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PROJECT REPORT ON BANK LOANS

Bank Loans : Leading of fund to the constituents, mainly traders, business and industrial enterprises, constitutes the main business of the banking industry. The major portion of a Bank fund is employed by way of loans, which is the most profitable employment of its fund. The major part of bank is earned from interest. The business of leading, nevertheless is not without certain inherit risks largely depending on the borrowed funds, a banker therefore, follow a very caution policy, and conduct his business on the basis on the basis of safety, liquidity, profitability etc.

MEANING OF LOANS

Under the lonas, credit is given for a definite purpose and for a predetermined period. Normally these loans are repayable in installments. Funds are required for single non-repetitive transactions and are withdrawn only once. If the borrower need funds again or wants renewal of an existing loan, a fresh request is made to the bank.
This borrower is required to negotiate every time; he is taking a new loan or renewing an existing loan. Banker is at liberty to grant or refuse such a request depending upon his owner cash resources and credit policy of the control bank.

PROJECT REPORT ON TYPES OF LOANS

Bank grants loan for different periods short, medium and long and for different purposes.

Short Term Loans

Short-term loan is granted to meet the working capical needs of the borrowers. These loans are granted against securities of tangible assets mainly the movable assets like goods and commodities, shares, debentures etc. Since April 1995, RBI has made it mandatory for the banks to grant a portion of bank credit to big customers in the form of loans, which may be for various maturities. The RBI has also permitted the banks to roll over such loans i.e. to extend the loan for another period at the expiry of the tenure of the first loan.

Term Loan

Medium and long-term loans are usually called ‘Term loans’. These loans are granted for more than one year and also meant for the purpose of capital asset for establishment of new expansion or diversification of an existing unit. Banks usually grant such loans together with specialized financial institutions like industrial Finance Corporation of India, credit and investment corporation etc.
In April 1995, RBI banned bridge loan granted by banks and financial institutions to all companies. But in oct. 1995, RBI permitted banks to sanction bridge loans /Interim finance by banks subject to some conditions in no. 1997, RBI permitted to banks to grants bridge loans to companies (other than non-banking finance companies) against public issue of equity of India or in abroad.

Composite Loans

When a loan is granted both for buying capital assets and for working capital purpose it is called composite loans. Such loans are ususllly granted to small borrowers such as artisans, farmers, small industries etc.

Retail loans

These are loans that are given to individuals for their purpose, Retail loans can be subdivided into 4 categories.

Housing Loans

This is the loans scheme that is offered to individual for constructions of house, purchase of house, plot purchase, repair, renovation, purchase of flat from private builder, for furnishing etc. This is one of the retail product thus involve colossal volumes in terms of customers and dunds.

Education Loans

Education loan is given to the students for further studies in India and abroad both. This loan can be for air fare travel expenses admission/tuition fees, boarding and lodging expenses books & stationary expenses etc.

Auto Loans

Auto loan is given to individual to buy old/new car and two wheeler. It is very popular loan among borrowers as today everyone want vehicle in their home and bank provide them at easy installments.

Personal Loans

Though normally banks provide loans for productive purpose only, but as a exception loans are granted on a limited scale to meet the medical needs or the educational expenses or expenses relating to marriage or other social purpose of the needs persons. Such 1Soans are called Personal loans.

ADVANTAGE OF LOANS

Financial discipline of the borrower
As the time of repayment of loans or its installments is fixed. In advance, these systems ensure a greater degree of self discipline of borrower as compared to cash credit system.
Periodic review of loans A/C
Whenever a loan is granted or its renewal is sanctioned, the banker gets an opportunity of automatically reviewing the loan account. Unsatisfactory loan account may be discontinued at the discretion of the banker.
Profitability
System is comparatively simple, interest occurs to the bank on the entire amount lent to a customer.

DRAWBACK OF LOANS

  • Every time loan is required. It is to be negotiable with the banker. To avoid it, borrower may borrow in excess of their exact requirement to provide for any contingency.
  • Bank have no control over the use of fund borrowed by the customers, however banks insist on hypothecation of the asset/vehicle purchase with loan amount.
  • Though the loans are for fixed period but in practice they roll over i.e. they are renewed frequently.
  • Loan documentation is more comprehensive as compared to cash credit system.

    RETAIL LOANS

    Loan become necessary for every money minded person .From this way they can invest their money in other profitable purposes . The best coming way to get loan for building home for buying automobiles or education of your for personnel purposes is provided by Bank Of Punjab ltd. at preferential rate of interest . If you are eligible for loan then u will have money in hand in very few days. The bank will provide you the facility of re payment in easy installments the loan are made available at your doorstep.

    INTRODUCTION TO HOME LOANS

    The bank will take over the loan from that institution. Composite scheme: You can apply for combination from any of the above .Building your own home is one of the most important decision you will make and it can consider and life style and financial circumstance. Bank of Punjab stand by you as you take your first step ownership.
    The bank offers an array of low cost customized home loan schemes for your convenience.

  • Easy loan for construction
  • Easy loans for purchase of land an construction
  • Easy loans for purchase of land & construction
  • Easy loan for repair/renovation and up gradations.
  • Easy loans for purchase of plot.

    Financial Benefits of Home Loans

    Tax Benefits : Acquiring a home through Finance schemes provides tax Benefits on the principal repayment.

    Creation of Wealth : A home is an appreciable investment in. Security : in case of need your home provides security against which you can raise funds unforeseen financial needs.

    Purpose of Loan

    Construction of House/flat : It would mean construction of a complete dwelling unit at least one bedroom, kitchen, and bathroom as per map approved by authority.

    Purchase of House flat : Purchase would mean purchase of complete dwelling unit required for a family.

    Extension of an existing of House / Flat: It would mean construction of additional dwelling unit.

    Land purchase cum construction: Combined for loan for purchase of plot and the construction given in the ratio of 50% of loan amount or 85% of the cost of property being purchase which ever is lower. The construction of house will necessarily be commenced within 6 months as applicable.

    Repair/Rennovation: BOP Provides a maximum of Rs. 3 lakhs. For a term of 5 to 10 years in this case interest rate will be 1% higher than the normal scheme the bank sanction 75% of the estimate.

    Purchase of Plot: BOP provides 85% of the cost of plot. Interest will be 1% higher than normal interest rate. The bank finance maximum of 25 lakhs for a term of 2 years.

    Takeover/balance Transfer: if the person has taken loan form any other institution and he is not satisfied with the facilities provided by that institution then he can transfer his balance.

    Elighbility for Home loans:

    Residential Indian

  • Any Indian citizen having sufficient repayment capacity to the loan applied can apply for loan.
  • The age of applicant should not be less than 21 years ar the itme of applying of loan
  • The age of applicant should not exceed 65 years during the loan tenure.

    Non-Residential Indian
  • Any Indian citizen who is a non-residential and holding valid Indian passport can apply for home loan under the NRI scheme.’
  • NRI may be required to provide a guarantor residing in India.
  • The age of applicant should be more than 25 years.’
  • The individual should be of salaried class.

    Security required for the loan :
    The person who is applying for loan need to provide security of the financed property and/or such additional/collateral security may be mutually agreed.
    Documents required: the indicative list is given below.

    In case of Residential Indian :
  • Income documents
  • Details of other income
  • Photocopy of documents of title
  • Documents pertaining to savings and assets
  • Details of other loan taken
  • Residential Proof
  • Signed passport size photographs of all the applications
  • Cheque of processing fees-0.2% loan amount applied for
  • Any other document as required by bank of Punjab Ltd.
  • Bank statement for last 6 months.

    In case of Non-Residential Indian
  • Signed passport size photographs of all the applications
  • Copy of Passport and Visa(S)
  • Copy of work permit (if applicable)
  • Copy of CDC in case of customer working in merchant navy
  • Bank statements for last six months- both domestic and international
  • General power of attorney as per bank’s draft duly attested by the Indian consulate in case of not in India.

    If the NRI is in India then the POA can be locally notarized.
  • Copy of appointment letter and contract (Translated to English and attested)
  • Copy of labour/identity card (Translated to English and attested )
  • Salary Certificate (in English) specifying name, Date of joining, Designation and Salary.
  • Photocopies of title deeds.

    Processing Fees :
    Processing fee will be 0.20% of the loan amount payable with the application and 0.20% administration sanction, before disbursement of loan.

    Repayment:
    The loan will be repayable through equated monthly installments(EMI). Post-dated cheques are to be permitted by RBI or NRE/NRO (For NRI). The EMI is to be paid every month through post-dated cheques (PDC). In case of part disbursement of the loan, monthly interest is payable at disbursed amount. This interest is called pre EMI interest (pre EMI) and is payable monthly till disbursement is made or till commencement of EMI.

    Next Chapter - Scope of Retail Loans of Bank of Punjab



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