his valuation report that he has visited the address

where the property is located and as mention in the location map.

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4. Appropriate weight age is given for location of the property, self-occupancy, tendency, reliability

and other vital factors responsible for right valuation.

5. Valuation report must contain the market value, distress value, DLC value, and insurance value of

the property. Photograph of property should be attached with the report forming an integral part of

report.

INSPECTION BY BRANCH OFFICIALS:

1.Branches should undertake “on the spot” physical inspection of all properties offered for mortgage

as security to ascertain correct identification/existence of such properties and make enquiries

regarding the ownership of such properties with neighbors.

2. The inspecting officer should satisfy himself about the correct identification and approximate

valuation of the property/credit worthiness of the borrower. The inspection report by the officer

inspecting the property should contain comments on valuation based on market report.

3. Another officer of the Branch must make a second visit after obtaining of valuation report and

satisfactory title verification report from the empanelled valuer and advocate of the Bank. The

officer, who pays the visit, must tally the particulars of the property being inspected with those

provided by the advocate and valuer in their report and details of findings must be recorded in the

proposal.

4. Inspection of all properties should be done independently of the borrower. Persona visit to the

residence and place of business/employment and enquiries with the neighbors should be conducted.

5. Pre-sanction exercise is not a routine one. It has to be meaningful and effective as regards

identification, ascertainment of antecedents of the proponent. Meaningful inspection will help in

identifying the guarantors/third parties involved in the proposal submitted by the borrower to

prevent act of impersonation etc. by them.

6. In case of new advances, informal market reports are essential. This is often best done by

reference to our existing borrowers dealing in the same line of business. Our existing borrowers

with long track record of good financial health and loyalty to the bank are reliable source to gather

reports on potential new borrowers engaged in the same line of business. This will go a long way in

preventing frauds/ quick maturity.

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7. Branches to extract CIBIL report on the promoter’s guarantors/partners/proprietor/individual

borrower before processing the proposal and ensure that the CIBIL report is acceptable to the Bank.

The gist of CIBIL report should be mentioned in the proposal.

8. Post sanction inspection should be carried out as per sanctioned terms and during the inspection

and use of funds must be verified.

SUBMISSION OF LOCATION MAP:

Loan applications under Star Home Loan and Star Mortgage Loan are to be submitted along with a

location map of the applicant, specifically containing the name of the village/town, main road, acess

road, land mark, description of four boundaries, owner of the adjacent plot/flat/house/building, and

the best way to reach the location from the financing Branch. Inspecting officials undertaking pre-

sanction need to comment on this information provided in the application and if need to make

additional remarks/changes to facilitate easier post sanction inspection.

STATEMENT OF ACCOUNTS:

Statement of operative Bank account of the new customer- borrower for last 6 months duly

authenticated by the account maintaining Bank Branch should submitted along with the application.

SIGNATURE VERIFICATION:

Signature of the new customer applicant/non-customer, guarantor should be verified by their banker

or employer.

VERIFICATION OF AUTHENTICITY OF INCOME TAX PAID CHALLAN:

Authenticity of income tax paid challan can be obtained on line at the website-

https/tin.tin.nsdl.com/oltas/index.html by selecting CIN based view available at the home page and

providing information as under:-

BSR code of collecting branch.

Challan tender date (cash/cheques, deposit, date)

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Challan serial no; and

Amount

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DUE DILIGENCE EXERCISE FOR BORROWERS AT ENTRY LEVEL.

It was necessary to stress on due diligence of the borrowers at entry level, to prevent perpetration of

frauds, especially in accounts interviewing mortgage of property as security.

Articles of incorporation:

A corporate registration is the cornerstone and basis for legitimacy, as it requires the business to rely

upon its corporate name, reputation and image.

Status report:

This is useful to show that the company continues to exist and operate as large entity, and has not

been dissolved and / or reincorporated under another name. Most companies that actively engage in

business with serious clients will have one that is relatively recent. Whenever new proposals are put

up for approval, status reports of the company/ group needs to be obtained from their existing

bankers. Obtaining status reports is an essential step in due diligence process, in all advance

accounts.

Market enquiries:

This serves as an important tool verification of the antecedents of the borrower through discrete

market enquiries could amply reveal inherent deficiencies. Cross verification with our existing

customers in the line and other players in the line, would serve as first hand information.

Licenses/ certifications:

Ask for a copy of licenses, permits, registrations or certifications if they are directly related to and

required for the specific work the company must perform. If copies are not available, requests the

number and issuing authorities of each document.

Website addresses:

All companies have their websites. Companies that said they do not have a website or do not need

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one have to be treated with caution.

Good companies always make efforts to allow clients or partners to keep in touch with them, receive

notice of changes of office address, E-mail addresses or phone numbers, reminders of services

offered or updates on new services.

Resumes of Managers or key Employees:

Ask for resumes (also called professional bio) of managers/ key employees of the company. This will

give us some additional leads and information to verify the company’s ability to perform the work

promised and general capabilities.

Corporate brochure or company overview:

Every company should have a professional and well-developed presentation of their business concept

or services. This evidences the level preparation of the company, and demonstrates whether they

have sufficiently developed their capabilities. Project reports/ information memoranda are not to be

taken for face value. They need to be critically examined vis-à-vis other sources like similar

businesses.

It should be ensured that the company avoids too much dependence on consultant driven business.

Even when consultants refer business, discussions should be held with the promoters/ CADs.

Other steps:

ROC Search:

ROC search, as applicable, at the time of considering fresh advances, needs to be done, to assess

existing charge/s on company’s assets.

Each proposal should bear reference related to RBI/CIBIL/ECGC/List of defaulters/willful defaulters

list, etc. as per existing guidelines, Branch/Zonal office must bring out this aspect in the proposal.

Risk Mitigation:

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Proper coverage of risk and mitigation in the proposal reflects good understanding of the business.

As per existing guidelines, branch/Zonal office must bring out these aspects in the proposal.

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EQUITABLE MORTGAGE WHERE ORIGINAL TITLE DEEDS ARE LOST

It had been decided by the Bank that in the absence of original title deeds equitable mortgage cannot

be created to secure a loan. All the Zones/Branches were advised that EQM should not be created

without the original title deeds.

The conclusion is that when loan is processed a suitable EQM in the form of house, any immovable

property is to be taken as security. In case, where the borrower lost his original title deed, the said

property cannot consider as EQM as it increases the chances of fraud.

Only in very exceptional cases, after considering the borrowers integrity, reputation, satisfactory,

explanation for non availability of original title deeds and public notice about the non-availability/

loss of title deeds etc. Branch may consider going for a simple registered mortgage.

It may be always kept in mind that a clever fraudster can cheat the Bank by giving any number of

undertaking or affidavits to support his claim that he has lost the original title deed, which in fact not

be the case and hence, Banks must be very careful in selecting such cases decided to permit creating

security in such cases by registered simple mortgage.

An explanation for loss of original title deeds from the mortgagor and the efforts made by him to

recover the original title deeds immediately, how he has lost the title deeds. Whether he had made

any Police complaint, advertised in newspaper about loss of his title deeds etc. must be verified to

know about its correctness, his indemnity to Bank to safe guard against any loss in future, the

certified copies of the title deeds certified by sub-registrar of assurances, public notice through

newspaper for having lost the original title deeds and his intention to give it as security and such

other precautions as may be suggested by the local advocate also have to be taken if it is considered

to create security by way of simple mortgage in the absence of original title deeds.

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BANK OF INDIA AND BOSTON CONSULTANCY GROUP(BCG)

The bank has undertaken a project on “project Profitability and design Review” with consultancy

assistance from BCG. The project is aimed at studying the profitability of various products of Bank,

and also making design recommendation to improve the growth and profitability of some of the key

products.

These are the recommendations/ findings of BCG towards market assessment are given below:

Competition in the banking industry has been increasing in the last few years. Foreign and

private banks have entered and aggressively grown in the market.

Many of BOI customers are availing of retail loans and credit cards from foreign and private

banks, particularly the most profitable customers.

Substantial fall in interest rates during last 5-6 years has led to dramatic changes in

profitability levels of products. The breakdown sizes have gone up. Customers above

breakeven who contribute to the profits for the bank are under threat of being ‘cherry

picked’ and have to be protected. The bank has a long tail of customers below breakeven.

Their contribution to profitability has to be increased by increasing their balances or

appropriate service charges.

Competitors are offering value added differentiated products based on customer’s balances

with the bank. High-end customers are offered higher service levels and discounts.

Competitors direct sales force to actively scout for customers.

Bank of India has strong brand perception based on trust among the customers. However this

perception is under threat and Bank’s relationships with customers are weakening due to

higher service levels being offered by private and foreign banks.

WHY CUSTOMERS ARE LOST?

1% pass away

3% migrate to other cities

5% make new relationships

9% loss due to intense competition

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14% loss due to product dissatisfaction

68% loss due to casual and careless approach/ bad services of employees of any institution.

REVENUE LEAKAGE

The major areas where revenue leakage detected, as under:

(A) INTEREST INCOME

Wrong/ belated feeding of parameter/ master data.

Mistake in feeding of interest data.

Delay in modifying interest rate of interest especially in case of Loan/overdraft against TDR

on renewal.

Wrong classification of category of advances.

Erroneously reporting.

Misrepresentation of instructions/ guidelines.

No charging of penal interest including penal interest on over due export credit.

(B) PROCESSING CHARGES

Omission to recover processing charges on review.

Non-recovery for the delayed period.

Non-recovery of technical appraisal charges.

Non-recording of proper records for recovery.

(C)OMMISION TO CHARGE UPON INSPECTION

Inspection charges to be recovered on the data of inspection or latest by next day of

inspection

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(D) COMMISSION ON GUARANTEE

Wrong classification of percentage of margin.

Wrong classification of guarantee.

Wrong application of rate of commission.

Omission of claim period.

Appropriate concessional rate commission charged for the guarantees backed by cash margin.

(E) OTHER AREAS OF REVENUE LEAKAGE

Mortgage charges.

Documentation charges.

Half yearly service charges in inoperative/ dormant accounts.

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Findings:

Retail products of Bank of India are very popular among the customers because

of the various modifications in schemes such as fixed interest rate in Star home

loan for starting 5 years.

Bank of India’s Star education Loan comes with a Interest rate of only 9.5%

which is much lesser then SBI, BOB, PNB, Etc. Thus it Bank of India is runner

up in disbursing education loan for consecutive 3 years.

The NPA ratio and NPA accounts are decreasing, but still bank suffers a huge

loss in branches specially Mumbai, Chennai, Indore, so due diligence is

necessary to avoid losses.

There is a huge competition among scheduled commercial banks and also threat

from new entrants so mass marketing for retail products is necessary which not

only adds new accounts and profitability but also generates new client base.

Capital ratio of BOI is greater than RBI recommended ratio which is 9% for

CAR but lower than its counterparts which is due to two basic reasons, the

capital adequacy ratio of BOI is lesser than its counterparts which they have to

take care by increase their capital base i.e. tier1 & tier2 capital.

Action must be taken to strengthen the liquidity position of bank of India to

meet the entire obligation by extensive planning.

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Limitations:

The time period for project is very less.

The PSU culture where least help is expected from employees.

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BIBLIOGRAPHY:

www.bankofindia.com

www.iba.nic.in

www.rbi.nic.in

Bank journal, SANDIPANI- one page manager

www.moneycontrol.com/financials/icicibank/balance-sheet/ICI02

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofindia/BOI

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/punjabnationalbank/PNB05

http://www.hdfcbank.com/aboutus/basel_disclosures/default.htm

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=A%20Profile%20of%20Banks

http://www.moneycontrol.com/india/stockpricequote/banksprivatesector/kotakmahindrabank/KMB

http://www.moneycontrol.com/india/stockpricequote/bankspublicsector/bankofbaroda/BOB

• Varshney P.N,Swaroop Gopal (1999). “Banking Law and Practice”, 6th edition, Sultan Chand

And Sons.

• Jeevanandam.C (1993). “Practice And Law Of Banking”, 7th edition, Premier Book Vompany.

• Hasija Ashok, Sood Rajendra (2002), “Ever More Banking”, 6th edition, Sachin Publication

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LIST OF ABBREVIATIONS USED:

BPLR: Benchmark Prime Lending Rate

KYC: Know Your Customer

NPA: Non Performing Assets

SRTO: Small Road Transport Organization

EQM: Equitable Mortgage

PPC: Proposal Processing Charges

DBD: Double Benefit Deposit

D.P. Note: Demand Promissory Note

CPA: Credit Process Audit

TDR: Term Deposit Receipt

BCSBI: Banking Codes and Standards Board of India

FBL: Fund Based Limit

NFBL: Non Fund Based Limit

CDR: Corporate Debt Restructing

WCTC: Working Capital Term Loan

AMC: Anti Money Laundering

POA: Power of Attorney

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