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HOME LOANS | RETAIL ASSET PRODUCTS | CAIIB RETAIL BANKING

RETAIL ASSET PRODUCTS: HOME LOANS | CAIIB RETAIL BANKING MODULE B & UNIT 4

Free short notes on Retail Asset Products i.e Home Loans from the CAIIB Syllabus 2022 for CAIIB Exams 2022 preparation.

Dear Future CAIIBs!!

If you have already registered for the CAIIB exams, you know that IIBF prescribes the syllabus for CAIIB papers 2022. CAIIB Exams are viewed as the most difficult course among the courses offered by IIBF.

But this is not the case for CAIIB candidates who study from the CAIIB Study Material provided by learning sessions. Learning sessions are one of the leading and trusted platforms known to provide best study material 2022. 

CAIIB exams are conducted twice in a year just like JAIIB & Candidates wanting to write these should have completed JAIIB before registering for CAIIB Exam 2022. In this article, we will provide you with detailed notes of one unit from Module B of Retail Banking Syllabus as per the latest pattern of IIBF.

So, here we are providing Retail Asset products: Home Loans from Module B: Retail Products from prescribed Syllabus of the Elective Paper: Retail Banking of CAIIB 2022.

The types of Loans provided under Retail Banking:

  1. Home loan
  2. Vehicles loan
  3. Personal loan
  4. Education loan

In this article, you read about the home loans which are provided by the Retail Bank Branches from Retail Banking Paper.

Read Also: RETAIL BANKING 7-DAY STRATEGY

HOME LOANS

HOME LOANS SCHEME
No. Particulars Features
1 Eligibility and Other Conditions Home loans are offered to individuals, group of individuals and members of cooperative society.
For Individuals – 
  1. Regular income from Agriculture or Profession or Trade or Business or Salary in any case, whether they are self-employed or under someone else’s employment.
  2. a minimum 3 years of confirmed service is necessary.
  3. In case they are self-Employed or Business Persons, they should have a minimum 3 years standing in their respective field.
  4. Applicant should not have taken the benefit of credit facility for the same purpose i.e home loan, from any bank or financial institution 
  5. Applicant should also not be a defaulter in the case of any other credit facility.
Applicants who own a house to their own name or their spouse or their minor children are also eligible for home loans.
Age: Applicant < 60 years
2 Purpose The purpose for taking loan should be: purchase or construction of new or old houses or flats and for already owned homes’ extension, provided that in case houses or flats are already owned, the age of the house or flat < or =15 years.
3 Amount Whether it is for construction or purchase of a house or flat, there has been no upper ceiling put up by the banks.
Bur for purchase of a plot – Loan amount varies from bank to bank
4 Margin Loans upto Rs. 30 lacs – 10%
Loans > Rs. 30 lacs to Rs. 75 lacs – 20%
Loans > Rs. 75 lacs – 25%
5 Security First Security: Mortgage of the property which is to be financed.
The land should be in the name of the applicant (with a clear and marketable title to the property) or jointly with the spouse who should be a co-obligant.
6 Disbursement For construction of house – 

The disbursement will be in stages based on the progress in construction.

For purchase of plot & construction – 

the loan will be disbursed first for purchase of flat & then as per the procedure described above for construction.

For purchase of flats – 

Disbursement will be made on the basis of progress of construction in case of new flats.

For already completed flat and old flats – 

the loan amount will be disbursed in one go on the Agreement of sale basis.

7 Moratorium i.e Holiday period of upto 18 months will be given for construction of house while for purchase of house/flat 3 months will be given.
8 Prepayment Issues There are some banks who levy pre-payment charges for pre-closure of loans, whatever the kind or purpose. Although some PSBs do not charge the customers for pre- closure.
9 Repayments/ Collection Highly flexible repayments –
  • maximum 30 years which also includes moratorium period 

While Maximum moratorium period 

  • in case of construction = 18months and 
  • in case of purchase = 3 months 

is allowed generally by banks.

Loan is normally required to be repaid 
  • in case of salaried persons – before the retirement and 
  • in case of others – before attaining 65 years of age 
10 Price and Interest Rate Interest rate depends to a great extent on the loan size and repayment period as well as interest rates i.e whether it is a fixed rate or floating rate loan

Interest Band = 8 % to 12 % p.a. depending on the loan tenor & also whether the loan is fixed or floating:

If floating rates are applicable – rate varies with the Bank’s Prime Lending Rate.

If fixed rates are applicable – the rate is reset over every fixed period; say 5 years, which indicates that even on fixed rate loans, the price will vary over a long tenor.

Note: Most of the banks allow switching from fixed rate to floating rate after charging a rewriting fee = 1 % & a lock in period of 3 years is also prescribed if considered.

A new pricing model has emerged for Home Loans in the recent past i.e Step up pricing i.e. lower interest (teaser interest rates to initially attract customers) for the entry years (2 to 3 years) and subsequently hiking to fixed or floating rates prevailing at that time for the remaining tenor.
Processing charges: They vary from 0.5 % to 1 % 

There are some banks who waive processing charges during special campaigns to mobilise accounts and as per their marketing initiative.

 

OTHER HOUSING LOAN SCHEMES:

PMAY – Housing Loan Under Pradhan Mantri Awas Yojana

The Pradhan Mantri Awas Yojana, PMAY, aims to provide affordable housing to urban poor by 2022 through the initiative of the Government of India. Launched on June 1, 2015, the scheme has been expanding every year since. The PMAY scheme is available for a tenure of 20 years at an interest rate of 6.50% p.a. For the MIG-I and MIG-II categories, the deadline for applying for the PMAY CLSS scheme has been extended to 31 March 2021 while for LIG and EWS categories, it has been extended to 31 March 2022.

Read Also: SERVICE STANDARDS FOR RETAIL BANKING

Features and Benefits of PMAY Scheme:

  • A subsidy interest rate of 6.50% per annum is provided under the PMAY scheme as a loan subsidy for 20 years for all beneficiaries.
  • A preference will be given to different abled individuals and senior citizens when it comes to allocation of ground floors.
  • Construction would be based on eco-friendly and sustainable technologies.
  • A total of 4041 statutory towns are included as part of the scheme, with priority given to 500 Class I cities & will be implemented in 3 phases.
  • As part of the PM Awas Yojana, credit-linked subsidies are provided to all statutory towns from the very beginning.

Eligibility of Pradhan Mantri Awas Yojana: The persons who can benefit from the PMAY scheme are listed in the below table:

Beneficiary of PMAY Their Annual Income should be in the below ranges:
Economically Weaker Section (EWS) Rs.1 to Rs.3,00,000.00
Lower Income Group (LIG) Rs.3,00,000.00 to Rs.6,00,000.00
Middle Income Group I (MIG I) Rs.6,00,000.00 to Rs.12,00,000.00
Middle Income Group I (MIG II) Rs.12,00,000.00 to Rs.18,00,000.00

 

PMAY INTEREST SUBSIDY

Particulars Interest Subsidy Maximum Loan limit to get the Subsidy
EWS 6.50% p.a. Rs.6,00,000.00
LIG 6.50% p.a. Rs.6,00,000.00
MIG -1 4.00% p.a. Rs.9,00,000.00
MIG-2 3.00% p.a. Rs.12,00,000.00

 

So, the above scheme & loans are offered by different PSBs & other Banks. If you liked the above notes, we assure you that you will find the Study Material prepared by Learning Sessions’ Faculty on CAIIB very understandable & easy to use. 

You can avail the CAIIB Study Material Video course at heavy discount from here:

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