Retail Loan .pptx

Retail Loans A presentation by CRCH-Ernakulam Major Points of Discussion CIBIL Age Co-obligancy Income FOIR and Take Home Pay Assessment ABB Assessment RTR Assessment NRI Lending Security Credit rating  CIBIL reports play crucial role in credit decision...

Retail Loans A presentation by CRCH-Ernakulam Major Points of Discussion CIBIL Age Co-obligancy Income FOIR and Take Home Pay Assessment ABB Assessment RTR Assessment NRI Lending Security Credit rating  CIBIL reports play crucial role in credit decision making CIBIL Version 3.0 (Credit Vision Score) Product V3 Cut off Score Housing Loan 720 Property Power Loan 720 Auto Loan 720 Education Loan (Career 720 Solutions) Personal Loan 730  How to Read a CIBIL? Main Indicators  Transunion Score (300 to 900 or -1 )  Demographics (Name, Date of Birth, ID & Address proof, Address, Employment etc.)  Summary (Details of loan accounts) Continued…  Accounts ( Summary of Individual Accounts like- Lender name, Type of facility, Date of sanction, Loan Amount, Balance O/s, EMI, Overdue if any)  Status – Blank, Settled, Willful defaulter, Suit filled, Written Off etc.  Enquires (Details of Member, Enquiry date, Enquiry Purpose, Enquiry Amount)  Asset Classification Indicators Meaning STD or 000 Standard / Regular SMA Special mentioned Accounts (Accounts with arrears less then 90 days) SUB Substandard (Payment made after 90 days) DBT Doubtful (Remained substandard for 12 months) LSS Loss (Where loss is identified & Loan irrecoverable) XXX Means no information available for particular month. 014 Days Past Due (DPD)  Age Profile of Applicant Maximum Age Resident Salaried Retirement Age Resident Self Employed 65 years. May permit up to 80 years if one of the successor to the business joins as co-obligant to the loan. NRI Salaried and Self Employed 55 years  Permitted Deviations Age of borrowers including NRIs can go up to 70 years , provided: At least 50% income from co-obligants Age of such co-obligant not to exceed 65 years or retirement age which ever is earlier for residents and 60 or retirement whichever is earlier for NRIs Loan can be considered even after retirement age considering Pension Income Home loans can be considered after retirement age up to 70 years Annual Salary > 9.00 L CIBIL score 730 + Availability of Pension Income  Co-obligancy Spouse or Close Relatives If income of spouse/close relative is clubbed, co- obligancy is compulsory For loans to PIOs/ OCIs a close relative ( as per Companies Act 2013) residing in India shall join as co- obligant. If co-obligants income is clubbed they shall satisfy age and income norms All who are owners of property shall join as co- obligants  Close Relatives Spouse Parents Major Children Brother Sister Father-in-law Mother-in-law Son-in-law Daughter-in-law  Permitted Deviations Loan is fully secured by Liquid Collateral Unmarried/ Divorced, employed abroad, bedridden Resident Salaried Employees meeting the following requirements Employed with Permitted category of employers. No Deviations in FOIR and CIBIL KYC and CIBIL of spouse to be verified  Income- Types Salaried Self Employed NRI- Salaried NRI-Self Employed Rental Income Pension Income Agricultural Income Salaried Self Employed Rental Pension Agricultural (For Loan Amount > (Income from 5.00 L Pension not Should not exceed less than 85% of Total Income) Rs.10000 per month Latest Salary ITR for 2 years Lease Agreement Pension Agricultural Certificate/ 3 Payment Income Months Pay slip Property should order Assessment have been rented showing extent out at least for Pension of land Holding last 1 year Crediting and details of A/c Stateme yielding crops nt Latest 3 Balance Sheet & Latest Building Pension Salaried – months' Salary P&L for last 2 Tax Receipt Income not Monthly crediting years more than Income not account (Audited wherever 50% of Total less statement auditing is Income of than Rs.40000 mandatory borrower/spo use Self Employed – Annual Income not less than 12.00 L Latest years' Business License Last 1 year Bank If Pension ITR and Form GST Registration account is the 16 statement major incom showing Rent e tenor not Adding back Treating growth Treatment of Depreciation or decline in Net incentives Profit Related to Fixed Net Profit – Profit Only 50% of Asset after Tax Average incentive for last 1 year Audited balance Average of 2 years' Shall not be more sheet is mandatory Net Profit than 30% of gross salary 100% of If there is drop in Regular nature Depreciation can be Net Profit from Regular credit to added back previous year, PAT salary account for for latest year to be last 12 months considered. Minimum 2 years' experience in business Networth not less than 100% of loan amount  Income- Assessment Models 3 Assessment Models Fixed Obligation to Income Ratio (FOIR) Average Banking Balance (ABB) Repayment Track Record  FOIR & Take Home Fixed Obligation to Income Ratio EMI of existing Liabilities + EMI of proposed loan Income Take Home Pay Income - (EMI of existing Liabilities + EMI of proposed loan) Net Annual FOIR Income Type of center Take Home Pay Up to Rs.5.00 L 55% Metro 20000 Rs.5.00 to 60% Urban/ Semi 15000 Rs.12.00 L Urban Above Rs.12.00 65% Rural 10000 L  Income-Salaried Income Deductions Basic 40000 PF 4000 HRA 1000 DA 20000 Statutory Bonus 1000 Professional Tax 210 Special Allowance 500 Income Tax 5000 Total 9210 Deductions Gross Income 62500 Net 53290 Treatment of Incentives Income Total Field Travel and Sales Incentive for 12 months is Rs.25200 Average Monthly Incentive is Rs.2100 50% of Average Monthly Incentive is Rs.1050 Net Income after adding back incentives is 53290 + 1050 = 54340 FOIR- Case Study EMI of Existing Amount Loans F Auto Loan 5300 Personal Loan 3500 EMI of Proposed 12800 Loan FOIR = 12800 39.74% 8800 54340 Take 54340 - 21600 Home = 32740 Income-Self Employed Particulars AY 2019-20 AY2020-21 Profit 1062601 1076287 Less : Tax as per 124462 97566 ITR Net Profit (PAT) 938139 978721 Average Income 958430 (A) Add : 100% 218527 depreciation on Fixed Asset (B) Add: Interest on 0 0 Term Loan paid (C) Total Income 1176957 (Yearly) ( A + B + C) Monthly Income 98079 (D) Add : Net Rental or 0 0 Other Income (Monthly) ( E ) Total Monthly 98079 FOIR- Case Study EMI of Existing Amount Loans F Auto Loan 10300 Consumer Loan 5800 EMI of Proposed 12800 Loan FOIR = 12800 29.46% 1610 0 98079 Take 98079 - 28900 Home = 69149  ABB Based on Average Banking Balance in Savings/ Current Account for last 12 months. Preferred assessment for individuals running small business units who don’t maintain books of accounts. EMIs of all loans availed in last 12 months period to be considered along with EMI of proposed loan Credit and LTV norms to be complied with. There shall not be any 30+ DPD in last 12 months Criteria Savings Current ABB 1.5 times EMI 1.5 times EMI Average monthly 3 times EMI 10 times EMI credit summation No of transactions 10 24  RTR Based on Repayment Track Record of Existing Home Loan Applicable for Home Loans & Home Plus Top up Equity Loans Maximum loan Amount – Rs.300 L No need to consider any other loan obligations while arriving the eligibility Applicable for takeovers and existing customers Minimum track record required is 18 months EMI of the proposed loan (Home Loan & Top up Equity 110% of EMI of loan 18 – 36 Months Track together) shall be within the to below stipulated be taken over levels: More than 36 Months 125% of EMI of loan to Track be taken over  NRI Lending Minimum monthly income stipulation for NRIs is Rs.50000 and Minimum Take Home Pay stipulation is Rs.30000 NRI Salaried NRI Self Employed Latest Salary Certificate / Audited Balance Sheet 3 Months Salary Slip Business Account statements for last 6 months Salary crediting Bank IBTO Visit Report Account statement Last 12 months statement 24 Months average with any Bank in India remittance to NRE account reflecting 50% monthly is treated as Income income routing IBTO/ Embassy attestation Bulk remittances to be of Salary Certificate excluded. Third party remittances to be crossed checked.  NRI Lending Maximum period for NRIs for FHS is 240 months and Property Power Loan is 120 months Overseas credit Information report shall be obtained for Housing loans of Rs.50.00 L and above and LAP for Rs.25.00 L and above for NRIS residing in UAE, KSA, Bahrain, Qatar and Kuwait. FOIR Norms for NRIs Based on Take FOIR Home Pay FHS & Auto Loans Property Power > Rs.30000 to 55% 50% Rs.50000 > Rs.50000 to 55% with 50% with Rs.100000 deviation up to deviation up to 60% 55% Above Rs.100000 60% with deviation up to 65% Above Rs.2.00 L 65%  Security Equitable Mortgage Valuation report from approved valuer. It shall be further confirmed by Branch Legal Scrutiny Report from Panel advocate  Original Title Deed to be verified  For loan amount below 60.00 L, 13 years title derivation and for loan amount up to and above 60.00 L title derivation for 30 years.  Original of prior deeds covering 13 years to be verified  EC for 13 years / 30 years  Revnue documents and Power of Attorney to ve verified  LTV Loan to Value = Loan Amount Security Value Resident and NRE Housing loan Property Power Loan- Resident Type of Residential Commercial Property Loan Amount LTV 70%- For loans up to Up to Rs.30.00 L 90% Rs. 3 Cr. Self 65%- For > Rs.30.00 L to Rs.75.00 L 80% 55% Occupied loans above > Rs.75.00 L 75% Rs. 3 Cr (No deviation permitted) 55% (No Vacant/ Deviation 45% Rented permitted)  Credit Rating For assessing Risk. CRISIL Rating (CRESS) Rating Model Based on various Retail Products. Based on defined parameters FBR1 to FBR6 AAD, AAS, Pre-approved loans and Car Loans fully covered by liquid Securities are exempted from rating. Special Vidya Loans can be sanctioned up to FBR8. Retail Loan Schemes  Housing Loan Construction of house in the already owned land , for acquisition of land and construction of a house in that land , for acquisition of ready built house/flat/ villa , for acquisition of flat /villa under construction , for purchase and completion of incomplete houses , for purchase of land for subsequent construction of house ,repair / renovation / remodelling / extension of existing house / flat/villa, reimbursement of debt incurred for construction/outright purchase/ furnishing of a new house ,supplementary FHS loan to employees of reputed companies/institutions ,for purchase of house plots under special Scheme - Scheme for Financing Purchase of House Plots, for takeover of housing loans from other banks/financial institutions. Maximum Loan Amount is Rs.1500.00 L. For repairs / renovation/ extension Rs.25.00 L The value of house should be at least 25% of the total value of the property (ie, value of land + house) or the total built up area of house should be at least 25% of the area of land to be financed. For Individuals Margin Required is 15%. For Home Invest Scheme 25% Maximum tenure of 30 years (Residents) and 20 years (NRIs)  Housing Loan Cushion Period Purpose Cushion Period Outright Purchase of ready built Up to 3 months house/ flat Up to 36 months from the date of Eligible Expense first disbursement Flat / Villa under OR the completion construction (where date shown in the Eligible Expense Condition there is a construction construction agreement OR one Loan component not to agreement) month after final exceed 20% of project cost/ disbursement, estimate amount for land & whichever is Registration fee/ stamp or building and not included earlier. duty , Cost of construction in original estimate. of compound wall and gate, Loan component for Up to 18 months Cost of fixing permanent Registration Fee & Stamp from the date of fixtures, kitchen cabinet duty charges shall not first disbursement etc. exceed 10% of project cost/ All other OR one month after estimate amount for land & construction cases final disbursement, or building and not included whichever is in original estimate earlier. Cushion period up to 24 months to Purchase of land for start construction subsequent and another 12 construction of months for house completion of  Housing Loan In the case of Construction, sanctioned plan & building permit/ NOC by competent authority in the name of a person. In the case of Purchase, Sale Agreement shall be obtained. An Architect/Engineer appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/ or building bye-laws. No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid. No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan. Primary security shall be the mortgage of the property to be financed including the building to be constructed / existing. In the case of construction of new house the security shall be the property that is to be acquired/ owned and the building constructed thereof. No other collateral/ additional securities need be insisted. Stage Wise Disbursement in Case of Construction, Repairs/ Renovation/Extension  Property Power For any lawful purpose Minimum Rs.5.00 L up to a Maximum of Rs.20.00 Cr. Term Loan and Overdraft Individuals (Residents, Non-residents, PIOs) having sufficient repaying capacity. Sole-proprietorships, family partnerships, professionals and salaried where end use is personal or business, where the collateral is in the name of individuals. Minimum period of 12 months up to a Maximum Period of 120 months. For loans against self occupied Residential Property/Flat, the future estimated life of the building shall be 10 years post maturity as certified by valuer / structural engineer a Maximum loan tenure of 180 months can be offered (Residents only) Minimum age of 24 years. Age can be less than 24 provided the borrower is a confirmed employee. If self employed, should have been in business for past 2 years Security property in the name of individual borrower Security property in the name of Third party (Close Relative as per CA2013) can also be accepted. For granting Property Power to NRIs and PIOs, the property shall be in their own names.  Auto Loan For purchasing brand new vehicles and used vehicles only for private use. Individuals, Sole Proprietorships, Partnership firms, Companies, Trusts, Educational Institutions and any other lawful organizations with adequate / regular income to repay the loan. Minimum loan Amount of Rs.25000 up to a Maximum loan amount of Rs.250.00 L (Individuals) and Rs.750.00 L for corporates Margin Margin Conditions 10% (i.e., Funding up to 90% of On-Road - Minimum On-Road price of Rs. 7.50 Lakhs Price) - For individual borrowers, minimum CIBIL score shall be 730 - For Non-individual borrowers, CIBIL should not have any adverse comments - No Deviation in FOIR 0% (i.e., Funding upto 100% of ex- For all other cases showroom price) Fully backed by Liquid Collateral 0% (i.e., Funding upto 100% of On-Road Price) 25% (i.e., Funding upto 75% of the For used Vehicles depreciated value of the vehicle)  Auto Loan Reimbursement of expense (100% of Ex-showroom Price) can be considered for Brand New Vehicles within 1 month of purchase. Maximum loan tenure is 84 months for Residents and 60 months for NRIs For used vehicles : The total of ‘Loan Tenure’ + ‘Vehicle Age’ shall not exceed 10 years Requirement of collateral security can be waived up to Rs.50.00 L, subject to CIBIL score of 730 and no deviation in FOIR. Borrower should own landed property. The condition is applicable to individual borrowers only If the borrower/spouse does not own any landed property, a parent or close relative who owns a residential property shall join the loan as a co obligant. In such cases collection of any document evidencing residence ownership as mandated by Government agencies – such as utility bills, (water bill, electricity bill etc), land/building tax receipts etc If neither borrower nor his relatives own landed property, one person satisfying income criteria shall join the loan as an additional co obligant  Career Solutions Loan Financial assistance to the needy and deserving young people to pursue higher education, vocational training courses, Pilot trainings, skill up gradation, diploma or degree courses offered in aviation, hospitality and travel management, executive development etc Indian citizen Parents shall join as co-applicants Proof of admission to the proposed course/ programme Age- Minimum 18 years & maximum 45 years Net worth -Minimum double the loan amount (combined with coobligants) Initial expenses- Caution Deposit, Security Deposit, infrastructure development cost, other service charges stipulated by institutions, travel expenses (for abroad), visa fees, etc. Recurring expenses– Tuition fees, examination fees, special fees, hostel fees/ residence expenses, cost of books / equipments / computers, uniform, etc. Any other expenses required to complete the course such as study tours, Project works, thesis etc  Career Loan Amount Solutions Loan Studies in India -Minimum Rs.1Lakh Maximum Rs.75 lakh Studies Abroad - Minimum Rs.3L Maximum Rs.100 Lakh Maximum loan amount for pursuing medical courses abroad is Rs. 25 L Tenure Moratorium period – course period + 6 months or 3 months after getting job, whichever is earlier. Repayment period – maximum 10 years Maximum Loan period – 17 years Periodical interest should be serviced during the course period and subsequent cushion period. 75% of the Estimate will be financed. Loan amount shall be collaterally secured by landed property with margin of 50%.  Special Vidya Loan IBA Model Education Loan Scheme for Higher Studies in India and Abroad. Uniform repayment period (after moratorium) up to 15 years for all loans sanctioned Uniform one year moratorium for repayment after completion of studies in all cases The student should be an Indian National. Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/ Merit Based Selection process after completion of HSC(10 plus 2 or equivalent). Studies in India – Approved courses leading to graduate/ post graduate degree and P G diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc. – Courses like ICWA, CA, CFA etc. – Courses conducted by IIMs, IITs, IISc, XLRI. NIFT, NID etc. – Regular Degree/Diploma courses like Aeronautical, pilot training, shipping, degree/diploma in nursing or any other discipline approved by Director General of Civil Aviation/Shipping/Indian Nursing Council or any other regulatory body as the case may be, if the course is pursued in India. – Approved courses offered in India by reputed foreign universities. Studies Abroad – Graduation: For job oriented professional/ technical courses offered by reputed universities. – Post graduation: MCA, MBA, MS, etc. – Courses conducted by CIMA- London, CPA in USA etc. – Degree/diploma courses like aeronautical, pilot training, shipping etc provided these are recognized by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.  Special Vidya Loan Applicants securing admission under merit quota only shall apply for loans. Management seats are not eligible for consideration under Special Vidya Loan Scheme. Special vidya loans cannot be sanctioned for medical courses in China, Eastern European and CIS countries. Screening committee approach Only those seats having substantially reduced fee fixed by the Govt will be treated as merit quota. Ie, the fee stipulated by government for seats in government colleges only will be eligible. If any private college is granting admission with the same fee structure of government college as above and if admission is through merit based selection process, such courses can also be considered eligible. Admission under government quota in government Self financing colleges can also be considered. Admission to various courses to be considered under merit quota shall be Qualifying through Exam a competitive Minimum exam Mark (All India/State Govt/University/ Bodies like Stipulation AICTE) or marks obtained in qualifying board/university exam.) Plus two or equivalent 80% marks (for Graduation) Graduate degree 70% marks (for Post Graduation)  Special Vidya Loan Margin Security Amount Margin Amount Security Up to ₹ 4 NIL Up to ₹ 4 Lakhs No Security. Co- borrowership of the Lakhs Parent(s)/guardian of the student borrower. > ₹ 4 lakhs Studies in > ₹ 4 Lakhs up to ₹ Co-borrowership of the India: 5% 7.50 L Parent(s)/guardian of the student borrower Studies together with third abroad: party guarantee 15% > ₹ 7.50 L Co-borrowership of the Parent(s)/guardian of the student borrower together with Tangible Collateral security of suitable value.  Special Vidya Loan Margin on Collateral Security Nature of security Margin NSC/KVIP (Present Value), Life NIL Insurance Policy (Surrender value), Deposits with us Pledge of gold ornaments , 10% (Security value shall be Government securities 111.11% of the loan amount) Land & Building 30% (Security value shall be 142.86% of the loan amount) Thank You  Reference Federal Wikis – Retail Loan General Guidelines – Federal Housing loan Scheme (Master Circular) – Federal Property Power Loan Scheme (Master Circular) – Federal Personal Car Loan Scheme ( Master Circular) – Federal Career Solutions Loan Scheme ( Master Circular) – Federal Special Vidya Loan Scheme ( Master Circular) Ciculars – Circular No.9714/CRD/IRMDC101/2019-20 Migration to CIBIL Version 3.0 (Credit Vision Score) – RBD/EL/SVL/BJ/Circular 7422/2017 Restriction in Lending for Medical Courses – Circular No.10870/CRD/IRMDC96/2020-21 Lons to NRIs-Obtaining Credit Information Report from overseas Bureaus in GCC Countries – RBD/kR/Retail Loans/10016/2020 Retail Loan Policy refinements – RBDA/kR/LAP/9942/2019-20 Restricts on lending to certain segments/profiles