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COMPARATIVE STUDY OF HOMELOANS

CHAPTER 1

INTRODUCTION TO SUBJECT

Home loans work like any other debt. That is, loans are simply specific money that we borrow

from a bank, a private lender, or some other type of

lender. Afterwards, we must repay our debts with

interest. However, unlike other types of loans, home

loans are different in several respects. Owning a piece

of land or property is a lifetime dream for every

individual. There are many home loans provider in the

market.

There are different type of home loan i.e.

Home Purchase Loans

Home Improvement Loans

Home Construction Loans

Home Extension Loans

Home Equity Loans

Land Purchase Loans

Bridge Loans




Home purchase loans: These are the basic forms of home loans used for purchasing of a new

home. With about a million home lenders and mortgage brokers it's becoming a tough challenge as the

days are progressing. But at the same time, when the sites are coming up with all the latest tools and

relevant information for us, and with all such conveniences, obtaining a home purchase loan or

mortgage has become really pretty simple. However, at the same time though, we may be flummoxed

to look so many attractive rates and offers in the market, not to forget the hidden costs associated with

each of them.

Home improvement loan: Home improvement loans are used to finance improvements and add

on to the existing set of credentials of beauty on your owned house, recently purchased property or

rented accommodation. Home improvement loans are used to maintain or enhance the value of your

house. In general it includes: repairs, remodeling, energy-related items (permanent in nature), repairs, a

new kitchen, a new bathroom, terrace, an extension or general property improvements. Luxury itemsand fireplaces are generally not eligible, though. Many improvements in landscape and even swimming

pools are nowadays considered to be a part of home improvement.

Home construction loan

Home construction loans are used to finance for the construction of our newlyacquired home or if we are planning to build a home.The factors include in calculations for house building costs?

Design of the house

Construction cost

Financing Cost

Buildable site

All the above mentioned costs will help us to determine the amount we mayneed toborrow. For example, besides calculating the construction costs, we may alsobe




required to consider the total expenditures to develop the site in order to build.Eachsite is unique requiring different expenditures so this specific rupee amountwill varyfrom site location to site location.Payment: Before the house starts getting build, we will be required to pay adepositto your builder as well as paying a deposit for the land if we are buying land.As work progresses you will need to make payments to the builder. Certain loans canbestructured for progress payments to be made during construction.

Home extinction loan

Home extension loans are used by customers to get loans from the banks toextend

their houses, by adding more rooms, kitchens, wash rooms, terraces, or anyotherrooms for your growing family. It may also be used to enclose openbalcony/terracespace, or constructing a Puja ghar.

Maximum Amount of Home Extension Loans

Banks generally offers about 70-85% of the total amount of home extension asloan.The amount of loan sanctioned also depends on a number of factors such asthe age of the applicant at the time of loan, tenure of the loan, repayment capacity of theborrower; his/her credit history etc.

Home equity loan




Home equity loans helps customer to encash the market value of the commodity by taking a loan

by mortgaging the property. So, Home equity loans are availed by customers, who wish to

mortgage his/her property to the bank for taking some loan for some other purpose. Then, it's up

to the bank's discretion to consider the market

value of the property and accordingly decide how much to pay to the customer.

Both the residential as well as non residential property can be considered for the

approval of the loan, provided the mortgager is a licensed title holder and the land is

free form any kind of dispute.

Home equity loans don't restrict one to use the loan money in specific investments. It

might also be used in marriage, higher education, medical expenses, etc. However it

should not be used in any illegal or speculation purposes.

Land purchase loan

Land Purchase loans are used by customers who wish to purchase aplot of land for commercial or residential purpose. Everyone hashis/her dream perfectly sketched in his souls and so is his ambitionto get his house erected on the exact location he dreamt that to be. If you have found and shorlisted the piece of land, and have arrivedhere for finance, you have come to the best place you could havearrived in the web. Now, that you have decided to purchase a land as

an investment or for your own dream home, you will realize that aland purchase loan is one you will cherish. Loans that are strictly forland purchase can be as scarce as good residential plots.While many lending firms around the nation compete to providemortgages for the purchase of a house on a lot, only local institutionstypically will be interested in lending for an empty lot.




Bridge loan

Bridge loansare designedfor peoplewho wish tosell theexistinghome andpurchaseanother one.The bridgeloans helpfinance thenew home,until a buyeris found forthe home.Bridge loansare used bycustomers asan effectivevehicle tocapitalize ona purchaseopportunity.

It can be considered as a short term financing scheme which is generally expectedto be paid back, within the range of 6-36 months, till the time the borrower getsmore permanent and lower cost financing. So, bridge loans, (or swing loans asthey are otherwise said) is a short term loan providedby various banks like Bank of India, Citibank, ICICI etc. often used forcommercialreal estate purchases, retrieve real estate from foreclosure. Bridgeloans incorporate finance is called gap financing, and are used to cover the timebetween redemption of issuance of one bond and its replacement by a new issue.They can also be operating loans for periods between LOI and quisition, or quiet

period and IPO.Bridge loan may contain a decent proportion of prepaid interest,sometimes as much as six months. If the home gets sold before that time, you mayreceive interest payments back, but if it hasn't sold, you may be required tocontinue payments.




CHAPTER 2

INTRODUCTION TO COMPANY

PUNJAB NATIONAL BANK

PNB has over 4500 branches and offices bringing the Punjab National Bank to your

doorstep. Around 2400 offices come under the network of Centralized Banking Solution or CBS.

A need for centralized banking system prompted PNB to go computerized and what followed

was the establishment of CBS in Punjab National Bank branches in all the leading cities like

Delhi, Pune, Chennai, Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar,

Kolkata, Ludhiana, Nodal and Bangalore.

Internet Banking Services are provided to all customers in the CBS branches. A

branch and ATM locator is also available on the official website of Punjab National

Bank. For an overview of the annual report or the bank profile, the site can be

resourceful. The website also provides info on the careers and recruitments at PNB

and the exam results. The careers at nationalized banks like PNB are the most sought

after one and candidates are selected on the basis of their exam result.

PNB topped the Best Paying Commercial Bank category with an overall rating of

87.45% as evaluated by the SSS Retirement, Death & Funeral Benefits Program.




STATE BANK OF INDIA

State Bank of India (SBI) is India's largest commercial bank. SBI has a vast domestic

network of over 9000 branches (approximately 14% of all bank branches) and

commands one-fifth of deposits and loans of all scheduled commercial banks in India.

The State Bank Group includes a network of eight banking subsidiaries and several

non-banking subsidiaries offering merchant banking services, fund management,

factoring services, primary dealership in government securities, credit cards and

insurance.The eight banking subsidiaries are:State Bank of Bikaner and Jaipur

(SBBJ),State Bank of Hyderabad (SBH).State Bank of India (SBI),State Bank of

Indore (SBIR),State Bank of Mysore (SBM),State Bank of Patiala (SBP),State Bank

of Saurashtra (SBS) and State Bank of Travancore (SBT). Today, State Bank of India (SBI) has

spread its arms around the world and has a network of branches spanning all time zones. SBI's

International Banking Group delivers the full range of cross-border finance solutions through its

four wings – the Domestic division, the Foreign Offices division, the Foreign Department and

the International Services division.




OVERVIEW OF THE INDUSTRY

HISTORY Banking in India has a long and elaborate history of more than 200 years. The beginning of this

industry can be traced back to 1786, when the country‟s first bank, Bank of Bengal, was

established. But the industry changed rapidly and drastically, after the nationalization of banks in

1969. As a result, the public sector banks began experiencing numerous positive changes and

enormous growth. Then came the much-talked-about liberalization and economic reforms that

allowed banks to explore new business opportunities and not just remain constrained to

generating revenues from mere borrowing and lending. This provided the Indian banking

scenario a remarkable facelift that only continues to get better with time. However, even today,

despite the foray of foreign banks in the country, nationalized banks continue to be biggest

lenders in the country. This is primarily due to the size of the banks and the penetration of thenetworks. The Indian banking system can be classified into nationalized banks, private banks and

specialized banking institutions. The industry is highly fragmented with 30

banking units contributing to almost 50% of deposits and 60% of advances. The Reserve Bank of

India is the foremost monitoring body in the Indian Financial sector. It is a centralized body that

monitors discrepancies and shortcomings in the system. Industry estimates indicate that out of

274 commercial banks operating in the country, 223 banks are in the public sector and 51 are in

the private sector. These private sector banks include 24 foreign banks that have begub their

operations here. The specialized banking institutions that include cooperatives, rural banks, etc.

form a part of the nationalized banks category.

Opportunities:The Banking sector is considered the most lucrative option in today‟s job market. In

the industry, a position in Treasury or Forex is considered right on top and this is

followed by careers in Private Banking, Investment Banking and Retail Banking. One

could work in a variety of areas in banking industry including Recurring Deposit account,

bankingofficer, probationary officer, loan officer, assessor, personal loan

officer, home loan officer, home loan agent, loan manager, mortgage loan underwriter,

loan processing officer, accountant, product marketing and sales executive, and

customer service executive among others.In the Financial Services, some of the important jobs include that of a stockbroker

who is essentially a person who buys and sells securities on behalf of individuals and

institutions for some commission. While some brokers like to practice with individual

clients others work for institutions. Brokers who work for institutional investors are

often called securities traders. Many prefer to work as dealers, advisors and securities

analysts. Security analysts are those who advise companies on floatation‟s of shares




as they are expected to have sound knowledge of capital markets.

Investment analysts are the backbone of the financial services sector. They study the

financial reports of companies, assess various statistical information, profitability

projections, compare financial results, survey the industry as a whole and on the basis

of the available information, and finally conclude to a decision. Equity Analysts do jobs similar to investment analysts and research the equity markets and makepredictions.

GrowthThe limit for foreign direct investment in private banks has been increased from 49%

to 74%. In addition, the limit for foreign institutional investment in private banks is

49%. Liberalization and globalization have created a more challenging environment

in the banking sector as well as in the other segments of the financial sector such as

mutual funds, Non Banking Finance Companies, post offices, capital markets, venture

capitalists, etc.Research and Markets has announced the addition of 'Indian Retail Banking, 2006' to

their offering. Indian Retail Banking continues to redefine the credit growth in the

country. It grew by a whopping 44.4% in 2005-06 to touch Rs 3,538 billion. This leap

was despite the increase in risk weight by RBI for housing and real estate loans during

August, 2005. Housing, which constitutes more than 52% of all retail loans, grew at a

robust rate of 44.35% during 2005-06. In order to help banks in India to understand

the market and competition and plan future strategies, we have just come out with an

Industry Insight on Indian Retail banking - 2006 edition.

Finally, it seems Reserve Bank of India's (RBI) flurry of measures to restrain the

home finance market is paying off. With tightening of interest rates by the RBI and a

simultaneous increase in real estate prices in a few markets, the banking sector is

witnessing a decline in the growth of its home loan portfolio.

The home loan industry is experiencing a growth of 25% this year, as against 30%

growth in home loans earlier. Rajiv Sabharwal, senior general manager, ICICI Bank, which has

recorded the highest incremental growth in home finance segment in recent

past, said, “The real estate prices have become very high in few markets, which has

resulted in the fall in growth rates for home loans for the banking industry. Home loan

growth has reduced to 25% from its earlier growth rate at 30% and since we are an

integral part of the industry, there will be some impact on us too.”

He added that the bigger impact had come from real estate prices, but obviously

interest rates hikes will also have an impact. He, however, declined to disclose the

bank‟s current home loan growth rate. Echoing a similar view, a senior official of

State Bank of India (SBI) said the home loan market is showing some signs of

slowing down.

PNB Bank is a leading home loan lender of the country with about 30% market share.




Retail lending comprises 70% of the total loan portfolio of the bank, of which the

home loan lending is about 50%. In the first half of fiscal 2007, the bank experienced

total home loan disbursements of Rs 13,400 crore.

TOP 10 PLAYERS IN BANKING &

FINANCE

State Bank of India

HDFC bank

Citibank

ICICI Bank

Punjab National bank

UTI Bank

Hongkong & Shanghai Banking Corp.

Kotak Mahindra Bank

Sundaram Bank

Oriental Bank of Commerce

TOP 10 PLAYERS IN INSURANCE

Life Insurance corporation of India

Bajaj Allianz General Insurance

ICICI Prudential Life Insurance

ICICI Lombard General Insurance

Birla Sun life Insurance

Tata AIG General Insurance

New India Assurance Co.

Iffco Tokia General Insurance

Oriental Insurance Co.

HDFC Standard Life Insurance

MAJOR PLAYERS

The financial sector in India has become stronger in terms of capital and the number

of customers. It has become globally competitive and diverse aiming, at higherproductivity and efficiency.Exposure to worldwide competition and deregulation in Indian financial sector has ledto the emergence of better quality products and services. Reforms have changed theface of Indian banking and finance. The banking sector has improved manifolds interms of capital adequacy, asset classification, profitability, income recognition,provisioning, exposure limits, investment fluctuation reserve, risk management, etc.

PROFILE OF THE ORGANISATION

PUNJAB NATIONAL BANKPunjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Actwith its office in Anarkali Bazaar Lahore. The Bank, founded by Dyal Singh Majithia and LalaHarkishen Lal, is the second largest government-owned commercial bank in India with about4,500 branches across 764 cities. It serves over 37 million customers. The bank has been ranked248th biggest bank in the world by Bankers Almanac, London. Total Business of the bank forfinancial year 2007 is estimated to be approximately US$60 billion. It has a banking subsidiary




in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty,Shanghai, and Dubai.We offer a wide range of retail credit products including housing loans, personal loans andautomobile loans. We cater to the financing needs of the agricultural sector and have createdinnovative financing products for farmers. We also provide significant financing to other prioritysectors including small scale industries. Through our treasury operations, we manage our balancesheet, including the maintenance of required regulatory reserves, and seek to maximize profitsfrom our trading portfolio by taking advantage of market opportunities.Our revenue, which is referred to herein and in our financial statements as our income, consistsof interest income and other income. Our securities portfolio consists primarily of Governmentof India and state government securities. We meet our statutory liquidity reserve ratiorequirements through investments in these and other approved securities. We also holddebentures and bonds issued by public sector undertakings and other corporations, commercialIncome and expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense is also affected by the extent to which we fund our activities withlow interest or non-interest deposits, and the extent to which we rely on borrowings.

Our non-interest expense consists principally of operating expenses such as expenses for wagesand employee benefits, rent paid on premises, insurance, postage and telecommunicationsexpenses, printing and stationery, depreciation on fixed assets, other administrative and otherexpenses. Provisioning for non-performing assets, depreciation on investments and income tax isincluded in provisions and contingencies. We use a variety of indicators to measure our performance. These indicators are presented in tabular form in the section titled “Selected

Statistical Information” on page [·]. Our net interest income represents our total interest income(on advances and investments) net of total interest expense (on deposits and borrowings). Netinterest margin represents the ratio of net interest income to the monthly average of total interestearning assets. Our spread represents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. We

calculate average yield on the monthly average of advances and average yield on the monthlyaverage of investments, as well as the average cost of the monthly average of deposits andaverage cost of the monthly average of borrowings. Our cost of funds is the weighted average of the average cost of the monthly average of interest bearing liabilities. For purposes of theseaverages and ratios only, the interest cost of the unsecured subordinated bonds that we issue forTier 2 capital adequacy purposes (“Tier 2 bonds”) is included in our cost of interest bearing

liabilities. In our financial statements, these bonds are accounted for as “other liabilities and

provisions” and their interest cost is accounted for under other interest expenses.

Since 1969, when we became a public sector bank, we have managed to continue to grow ourbusiness while maintaining a strong balance sheet. As of September 30, 2004, our total depositsrepresented 85.9% of our total liabilities. On average, interest free demand deposits and low

interest savings deposits represented 43.8% of these deposits in the first six months of fiscal2005.These low-cost deposits led to an average cost of funds excluding equity for the first sixmonths of fiscal 2005 of 4.7%. As of September 30, 2004, our gross and net non-performingassets constituted 7.65% and 0.30% of our gross and net advances, respectively. In fiscal 2004our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion before adjustmentand Rs. 10.6billion after adjustment as part of the restatement of our financial statements for thisIssue. In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our netprofit was Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound




annual rate of12.5%, our unadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37.4%, respectively, and our total deposits and total advances grew at a compoundannual growth rate of 17.1% and 17.2%, respectively.We intend to maintain our position as a cost efficient and customer friendly institution thatProvides comprehensive financial and related services. We seek to achieve this by continuing toadopt technology which will integrate our extensive branch network. We intend to grow by crossselling various financial products and services to our customers and by expanding geographicallyin India and internationally. We are committed to excellence in serving the public and alsomaintaining high standards of corporate responsibility.

Type- Public (BSE, NSE: SBI), (LSE: SBID)Founded- Calcutta, 1806 ( as Bank Of Calcutta)Headquarters- Corporate centre, Madam Cama Road,Mumbai 4000 021 IndiaKey people- Omprakash Bhatt, Chairman

State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by thenumber of branch offices and employees, the second largest bank in the world. The bank tracesits ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stakeheld by the Reserve Bank of India.SBI provides a range of banking products through its vast network in India and overseas,including products aimed at NRIs. With an asset base of $126 billion and its reach, it is aregional banking behemoth. SBI has laid emphasis on reducing the huge manpower through

Golden handshake schemes and computerizing its operations.The State Bank Group, with over 16000 branches, has the largest branch network in India. It hasa market share among Indian commercial banks of about 20% in deposits and advances.Regional office of the State Bank of India (SBI), India‟s largest bank, in Mumbai. The

government of India is the largest shareholder in SBI. The bank has 52 branches, agencies oroffices in 32 countries. It has branches of the parent in Colombo, Dhakka, Frankfurt, HongKong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, NewYork, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, andSingapore, and representative offices in Bhutan and Cape Town.SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank,State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India

(California), and State Bank of India (Canada). In 1982, the bank established its Californiasubsidiary, which now has seven branches. The Canadian subsidiary was also established in1982 and also has seven branches, four in the greater Toronto area, and three in BritishColumbia. In Nigeria, it operates as INMB Bank. This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It nowhas five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branchesthroughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with CanaraBank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India




already has a branch in Shanghai and plans to open one up in Tianjin.

COMPANY HISTORY

PNB HISTORY

Punjab National Bank of India was established by Lala Lajpat Rai in the pre-

independence India in 1895 in Punjab, with Lahore as its head office. Today it is the

second largest public sector bank in India. It was nationalized in 1969 along with 13

other major commercial banks. The privatization started in 1989 when 30 per cent of

its shares were offered to the public and it was listed on the stock exchange.In 1992,

PNB became the first Philippine bank to reach P100 billion in assets. Later that year,

privatization continued with a second public offering of its shares.In August 2005, PNB was fully privatized. The joint sale by the Philippine

government and the Lucio Tan Group of the 67% stake in PNB was completed within

the third quarter of 2005. The Lucio Tan Group exercised its right to match the P

43.77 per share bid offered by a competitor and purchased the shares owned by the

government. The completion of sale is expected to speed up the development of

PNB‟s franchise and operational competitiveness.

SBI HISTORY

The origins of State Bank of India date back to 1806 when the Bank of Calcutta (later

called the Bank of Bengal) was established. In 1921, the Bank of Bengal and two

other Presidency banks (Bank of Madras and Bank of Bombay) were amalgamated to

form the Imperial Bank of India. In 1955, the controlling interest in the Imperial Bank

of India was acquired by the Reserve Bank of India and the State Bank of India (SBI)

came into existence by an act of Parliament as successor to the Imperial Bank of India.

Today, State Bank of India (SBI) has spread its arms around the world and has a

network of branches spanning all time zones. SBI's International Banking Group

delivers the full range of cross-border finance solutions through its four wings - the

Domestic division, the Foreign Offices division, the Foreign Department and the

International Services division




RECENT ACHIVEMENTS AND MILESTONES

PNB Recent achievements and milestones:

Punjab National Bank (PNB), has announced that it has completed 100% corebanking implementation at all its 4604 branches and extension counters through theFinacle Universal Banking Solution from Infosys, on Sun infrastructure and theOracle Database setting a significant milestone for themselves and a new benchmark for the Indian banking industry.

At the second ASIA‟s BEST EMPLOYER BRAND AWARDS held in Singapore on22nd July, 2011, Motilal Oswal Financial Services bagged awards in two categories:Award for Excellence in HR through Technology & Award for Managing Health atWork.

Motilal Oswal in association with Zee Business, hosted the first of its series of

seminars under its investors education initiative called Investor Ki Kahani Usi KiZubani on July 2, 2011 at BSE in Mumbai. The seminar saw a colossal turnout withmore than 750 investors attending the session.

Motilal Oswal AMC organized the first edition of Motilal Oswal MOSt Shares ETFConclave 2011 at NSE, Mumbai on 15th June, 2011. The event was telecast LIVE viawebcast and the panel discussion was telecast LIVE by CNBC TV18.

Mr. Raamdeo Agrawal was honoured with an award for Special Contribution toIndian Capital Market by Zee Business at the „INDIA‟S BEST MARKET ANALYST

AWARDS 2011 on April 29, 2011.

Our Analysts Mr. Dhirendra Tiwari & Mr. Harshad Borawake won the Best MarketAnalyst Award for the categories Equity-Sectoral-Infrastructure and Equity – Sectoral –

Energy respectively at „INDIA‟S BEST MARKET ANALYST AWARDS 2011organised by Zee Business on April 29, 2011.

Motilal Oswal Asset Management Company becomes India‟s 1st AMC to ring The

NASDAQ Stock Market Opening Bell on 30 March 2011, to celebrate the launch of Motilal Oswal MOSt Shares NASDAQ 100 - India‟s First US Equities Based ETF.

Motilal Oswal MOSt Shares NASDAQ 100 - India‟s First US Equities Based ETFgets listed on NSE and BSE on 31st March, 2011

Motilal Oswal Securities won 4 awards at the ET Now Starmine Analyst Awards2010-2011. This puts MOSL amongst the Top 3 Award winning Brokers at the ETNOW Starmine Analyst Awards 2010-2011

Our analyst Mr. Alpesh Mehta was awarded Top Earnings Estimator – Overall, at the

ET NOW Starmine Analyst Awards 2010. He also received an award for TopEarnings Estimator for Financial Sector along with our analysts Mr. HarshadBorawake being awarded Top Stock Picker for Energy Sector and Mr. SiddharthBothra being awarded Top Stock Picker for Real Estate Sector.

SBI RECENT ACHIVEMENTS AND MILESTONES




1. Lipper Award-The Lipper India Awards 2008.2. ICRA-Mutual Fund Awards 20083. Outlook Money-NDTV profit Awards.4. Awaaz Consumer Awards 2007 and many more……..

SBI Card reaches three million milestone: SBI Card, a joint venture between State Bank of India and GE Money, announced yet another landmark achievement of crossing the three millioncardholders-mark. Roopam Asthana, CEO-SBI Card, said, "This milestone is even moreremarkable as we have added one million cardholders in just ten months. Our objective is toaccelerate the pace of growth by extending the benefits to a broader range of consumers in TierII cities, along with improved value propositions for the urban affluent customers." SBI Cardrecently signed up Indian cricketer Yuvraj Singh as its brand ambassador.

2.6 Section

PRODUCT RANGE OF COMPANY/INDUSTRY

The products and services provided by the SBI and PNB are in various fields, such as:

Banking services

NRI services

International banking

Corporate banking

Agricultural banking

International banking

2.7 Section

PERFORMANCE OF COMPANTY IN LAST FIVE YEARS

PNB performance in last five years: 1st Quarter Net Income UP 48% Year-on-YearTaking-off from a breakthrough performance in 2007 with a registered net income of P1.5 billion, PNB continues to reap the benefits from its efforts to strengthen corebusinesses, reduce non-performing assets and manage costs. Net Income for the 1stQuarter of 2008 registered P457 million, up 48% from P308 million of the sameperiod last year. This performance bucks industry trends for the 1st quarter of 2008based on published income reports.Even as the operating environment proved volatile where negative trends are expected,




PNB still managed to reflect a 136% growth in foreign exchange gains year-on-year,from P242 million to P571 million. A relentless focus in generating low-cost fundsfrom deposits and other funding sources led to a reduction in total interest expense byas much as 27%. Total deposits closed firm at P180 billion.Operating expenses were down 23% despite investments made in systemsenhancement and upgrading of facilities. The Bank has recently implemented a newgeneration core banking system: Flexcube – an end-to-end solution designed toautomate both corporate and retail banking businesses; and effectively in-source coreoverseas operations to its global data center in the Philippines. PNB‟s Japan, Singapore, Hongkong and United States branches as well as the London subsidiaryhave already been converted and the rest of the Bank is expected to go live soon.As of March 31, 2008, PNB‟s consolidated total asset size remained strong at P242 Billion, up P2.7 billion versus end-2007. With the significant strengthening of itsbalance sheet over the past few years, PNB has been able to concentrate on generatingnew client relationships in the corporate segment, both in the large and SMEcategories. The contribution from the consumer finance business has likewise

continued to register accelerated growth. Total consumer loans portfolio stood at P3.3 billion, up25% from end-2007. Combined new bookings for the 1st quarter 2008already reached the half- billion mark. PNB‟s Net Loans and Receivables closed P77 billion.As of March 31, 2008, PNB‟s Capital Adequacy Ratio under Basel II remained formidable at 18.51%, still way above the 10% ratio required by the Bangko Sentralng Pilipinas. Subject to appropriate approvals and clearances, PNB is going to thecapital markets to raise a minimum of P3 billion of Tier 2 Capital in preparation forits maturing subordinated notes in February 2009.PNB will emerge as the 4th largest domestic bank in the country in terms of asset sizeonce its planned merger with Allied Banking Corporation (ABC) is completed. The

respective Board of Directors of PNB and ABC passed resolutions last April 30, 2008approving the plan to merge the two banks. This transaction is subject to the approvalof shareholders and regulatory authorities and is expected to be completed by the 3rdquarter of 2008.SBI performance in last five years: State Bank of India (SBI) is all geared up toincrease its business per employee and profit per employee as it thinks that for SBI,these two parameters are among the lowest in the industry.On one hand, the bank is trying to reduce its staff strengthwhich would eventually improve the ratios; but on the other, the bank is also goingflat out to increase its customer base."Our business per employee and profit per employee is one of the lowest in the

industry," SBI had recently said in a joint statement issued by the management andunions.SBI's generates Rs 2.99 crore of business per employee, while its profit peremployee is just about Rs 2.17 lakh. By contrast, majority of the large public sectorbanks are better in terms of both these parameters.For instance, Canara Bank has a business per employee (BPE) of Rs 4.42 crore, whileUnion Bank of India's BPE is at Rs 4.36 crore and Bank of Baroda's (BoB) Rs 3.51crore. These are according to their respective annual reports for 2005-06.




2.8 Section

FINANCIAL STATUS OF THE ORGANISATION

PNB financial status for last five years

PUNJAB NATIONAL BANK

ANNUAL REPORT

Yearly Results of

Punjab National

Bank

-------------------

in Rs. Cr. -----

--------------

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

Sales Turnover 26,986.48 21,422.09 19,326.16 14,265.02 11,537.48

Other Income 3,612.58 3,457.31 2,919.69 1,997.56 1,042.30

Total Income 30,599.06 24,879.40 22,245.85 16,262.58 12,579.78

Total Expenses 8,856.20 6,183.42 5,183.63 4,235.81 4,387.74

Operating Profit 18,130.28 15,238.67 14,142.53 10,029.21 7,149.74

Profit On Sale Of Assets

-- -- -- -- --

Profit On Sale Of Investments

-- -- -- -- --

Gain/Loss OnForeign Exchange

-- -- -- -- --

VRS Adjustment -- -- -- -- --

OtherExtraordinaryIncome/Expenses

-- -- -- -- --




TotalExtraordinaryIncome/Expenses

-- 152.82 -- -- --

Tax OnExtraordinaryItems

-- -- -- -- --

Net ExtraOrdinaryIncome/Expenses

-- -- -- -- --

Gross Profit 21,742.86 18,695.98 17,062.22 12,026.77 8,192.04

Interest 15,179.14 12,944.02 12,295.30 8,730.86 6,022.91

PBDT 6,563.72 5,904.78 4,766.92 3,295.91 2,169.13

Depreciation -- -- -- -- --

Depreciation OnRevaluation Of Assets

-- -- -- -- --

PBT 6,563.72 5,904.78 4,766.92 3,295.91 2,169.13

Tax 2,130.22 1,999.43 1,676.04 1,247.15 629.05

Net Profit 4,433.50 3,905.35 3,090.88 2,048.76 1,540.08

Prior YearsIncome/Expenses

-- -- -- -- --

Depreciation forPrevious YearsWritten Back/ Provided

-- -- -- -- --

Dividend -- -- -- -- --

Dividend Tax -- -- -- -- --

Dividend (%) -- -- -- -- --

Earnings Per

Share

139.94 123.86 98.03 64.98 48.84

Book Value -- -- -- -- --

Equity 316.81 315.3 315.3 315.3 315.3

Reserves 19,720.99 15,915.62 12,824.59 10,467.35 9,826.31




Face Value 10 10 10 10 10

BALANCE SHEET

Balance Sheet of

Punjab National Bank

-------------------

in Rs. Cr. -----

--------------


12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 316.81 315.3 315.3 315.3 315.3

Equity Share Capital 316.81 315.3 315.3 315.3 315.3

Share Application Money 0 0 0 0 0

Preference Share Capital 0 0 0 0 0

Reserves 19,720.99 15,915.63 12,824.59 10,467.35 9,826.31

Revaluation Reserves 1,470.76 1,491.99 1,513.74 1,535.70 293.85

Net Worth 21,508.56 17,722.92 14,653.63 12,318.35 10,435.46

Deposits 312,898.73 249,329.80 209,760.50 166,457.23 139,859.67

Borrowings 31,589.69 19,262.37 4,374.36 5,446.56 1,948.86

Total Debt 344,488.42 268,592.17 214,134.86 171,903.79 141,808.53

Other Liabilities &Provisions 12,328.27 10,317.69 18,130.13 14,798.23 10,178.51

Total Liabilities 378,325.25 296,632.78 246,918.62 199,020.37 162,422.50




Mar ’11 Mar ’10 Mar ’09 Mar ’08 Mar ‘07

12 months 12 months 12months 12 months 12 months

Assets

Cash & Balances withRBI 23,776.90 18,327.58 17,058.25 15,258.15 12,372.03

Balance with Banks,Money at Call 5,914.32 5,145.99 4,354.89 3,572.57 3,273.49

Advances 242,106.67 186,601.21 154,702.99 119,501.57 96,596.52

Investments 95,162.35 77,724.47 63,385.18 53,991.71 45,189.84

Gross Block 4,981.60 4,215.21 3,930.36 3,699.64 2,247.74

Accumulated

Depreciation 1,876.01 1,701.74 1,533.25 1,384.12 1,237.92Net Block 3,105.59 2,513.47 2,397.11 2,315.52 1,009.82

Capital Work In Progress 0 0 0 0 0

Other Assets 8,259.42 6,320.07 5,020.20 4,380.84 3,980.80

Total Assets 378,325.25 296,632.79 246,918.62 199,020.36 162,422.50

Contingent Liabilities 101,465.73 68,124.47 79,270.65 80,606.88 52,884.89

Bills for collection 37,449.53 33,215.78 31,941.43 23,448.99 21,815.59

Book Value (Rs) 632.48 514.77 416.74 341.98 321.65




PROFIT & LOSS ACCOUNT

Profit & Loss

account

-------------------

in Rs. Cr. -----

--------------



Income

Interest Earned 26,986.48 21,466.91 19,326.16 14,265.02 11,537.48

Other Income 3,612.58 3,565.31 2,919.69 1,997.56 1,343.64

Total Income 30,599.06 25,032.22 22,245.85 16,262.58 12,881.12

Expenditure

Interest expended 15,179.14 12,944.02 12,295.30 8,730.86 6,022.91

Employee Cost 4,461.10 3,121.14 2,924.38 2,461.54 2,352.45

Selling andAdmin Expenses 2,813.45 1,701.46 1,406.42 884.19 1,032.50

Depreciation 255.85 222.83 191.06 170.23 194.8

Miscellaneous

Expenses 3,456.02 3,137.42 2,337.80 1,966.98 1,738.38

Preoperative ExpCapitalised 0 0 0 0 0OperatingExpenses 8,367.96 5,761.36 5,026.81 3,902.55 3,926.05




Provisions &Contingencies 2,618.46 2,421.49 1,832.85 1,580.39 1,392.08

Total Expenses 26,165.56 21,126.87 19,154.96 14,213.80 11,341.04



Net Profit for the

Year 4,433.50 3,905.36 3,090.88 2,048.76 1,540.08

ExtraordionaryItems 0 0 0 0 0

Profit broughtforward 0 7.64 0 15.52 183.49

Total 4,433.50 3,913.00 3,090.88 2,064.28 1,723.57

PreferenceDividend 0 0 0 0 0

Equity Dividend 696.99 693.67 630.61 409.89 409.89

CorporateDividend Tax 113.07 116.43 107.17 69.66 63.11

Per share data (annualised)

Earning Per

Share (Rs) 139.94 123.86 98.03 64.98 48.84

Equity Dividend(%) 220 220 200 100 100

Book Value (Rs) 632.48 514.77 416.74 341.98 321.65

Appropriations

Transfer toStatutoryReserves 1,258.39 1,532.46 1,155.46 596.14 435.06

Transfer to OtherReserves 2,365.05 1,570.44 1,190.00 988.59 800




ProposedDividend/Transferto Govt 810.06 810.1 737.78 479.55 473

Balance c/f toBalance Sheet 0 0 7.64 0 15.52

Total 4,433.50 3,913.00 3,090.88 2,064.28 1,723.58

CASH FLOW STATEMENT

Cash Flow of

Punjab National

Bank

-------------------

in Rs. Cr. -----

--------------



Net Profit BeforeTax 6563.72 5904.78 4766.92 3295.91 2169.13

Net Cash FromOperatingActivities 8045.67 1835.99 2105.16 1756.13 -10144.34

Net Cash (usedin)/from

-1083.66 -409.41 -395.84 -444.46 -159.41Investing Activities

Net Cash (usedin)/from FinancingActivities -744.36 633.84 873.11 1873.54 1157.57




Net

(decrease)/increase

In Cash and Cash

Equivalents 6217.65 2060.42 2582.42 3185.21 -9146.17

Opening Cash& Cash Equivalents 23473.56 21413.14 18830.72 15645.52 24791.69

ClosingCash & CashEquivalents 29691.21 23473.56 21413.14 18830.72 15645.52

STATE BANK OF INDIA

ANNUAL REPORT

Yearly Results Of

SBI.

-------------------

in Rs. Cr. -------

------------


Sales Turnover 81,394.36 70,993.92 63,788.43 48,950.31 39,491.02

Other Income 15,824.60 14,968.15 12,690.79 8,694.93 5,769.25

Total Income 97,218.96 85,962.07 76,479.22 57,645.24 45,260.27




Total Expenses 33,396.77 24,713.51 19,383.27 15,277.26 14,233.15

Operating Profit 47,997.59 46,280.41 44,405.16 33,673.05 25,257.87

Profit On Sale Of Assets -- -- -- -- --

Profit On Sale Of Investments -- -- -- -- --

Gain/Loss OnForeign Exchange -- -- -- -- --

VRS Adjustment -- -- -- -- --

OtherExtraordinaryIncome/Expenses -- -- -- -- --

TotalExtraordinaryIncome/Expenses -- -- -- -- --Tax OnExtraordinary

Items -- -- -- -- --

Net ExtraOrdinaryIncome/Expenses -- -- -- -- --

Gross Profit 63,822.19 61,248.56 57,095.95 42,367.98 31,027.12

Interest 48,867.96 47,322.48 42,915.29 31,929.08 23,436.82

PBDT 14,954.23 13,926.08 14,180.66 10,438.90 7,590.30

Depreciation -- -- -- -- --

Depreciation OnRevaluation Of Assets -- -- -- -- --

PBT 14,954.23 13,926.08 14,180.66 10,438.90 7,590.30

Tax 6,689.71 4,760.03 5,059.42 3,709.78 3,048.99

Net Profit 8,264.52 9,166.05 9,121.24 6,729.12 4,541.31




Prior YearsIncome/Expenses -- -- -- -- --

Depreciation forPrevious YearsWritten Back/ Provided -- -- -- -- --

Dividend -- -- -- -- --

Dividend Tax -- -- -- -- --

Dividend (%) -- -- -- -- --

Earnings PerShare 130.15 144.37 143.67 106.56 86.29

Book Value -- -- -- -- --

Equity 635 634.88 634.88 631.47 526.3

Reserves 64,351.04 65,314.32 57,312.81 48,401.19 30,503.66

Face Value 10 10 10 10 10

BALANCE SHEET

Balance Sheetof SBI

-------------------in Rs. Cr. -------------------






Capital and Liabilities:Total ShareCapital 635 634.88 634.88 631.47 526.3Equity ShareCapital 635 634.88 634.88 631.47 526.3Share ApplicationMoney 0 0 0 0 0Preference ShareCapital 0 0 0 0 0

Reserves 64,351.04 65,314.32 57,312.82 48,401.19 30,772.26RevaluationReserves 0 0 0 0 0

Net Worth 64,986.04 65,949.20 57,947.70 49,032.66 31,298.56

Deposits 933,932.81 804,116.23 742,073.13 537,403.94 435,521.09

Borrowings 119,568.96 103,011.60 53,713.68 51,727.41 39,703.34Total Debt 1,053,501.77 907,127.83 795,786.81 589,131.35 475,224.43Other Liabilities &Provisions 105,248.39 80,336.70 110,697.57 83,362.30 60,042.26

Total Liabilities 1,223,736.20 1,053,413.73 964,432.08 721,526.31 566,565.25



AssetsCash & Balanceswith RBI 94,395.50 61,290.87 55,546.17 51,534.62 29,076.43Balance withBanks, Money atCall 28,478.65 34,892.98 48,857.63 15,931.72 22,892.27

Advances 756,719.45 631,914.15 542,503.20 416,768.20 337,336.49

Investments 295,600.57 285,790.07 275,953.96 189,501.27 149,148.88

Gross Block 13,189.28 11,831.63 10,403.06 8,988.35 8,061.92AccumulatedDepreciation 8,757.33 7,713.90 6,828.65 5,849.13 5,385.01

Net Block 4,431.95 4,117.73 3,574.41 3,139.22 2,676.91Capital Work InProgress 332.23 295.18 263.44 234.26 141.95

Other Assets 43,777.85 35,112.76 37,733.27 44,417.03 25,292.31

Total Assets 1,223,736.20 1,053,413.74 964,432.08 721,526.32 566,565.24

Contingent 585,294.50 429,917.37 614,603.47 736,087.59 259,536.57




Liabilities

Bills for collection 205,092.29 166,449.04 152,964.06 93,652.89 70,418.15

Book Value (Rs) 1,023.40 1,038.76 912.73 776.48 594.69

PROFIT AND LOSS ACCOUNT

Profit & Lossaccount of SBI

-------------------in Rs. Cr. -------------------



Income

Interest Earned 81,394.36 70,993.92 63,788.43 48,950.31 39,491.03

Other Income 14,935.09 14,968.15 12,691.35 9,398.43 7,446.76

Total Income 96,329.45 85,962.07 76,479.78 58,348.74 46,937.79

ExpenditureInterestexpended 48,867.96 47,322.48 42,915.29 31,929.08 23,436.82

Employee Cost 14,480.17 12,754.65 9,747.31 7,785.87 7,932.58

Selling andAdmin Expenses 12,141.19 7,898.23 5,122.06 4,165.94 3,251.14

Depreciation 990.5 932.66 763.14 679.98 602.39MiscellaneousExpenses 12,479.30 7,888.00 8,810.75 7,058.75 7,173.55

Preoperative ExpCapitalised 0 0 0 0 0OperatingExpenses 31,430.88 24,941.01 18,123.66 14,609.55 13,251.78




Provisions &Contingencies 8,660.28 4,532.53 6,319.60 5,080.99 5,707.88

Total Expenses 88,959.12 76,796.02 67,358.55 51,619.62 42,396.48



Net Profit for theYear 7,370.35 9,166.05 9,121.23 6,729.12 4,541.31ExtraordionaryItems 0 0 0 0 0Profit broughtforward 0.34 0.34 0.34 0.34 0.34

Total 7,370.69 9,166.39 9,121.57 6,729.46 4,541.65PreferenceDividend 0 0 0 0 0

Equity Dividend 1,905.00 1,904.65 1,841.15 1,357.66 736.82CorporateDividend Tax 246.52 236.76 248.03 165.87 125.22

Per share data (annualised)Earning PerShare (Rs) 116.07 144.37 143.67 106.56 86.29Equity Dividend(%) 300 300 290 215 140

Book Value (Rs) 1,023.40 1,038.76 912.73 776.48 594.69

AppropriationsTransfer toStatutoryReserves 2,488.96 6,495.14 6,725.15 5,205.69 3,682.15

Transfer to OtherReserves 2,729.87 529.5 306.9 -0.1 -2.88ProposedDividend/Transferto Govt 2,151.52 2,141.41 2,089.18 1,523.53 862.04

Balance c/f toBalance Sheet 0.34 0.34 0.34 0.34 0.34

Total 7,370.69 9,166.39 9,121.57 6,729.46 4,541.65




CASH FLOW STATEMENT

Cash Flow of SBI

-------------------

in Rs. Cr. -------------------



Net Profit BeforeTax 14954.23 13926.1 14180.64 10438.9 7625.08

Net Cash FromOperating Activities 34282.52 -1804.99 29479.73 -856.87 -1776.07Net Cash (usedin)/from

-1245.53 -1761.52 -1651.93 -2798.01 -284.56Investing Activities

Net Cash (usedin)/from FinancingActivities 2057.11 -3359.67 5097.38 19371.12 9494.11

Net(decrease)/increaseIn Cash and CashEquivalents 35094.1 -6926.18 32925.18 15716.24 7433.49

Opening Cash &Cash Equivalents 87780.05 103110.02 71478.62 51968.69 44535.2

Closing Cash &Cash Equivalents 122874.15 96183.84 104403.8 67466.34 51968.69

2.9 Section

FUTURE PLANS

PNB future plans

PNB has initiated various steps in a bid to expand its operations in the state of Kerala.




These include opening new branches and increasing the number of its core banking

solutions branches. PNB currently has 71 CBS branches in Kerala and has registered

good growth from this region.

PNB in looking at increasing its international presence and in line with this, the

company is planning to set up offices in UK, Singapore, Hong Kong and Canada. The

Canada office is likely to open very soon, while the other locations are likely to

commence operations by end of this fiscal year.

PNB unvieled its plans to raise additional capital of Rs. 21,000 million to fund its

business expansion plans for this current fiscal.

SBI future plans

SBI has set for itself an ambitious target of credit linking 1 million SHGs up to March

2008.The Bank has started to leverage our vast SHG network for various services

beyond credit delivery.

The State Bank of India (SBI) has formulated a “home-grown strategy” to merge its

six associated banks with it within this fiscal.

SBI drawn up a home-grown strategy to carry out the merger programme and we may

take up such mergers one by one, or two at a time or in a phased manner. SBI want

the future mergers to be as smooth as the merger.Post-merger, the size of SBI‟s

balance sheet will cr-oss Rs 12,00,000 crore and its profitablity will increased.

CHAPTER 3REVIEW OF LITERATURE

1) In august 2001 James B. Thomson and Ben R. Craig had studied about the




Federal Home Loan Bank Lending to Community Banks,are TargetedSubsidies Necessary? The Gramm-Leach-Bliley Act of 1999 amended thelending authority of the Federal Home Loan Banks to include advancessecured by small enterprise loans of community financial institutions. Threepossible reasons for the extension of this selective credit subsidy tocommunity banks and thrifts are examined, including the need to: subsidize \community depository institutions, stabilize the Federal Home Loan Banks,and address a market failure in rural markets for small enterprise loans.They empirically investigate whether funding constraints impact the small-business lending decision by rural community banks. Specifically, theyestimate two empirical models of small-business lending by community banks.The data reject the hypothesis that access to increased funds will increase theamount of small-business loans made by community banks.

2) In December 2006 Fulbag Singh and Reema Sharma had studied about thehousing Finance in India. Housing, as one of the three basic needs of life,

always remains on the top priority of any person, economy, government andsociety at large. In India, majority of the population lives in slums and shabbyshelters in rural areas. From the last decade, the Government of India has beencontinuously trying to strengthen the housing sector by introducing varioushousing loan schemes for rural and urban population. The first attempt in thisregard was the National Housing Policy (NHP), which was introduced in 1988.The National Housing Bank (NHB) was set up in 1988 as an apex institutionfor housing finance and a wholly-owned subsidiary of Reserve Bank of India(RBI). The main objective of the bank is to promote and establish the housingfinancial institutions in the country as well as to provide refinance facilities tohousing finance corporations and scheduled commercial banks. Moreover, for

the salaried section, the tax rebates on housing loans have been introduced.The paper is based on the case study of LIC Housing Finance Ltd., whichanalyzes region-wise disbursements of individual house loans, their portfolioamounts and the defaults for the last ten years, i.e., from 1995-96 to 2004-05by working out relevant ratios in terms of percentages and the compoundannual growth rates. A relevant chart has also been prepared to highlight theresults.

3) In May 18, 2007 Michael LaCour-Little had studied about the Economic FactorsAffecting Home Mortgage Disclosure Act Reporting. The public release of the 2004-2005 Home Mortgage Disclosure Act data raised a number of questions given the

increase in the number and percentage of higher-priced home mortgage loans andcontinued differentials across demographic groups. Here we assess three possibleexplanations for the observed increase in 2005 over 2004: (1) changes in lenderbusiness practices; (2) changes in the risk profile of borrowers; and (3) changes inthe yield curve environment. Results suggest that after controlling for the mix of loantypes, credit risk factors, and the yield curve, there was no statistically significantincrease in reportable volume for loans originated directly by lenders during 2005,though indirect, wholesale originations did significantly increase. Finally, given a




model of the factors affecting results for 2004-2005, we predict that 2006 results willcontinue to show an increase in the percentage of loans that are higher priced whenfinal numbers are released in September 2007.

4) In may 1991 Stephen F. Borde had studied about the “Is the Savings and Loan Industry Facing Extinction?” This article tells about the Saving and loan crisis.Proposed solutions are discussed in the context of the industry as it currently stands.With a somewhat similar liability structure to that of banks (mainly short-termdeposits), the asset structure of S&Ls is quite different. Whereas banks assetsconsist of short-term loans, S&L assets consist largely of long-term loans, such ashome ownership mortgages. Therefore, in the absence of adequate hedgingmeasures, S&Ls are more vulnerable to interest rate risk, which can lead to lowerprofits when interest rates rise.

5) In June 29, 2001 Joshua Rosner had studied about the Housing in the NewMillennium: A Home Without Equity is Just a Rental with Debt.

They studied about the prospects of the U.S. housing/mortgage sector over the nextseveral years. Based on our analysis, we believe there are elements in place for thehousing sector to continue to experience growth well above GDP. However, webelieve there are risks that can materially distort the growth prospects of the sector.Specifically, it appears that a large portion of the housing sector's growth in the1990's came from the easing of the credit underwriting process. Such easing includes:* The drastic reduction of minimum down payment levels from 20% to 0%* A focused effort to target the "low income" borrower* The reduction in private mortgage insurance requirements on high loan to valuemortgages* The increasing use of software to streamline the origination process and

modify/recast delinquent loans in order to keep them classified as "current"* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problemsIf these trends remain in place, it is likely that the home purchase boom of the pastdecade will continue unabated. Despite the increasingly more difficult economicenvironment, it may be possible for lenders to further ease credit standards and morefully exploit less penetrated markets. Recently targeted populations that havehistorically been denied homeownership opportunities have offered the mortgageindustry novel hurdles to overcome. Industry participants in combination with easedregulatory standards and the support of the GSEs (Government SponsoredEnterprises) have overcome many of them.

If there is an economic disruption that causes a marked rise in unemployment, thenegative impact on the housing market could be quite large. These impacts come inseveral forms. They include a reduction in the demand for homeownership, a declinein real estate prices and increased foreclosure expenses.These impacts would be exacerbated by the increasing debt burden of the U.S.consumer and the reduction of home equity available in the home. Although we haveyet to see any materially negative consequences of the relaxation of credit standards,we believe the risk of credit relaxation and leverage can't be ignored. Importantly, a




relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home andreduce foreclosure expenses, holders of mortgage assets are currently recasting ormodifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdowncould eventually cause modifications to become uneconomic and, thus, credit qualitystatistics would likely become relevant once again. The virtuous circle of increasinghomeownership due to greater leverage has the potential to become a vicious cycleof lower home prices due to an accelerating rate of foreclosures.

6) In dec 2002 Melissa B. Jacoby had studied about the Home Ownership Risk Beyonda Subprime Crisis: The Role of Delinquency Management. They studied that Publicinvestment in and promotion of homeownership and the home mortgage market oftenrelies on three justifications to supplement shelter goals: to build household wealthand economic self-sufficiency, to generate positive social-psychological states, and todevelop stable neighborhoods and communities. Homeownership and mortgage

obligations do not inherently further these objectives, however, and sometimesundermine them. The most visible triggers of the recent surge in subprimedelinquency have produced calls for emergency foreclosure avoidance interventions(as well as front-end regulatory fixes). Whatever their merit, I contend that a systemof mortgage delinquency management should be an enduring component of housingpolicy. Furtherance of housing and household policy objectives hinges in part on theconditions under which homeownership is obtained, maintained, leveraged, and - insome situations - exited. Given that high leverage or trigger events such as job lossand medical problems play significant roles in mortgage delinquency independent of loan terms, better origination practices cannot eliminate the need for delinquencymanagement.

One function of this brief essay is to identify an existing rough framework formanaging delinquency. Legal scholarship should no longer discuss mortgageenforcement primarily in terms of foreclosure law and instead should include otherdebtor-creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as delinquency housing counseling. In terms of analyzingthis framework, it is tempting to focus on its impact on mortgage credit cost andaccess or on the absolute number of homes temporarily saved, but my proposedanalysis is based on whether the system honors and furthers the goals of wealthbuilding, positive social psychological states, and community development. Becausethose ends are not inexorably linked to ownership generally or owning a particularhome, a system of delinquency management that honors these objectives should

strive to provide fair, transparent, humane, and predictable strategies for home exit aswell as for home retention. Although more empirical research is needed, this essaystarts the process of analyzing mortgage delinquency management tools in theproposed fashion.

7) In 1999 Yoko Moriizumi had studied about the Current Wealth, Housing Purchaseand Private Housing Loan Demand in Japan.Japanese households accumulate wealth for downpayments at a high rate. Therefore,




current wealth plays an important role in home acquisition as public loans whosedirect mortgage lending is a strong support for home purchasers. We estimate thewealth effect on private mortgage debt as well as housing consumption by applying amodel where mortgage debt demand is derived from house purchase decisions andis determined jointly with housing consumption. We use a simultaneous equationTobit estimation method. Wealth effects on private mortgage debt, likelihood of borrowing, and housing consumption are not elastic. On the other hand, a change inhousing consumption affects the likelihood of borrowing elastically much more thanthe private mortgage amount of borrowers. Housing and private mortgage marketsfluctuate very closely with the number of participants in the mortgage market.Therefore, the number of housing starts is linked strongly to the private mortgagemarket.

8) Robert B. Avery and Allen N. Berger had studied about the Loan commitmentsand bank risk exposure. They studied about the Loan commitments increase abank's risk by obligating it to issue future loans under terms that it might

otherwise refuse. However, moral hazard and adverse selection problemspotentially may result in these contracts being rationed or sorted. Dependingon the relative risks of the borrowers who do and do not receive commitments,commitment loans could be safer or riskier on average than other loans. theempirical results indicate that commitment loans tend to have slightly betterthan average performance, suggesting that commitments generate little risk orthat this risk is offset by the selection of safer borrowers.

9) Sumit Agarwal,Souphala Chomsisengphet and John C. Driscoll had studiedabout the Loan commitments and private firms. They studied that, Most loansare in the form of credit lines. Empirical studies of line demand have been

complicated by their use of data on publicly traded firms, which have a widemenu of financing options. We avoid this problem by using a uniqueproprietary data set from a large financial institution of loan commitmentsmade to 712 privately-held firms. We test Martin and Santomero's (1997)model, in which lines give firms the speed and flexibility to pursue investmentopportunities. Our findings are consistent with their predictions. Firms facinghigher rates and fees have smaller credit lines. Firms with higher growthcommit to larger lines of credit and have a higher rate of line utilization. Firmsexperiencing more uncertainty in their funding needs commit to smaller creditlines. Almost all firms convert unused credit line portions into spot loans andtake out new lines.

10) Faik Koray and Eric T. Hillebrand had studied about the Interest Rate Volatility andHome Mortgage Loans . they studied that The U.S. economy has experiencedsubstantial fluctuations in real and nominal interest rates since the 1970s. Thispaper investigates empirically the relationship between home mortgage loansand volatility in mortgage rates for the period 1971:02 through 2003:03.Contrary to common wisdom, we find a positive relationship between mortgagerate volatility and home mortgage loans. Further investigation indicates that




this is due to volatility in the bond market. In times of high interest volatility,households disinvest in government securities and invest in real assets, whichyield a positive relationship between mortgage rate volatility and homemortgage loans.

CHAPTER- 4

INTERPRETATION

SBI: NO.50

1. What is your occupation?

Businessman 15

Student 0

Government employ 22

Others 0

Housewife 9

Interpretation:

0

5

10

15

20

25

businessman govt. employ housewifes others student




Total Numbers of Respondents is 46.

0 of our Respondents was students.

22 of the Respondents were into government employ.

15 of our Respondents were Businessman.

9 of our Respondents were Housewives.

None of our Respondents belonged to the category of others.

4 Respondents did not answer.

2. For how many years you are associated with this Bank?

Less than 1 year 10

1-5 year 24

More than 5 12

Interpretation:

Total Number of Respondents was 46.

10 persons are associated less than 1 year.

24 persons are associated from 1-5 year.

12 persons are associated from more than 5 year.

0

5

10

15

20

25

30

Less than year 1-5 year More than 5




3. How do you come to know about the loan schemes of that bank?

Newspaper 18

Television 14

Internet 10

Other 04

Interpretation:


18 Persons came to know from newspaper.

14 Persons came to know from television.

10 Persons came to know from internet.

4 Persons came to know from other resources

4. Are you aware of these types of Home loans?

Home purchase loan 9

0

2

4

6

8

10

12

14

16

18

20

Newspaper Television Internet Others




Home construction loan 18

Home improvement loan 6

Home equity loan 4

Land purchase loan 9

Interpretation:


Only 4 persons know Home equity loan.

Many of peoples know Home construction loan.

9 peoples know Home purchase loan.

6 peoples know Home improvement loan.

5. Are you aware all terms and conditions of Home loans?

Yes 40

No 6

0

2

4

6

8

10

12

14

16

18

20

Home

purchase loan

Home

construction

loan

Home

improvement

loan

Home equity

loan

Land Purchase

loan




Interpretation:

Total Numbers of Respondents was 46.

Many of persons know all terms and conditions of Home loans i.e. 40.

6 persons had not know properly about all terms and conditions.

6. Are you satisfying with the interest rate charges by your Bank?

Strongly agree 12

Agree 30

Disagree 4

Strongly disagree 0

0

5

10

15

20

25

30

35

40

45

Yes No




Interpretation:

Total Number of respondents was 46.

12 among all consumers are strongly agreed by interest rate of Bank.

30 among all consumers are agreed by interest rate of Bank.

4 among all consumers are disagreed by interest rate of Bank.

0 among all consumers are strongly disagreed by interest rate of Bank.

7. Your Bank offers which type of services?

Mobile banking 24

Net banking 15

Forex banking 7

0

5

10

15

20

25

30

35

Strongly agree Agree Disagree Strongly disagree




Interpretation:

Total Number of respondents was 46.

24 persons said that bank offers mobile banking services.

15 said that bank offers net banking services.

Only 7 persons said that bank offers forex banking services.

8. Do you agree that your Bank loan processing is fast?

Strongly agree 8

Agree 26

Disagree 9

Strongly disagree 3

0

5

10

15

20

25

30

Mobile banking Net banking Forex banking




Interpretation:


8 persons strongly agree that bank Home loan processing is fast.

26 persons agree that bank Home loan processing is fast.

9 persons disagree that bank processing is fast.

3 persons strongly disagree that bank processing is fast.

9. Do you satisfy with the after Home loan services provided by your bank are best as

compare to other Banks?

Strongly agree 12

Agree 30

Disagree 4

Strongly disagree 0

0

5

10

15

20

25

30





Interpretation:


12 among all consumers are strongly agreed by after sale services of the bank.

30 among all consumers are agreed by after sale services of the bank.

4 among all consumers are disagreed by after sales services of the bank.

0 among all consumers are strongly disagreed by after sale services of the bank.

10. Does the cost of Home loan is appropriate, according to your demand?

Yes 33

No 13

0

5

10

1520

25

30

35





Interpretation:


33 persons said that home loan is appropriate according to their demand.

13 persons said that home loan is not appropriate according to their demand.

11. Are you satisfy with the employees behaviour of the bank?

Strongly agree 19

Agree 23

Disagree 4

Strongly disagree 0

0

5

10

15

20

25

30

35

Yes No

0

5

10

15

20

25





Interpretation:


19 persons are very satisfy with the employees behaviour of the bank.

23 persons are satisfied with the employees‟ behaviour of the bank.

4 persons are dissatisfied with the employees‟ behaviour of the bank.

0 persons are very dissatisfied with the employees‟ behaviour of the bank.

12. Are you satisfy by the time taken in sanctioning the loan?

Yes 34

No 12

Interpretation:


34 persons are satisfied by the time taken.

12 persons are not satisfied by the time taken.

0

5

10

15

20

25

30

35

40

Yes No




13. Have you face any difficulty during taking the loan?

Yes 39

No 7

Interpretation:


39 persons faced difficulty during taking the loan.

Only 7 persons do not faced any difficulty during taking the loan.

14. Which grade you want to give of Home loan schemes of the bank?

Excellent 24

Good 18

Average 4

Below average 0

0

10

20

30

40

50

Yes No




Interpretation:


24 persons give excellent grade of the bank.

18 persons give good grade of the bank.

Only 4 persons give average grade of the bank.

No one give below average grade of the bank.

PNB: NO.50

1.) What is your occupation?

Business man 17

Student 0

Government employee 23

0

5

10

15

20

25

30

Excellent Good Average Below average




Other 0

Housewife 7

Interpretation:


0 of our Respondents was students.

23 of our Respondents were into government employees.

17 of our Respondents were Businessman.

7 of our Respondents were Housewives.

None of our Respondents belonged to the category of others.

3 Respondents did not answer.

2.) From how many years you are associated with this bank?

Less than 1 year 17

1-5 year 19

More than 5 11

0

5

10

15

20

25

Businessman Student Govt.

employee

Other Housewife




Interpretation:


17 persons are associated with less than 1 year.

19 persons are associated from 1-5 year.

11 persons are associated from more than 5 year.

3.) How do you come to know about the home loans schemes of that bank?

Newspaper 12

Television 22

Internet 9

Others 4

Interpretation:

0

5

10

15

20

Less than 1 year 1-5 year More than 5

0

5

10

15

20

25

Newspaper Television Internet Others





12 persons came to know from newspaper.

22 persons came to know from television.

9 persons came to know from internet.

4 persons came to know from other resources.

4.) Are you aware of these types of Home loans?

Home purchase loan 9

Home construction loan 19

Home improvement loan 9

Home equity loan 2

Land purchase loan 8

Interpretation:


Only 2 persons know home equity loan.

Many of people know home construction loan.

9 people know home purchase loan.

0

2

4

6

8

10

12

14

1618

20

Home

purchase loan

Home

construction

loan

Home

improvement

loan

Home equity

loan

Land purchase

loan




9 people know home improvement loan.

5.) Are you aware all terms and conditions of home loans?

Yes 34

No 13

Interpretation:


Many of persons know all terms and conditions of home loans i.e. 34.

13 persons had not known all terms and conditions of home loans.

6.) Are you satisfy with the interest rate charges by the bank?

Strongly agree 11

Agree 34

Disagree 2

Strongly disagree 0

0

10

20

30

40

Yes No




Interpretation:


11 among all consumers are strongly agreed by interest rate of the bank.

34 among all consumers are agreed by interest rate of the bank.

2 among all consumers are disagreed by interest rate of the bank.

0 among all consumers are strongly disagreed by interest rate of the bank.

7.) Your bank offers which type of services?

Mobile banking 26

Net banking 13

Forex banking 8

Interpretation:


0

5

10

1520

25

30

35

40


0

5

10

15

20

25

30

Mobile banking Net banking Forex banking




26 persons said that bank offer mobile banking services.

13 said that bank offer net banking services.

Only 8 persons said that bank offer forex banking services.

8.) Do you agree that your bank loan processing is fast?

Strongly agree 4

Agree 21

Disagree 13

Strongly disagree 9

Interpretation:


4 persons strongly agreed that bank home loan processing is fast.

21 persons agreed that bank home loan processing is fast. 13 persons disagreed that bank processing if fast.

9.) Do you satisfy with the after home loan services provided by your bank are best as

compare to others bank?

0

5

10

15

20

25





Strongly agree 14

Agree 29

Disagree 4

Strongly disagree 0

Interpretation:


14 among all consumers are strongly agreed by after home loan services of

the bank.

29 among all consumers are agreed by after home loan services of the

bank.

4 among all consumers are disagreed by after home loan services of the

bank.

0 among all consumers are strongly disagreed by after home loan services

of the bank.

0

5

10

15

20

25

30

35





10.) Does the cost of home loan is appropriate, according to their demand?

Yes 29

No 18

Interpretation:


29 persons said that home loan is appropriate according to their demand.

18 persons said that home loan is not appropriate according to their

demand.

11.) Are you satisfy with the employees‟ behaviour of the bank?

Strongly agree 16

Agree 25

Disagree 6

Strongly disagree 0

05

10

15

20

25

30

35

Yes No




Interpretation:


16 persons are very satisfied with the employees‟ behaviour of the bank.

25 persons are satisfied with the employees‟ behaviour of the bank.

6 persons are dissatisfied with the employees‟ behaviour of the bank.

No one is very dissatisfied with the employees‟ behaviour of the bank.

12.) Does the bank give any discount upon the loan services?

Yes 35

No 12

Interpretation:

0

5

10

15

20

25

30


0

5

10

15

20

25

30

35

40

Yes No





35 persons said that bank give discount upon loan services.

Only 12 persons said that bank do not give any discount upon loan

services.

13.) Are you satisfy by the time taken in sanctioning the loan?

Yes 30

No 17

Interpretation:


30 persons are satisfied by the time taken of the bank.

17 persons are not satisfied by the time taken of the bank.

14.) Have you face any difficulty during taking the loan?

Yes 43

No 4

0

5

10

15

20

25

30

35

Yes No




Interpretation:


43 persons face difficulty during taking the loan from bank.

Only 4 persons does not face any difficulty during taking the loan.

15.) Which grade you want to give of home loan schemes of the bank?

Excellent 18

Good 20

Average 8

Below average 1

0

10

20

30

40

50

Yes No




Interpretation:


18 persons give excellent grade to the bank.

20 persons give good grade to the bank.

Only 8 persons give average grade to the bank.

1 person gives below average grade to the bank.

0

5

10

15

20

25

Excellent Good Average Below average

Documents

Chapter 1 Bhavan