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Eyes of Banks on the Documentation required for Different Types of

Borrowers.

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Index

• Introduction• Loan Process• Basic Documents for all types of Loans• Specific documents required for each category

of Loans• Practical demonstration of Loan paper work.

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Introduction

A bank is an institution which accepts deposits from the public as well as lend money to the public.

From the definition itself it is clear that one of the primary function of a bank is lending of money. The main earnings of a banking institution is the interest from their customers(i.e., debtors). So, it is very essential to lend money to the public via loans and advances.

A loan is a debt provided by one entity to another entity at an interest rate ,For a specific period of time.

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Different Types of LoansThere are many forms of loans as follows:-

• Overdraft• Cash credit• Credit cards• Housing loan• Vehicle loans• Education loan • Personal loan• Gold loan • Consumer loans• Gold loans• Loan against pension• Loans to Professionals

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Process of Granting LoansLoan application

CIBIL check

Submission of Required documents

Approval of loan

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Basic Documents for all types of Loans

• Loan Application Form• KYC• CIBIL• Signature on the Form

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Loan Application form.• Different Banks have designed their own set of information

required.• Each form varies depending on the purpose for which the

loan is needed.• Online application form is also available.• Sample formats of the Loan Application form is attached

herewith.• From the point of view of Banking, an application form

should be designed in such a way that the person’s financial data as well as personal data are fetched in order to know the person. (P’s of Principles of Lending )

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Loan application forms format

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Sample format- Common Loan Application Forms

• Refer Sample format of Word of Central Bank of India, separately attached.

PART-I

LOAN APPLICATION FORM

(Basic Information common to all Schemes)

To, THE BRANCH MANAGER CENTRAL BANK OF INDIA ------------------------------------ I/We request for a loan of Rs.________________ under ___________________ Scheme for the purpose ________________________________________________________. I/We furnish our particulars as below. APPLICANT JOINT-APPLICANT NAME (in block letters)

PAN Number Fathers/Husbands Name

Relationship with Co-Applicant / Applicant

Residential Address Present Address:

Period of stay at the above Address

Tel No.: Mobile No.: E Mail : Permanent Address:

PHOTOGRAPH OF JOINT-APPLICANT

PHOTOGRAPH OF APPLICANT

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• Refer Sample format of Working capital Loan above 40 crores. Also refer, Mudra Loan Application form.

CORPORATE BORROWER - (APL-3) APPLICATION FORM FOR LOAN OF ABOVE Rs 40 CRORE FOR WORKING CAPITAL (FUND BASED/ NON FUND BASED) & TERM LOAN BORROWER PROFILE Name Constitution Partnership/Private Ltd/Public limited Date of incorporation/ Date of Establishment

Registered Office Corporate Office Company Identification Number (CIN)/ Registration Number in case of Partnership

Banking with us since/New Relationship. Names of Partners/ Main Promoters Manufacturing Facility (Locations) Name of the Contact person & phone no. E-Mail Id

Name, address &membership number of the Company’s Statutory Auditors / Name, address &membership number of the Firm’s Auditors

2. EXTERNAL RATING Agency Rating Date of Rating Purpose Valid up to Denoting 2a. MARKET PERCEPTION Share Price as on: Listed on/with: Face Value: High/Low (last 52 weeks) Market Capitalization as on last ABS in case of listed companies

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Digitalization of Home Loans• These days, most banks and Non-Banking Financial Companies (NBFCs) have an online presence through their

websites. Some have upgraded their web and mobile technologies so as to provide a high degree of convenience to their customers. Individuals seeking finance may obtain all loan-related details as well as apply for a loan through the internet.

• If you wish to obtain finance for purchasing your dream home, you may apply for a housing loan online. Most financial institutions offer lowered interest rate as they do not have to incur any physical expenses. Besides, you may reap the numerous benefits such online loans have to offer.

• Following are five benefits of digitalization of housing loans.• 1. Get all loan-related details• Lenders upload finance-related details on their website. The online portal provides information about the home loan

 eligibility and documentation required. Such websites also provide comprehensive information about interest rates, loan tenure, fees and charges, loan limit, besides others. You may, therefore, gain adequate knowledge before you avail of a housing loan.

• 2. Conduct extensive research on numerous options• Since various lenders have differential interest rates, you may conduct thorough research on the rates of numerous

lenders and make a choice accordingly. You may also compare other factors like loan tenure, repayment options, and loan limit, besides others. You may, therefore, select the lender offering the best deal, based on your needs.

• 3. Calculate the instalment amount • Lenders offer a digital calculation tool, known as an Equated Monthly Installment (EMI) calculator that helps you

calculate the EMI amount. Such digital tools simplify the calculation process, which would otherwise be a cumbersome and time-consuming task. Online EMI calculators help in calculating the EMI amount based on your financial position. You may increase or decrease the EMI amount according to your cash inflow and expenses.

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Digitalization of Home Loans• 4. Apply for a loan• Traditionally, it was necessary to visit the lender’s branch and submit the loan

application along with the necessary documents. However, with the advent of digitalization, you no longer have to invest time and effort to visit the lender’s branch. You may apply for a home loan on the lender’s website from the comfort of your home.

• 5. Get amortization schedule online• An amortization schedule is generally displayed in a tabular format. It shows the EMI

payment history as well as the outstanding loan amount. The amortization schedule also helps to determine the monthly amount paid towards the principal and interest. The online amortization schedule enables you to determine your pending payments and helps you plan your finances accordingly.

• Digitalization has helped banks and NBFCs increase their connectivity with not only customers but also employees. It is, therefore, important that lenders implement digital methods in order to provide customer-centric experience and gain an edge over their competitors.

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KYC Procedures

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FAQ on KYC as per RBI guidelines• 1. What is KYC? Why is it required?• Response: KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and

address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts. Banks are also required to periodically update their customers’ KYC details.

• Q2. What are the KYC requirements for opening a bank account?• Response: To open a bank account, one needs to submit a ‘proof of identity and proof of address’ together with a recent

photograph.

• Q3. What are the documents to be given as ‘proof of identity’ and ‘proof of address’?• Response: The Government of India has notified six documents as ‘Officially Valid Documents’ (OVDs) for the purpose of

producing proof of identity. These six documents are Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card issued by UIDAI and NREGA Job Card. You need to submit any one of these documents as proof of identity. If these documents also contain your address details, then it would also be accepted as ‘proof of address’. If the document submitted by you for proof of identity does not contain address details, then you will have to submit another officially valid document which contains address details.

• Q4. If I do not have any of the documents listed above to show my ‘proof of identity’, can I still open a bank account?• Response: Yes. You can still open a bank account known as ‘Small Account’ by submitting your recent photograph and

putting your signature or thumb impression in the presence of the bank official.

• For further questions you can refer the word file seperately attached detailed guidelines of RBI on KYC or you can go to the following link https://www.rbi.org.in/scripts/FAQView.aspx?Id=82

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CIBIL• Credit Information Bureau (India) Limited (CIBIL) is India’s first

Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications. Since its inception, CIBIL has come to play a critical role in India’s financial system. Whether it is to help loan providers manage their business or help consumers secure credit faster and at better terms, the use of CIBIL’s products have led to a significant change in the way the credit life cycle is managed by both loan providers and consumers.

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Sample CIBIL Report (www.cibil.com)

• Sample cibil report is attached for your reference and better understanding of the topic.

• IF YOU ARE PLANNING TO APPLY FOR A LOAN OR CREDIT CARD ANYTIME SOON; CHECK YOUR CREDIT SCORE FIRST!

• Your CIBIL TransUnion Score ranges between 300 and 900.• 79% of the loans approved are for individuals with a score

greater than 750.• Higher your CIBIL TransUnion Score, higher are your

chances of Loan Approval.

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FAQ on CIBILRefer the guide on CIBIL

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Specific Documents.

Practical demonstration of following documents are attached in the file. Please refer :

• Valuation report of property. • Title clearance report of property.

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Specific Documents required• Housing LoanOver and above the common documents, • If you are also required to execute the document for transferring the Legal

title from your name to the name of Bank. • If you are taking Fresh Loan from the Builder, than Builder will transfer the

property in the name of the Bank itself. The property documents will be handed over by the Builder to the Bank.

• For this, they will have to approve the project and it is know as Project Approval Number, which they take form the Bank.

• Banks will approve only those projects, wherein the title of the Builders is clear.

• Certain Banks are not involved in mortgaging your property. They just take the original documents form you. In this case, there are no mortgage charge involved, stamp duty of which is 0.35 of the Loan amount.

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Housing Loan

• Income Proofs.• If you are Appling the loan in joint name, than all the

documents of the joint applicant will also be required.• Title Clearance of the panel lawyers is required.• Valuation report of the panel lawyers is required.• All original property documents such as Sale Deed

(Dastavej), Original Index, Original Share Certificate in case of Cooperative Housing Society, Map of the Society as approved by the Municipal Corporation, to be handed over to the bank.

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Mortage Loan

• Common Documents• Legal and Valuation report of the panel valuers.• All original property documents such as Sale Deed

(Dastavej), Original Index, Original Share Certificate in case of Cooperative Housing Society, Map of the Society as approved by the Municipal Corporation, to be handed over to the bank.

• Please note housing loan interest is allowed as deduction under income tax and not mortage loan interest.

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Gold Loan

• Gold to be given.• They will value Gold either in-house or as per the

empanelled Valuers or Government approved Gold Values.

• For, males members, very tough loan as it involves the sentiments.

• Since, it is cheaper and available easily, it is gaining lot of importance.

• Margin ranges from 25 to 35 percent.

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Gold loan interest rates as on 24.01.2017

Bank •Gold Loan Interest Rates Schemes

SBI 11.05% - 11.05% EMI Scheme, Overdraft scheme

Muthoot 12.00% - 24.00% EMI Scheme, Bullet Repayment Scheme

HDFC Bank4.5/5 20 votes

11.00% - 13.00%EMI Scheme, Bullet Repayment Scheme, Overdraft scheme

Canara Bank 12.65% - 12.65% Bullet Repayment Scheme

What is a 'Bullet Repayment'A bullet repayment is a lump sum payment for the entirety of a loan amount paid at maturity. Loans with bullet repayments are also referred to as balloon loans, and are commonly used in mortgage and business loans to reduce monthly payments. The existence of a bullet repayment due at a loan’s maturity often necessitates advanced planning to have a refinancing facility in place, unless the borrowers have cash to pay off the lump sum.

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Gold Loan by Cooperative society• The Reserve Bank today doubled to Rs 2 lakh the amount of loan furnished by

cooperative banks under the Gold Loan Bullet Repayment scheme. Earlier, all state and central cooperative banks were permitted to grant gold loans up to Rs 1 lakh with bullet repayment option. "On a review, it has been decided to increase the quantum of loan that could be granted under the scheme, from Rs 1 lakh to Rs 2 lakh subject to conditions," RBI said in a notification. The period of the loan shall not exceed 12 months from the date of sanction. Under the bullet repayment scheme, the banks need to maintain loan to value ratio of 75 percent on the loan amount including the interest. However, if it is not maintained the loan would be treated as a non-performing asset (NPA), RBI added. Also, the interest will be charged to the account on monthly basis but will become due for payment along with principal only at the end of 12 months from the date of sanction, it said. State and central co-operative banks grant loans for various purposes against the security of gold/gold ornaments as part of their lending policy. (Source : 08, Jan 2015, money control )

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Cash Credits or Overdraft• All the paperwork.• If you are not a regular customer and also in the current scenario, bank

is asking to mortgage the property. Hence, all the property documents as discussed earlier would be required.

• Projected Balance Sheet, Profit and Loss account, CMA data would be required.

• Borrower has to regular submit stock and Debtors statement in order to get DP.

• Certain products of the Bank are such that DP is not required to be maintained.(O/D against property which is higher than CC since, end use is not trace).

• For, All CC limits end use is traced hence, stock or debtors statement is given and also the rate of interest is lower.

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Car Loans• All the documents• Mortgage of Car Papers• Income proofs are also required.• Bank will make payment directly to car dealers.• Margin money ranges between 10-15%.• Also, second hand car finance is available.• Chassis no. of the car is taken on paper, after you take the delivery.• Original Invoice, Margin money payment slips RC Book, original is also taken by the bank.• On Digital RC Book, the name of bank is shown. The Financing Banks name is recorded in

the software’s of RTO Authorities. Please find attached photo. (See Next Slide )• Once car Loan is repaid, you will have get the name deleted of the bank from RTO for which

Form no. 35 and No due certificate of the Banks are to be attached.• Once, the name of the bank is removed, you can sell your car.• Insurance is mandatory and is taken regularly by the Banks. If there is a tie up, it would be

debited to your loan account or you can pay a separate cheque. However, tie-ups as per my opinion are costly.

• Direct tie up between car dealer and Bank is most common practice.

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R C Book- Name of Financer

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Personal Loan• Without security.• Interest rate on higher side.• Bank is very much selective. Only selected customers will be

given.• Eg. For, Business, only those above Turnover Limit would be

given Loan.• Salary criteria i.e minimum amount of salary.• CIBIL Criteria. Score should be very high.• Past repayment trend is also seen.• Just check comparative rate of interest on various websites like

bankbazaar.com, deals4loans.com, myloancare.in.

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