ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal IMPACT FACTOR: 2.104 (ISSN NO. 2456-1037) Vol.03, Issue 09, Conference (IC-RASEM) Special Issue 01, September 2018 Available Online: www.ajeee.co.in/index.php/AJEEE
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A STUDY OF COMMERCIAL BANKING & ITS ROLE IN PROVIDING HOUSING FINANCE IN INDIA
Ms. Sangeeta Sahni,
Research Scholar, Jayoti Vidyapeeth Women’s University, Jaipur Dr. Mini Amit Arrawatia,
Professor, Jayoti Vidyapeeth Women’s University, Jaipur 1. MEANING OF COMMERCIAL BANKS:
Commercial bank is a financial institution that performs the functions of accepting deposits from the general public and giving loans for investment with the aim of earning profit.
Commercial banks are profit-seeking institutions, i.e., they do banking business to earn profit. Generally they finance trade and commerce with short-term loans. They charge high rate of interest from the borrowers and pay lesser rate of Interest to the depositors. And the difference between the two rates of interest becomes the major source of profit to the banks.
Most of the Indian joint stock Banks are Commercial Banks such as Punjab National Bank, Allahabad Bank, Canara Bank, Andhra Bank, Bank of Baroda, etc.
In India commercial banks are broadly classified as:
Public Sector Banks
Private Sector Banks
Foreign Banks
Public Sector Banks: Public Sector Banks are the banks where the majority equity stake is held by the government.
The Government of India keeps default stake holdings of minimum 51%, but management control is only with the Central Government, thereby classifying them as Public Sector Banks. Public sector banks include the State Bank of India, Nationalized Banks and Regional Rural Banks.
Private Sector Banks: Private Sector Banks are the banks in which individuals and corporations are the majority shareholders. In India, banks were nationalized in two phases, in 1969 and 1980. In 1993, the regulatory body of country’s banking organizations (RBI), allowed many new commercial banks in India to start operations. Some of the major commercial banks in India are ICICI Bank, HDFC Bank, Axis Bank, Yes Bank and Kotak Mahindra Bank. As of the end of March 2017, there are 21 private sector banks in India.
Besides these, four local areas banks are also categorized as private banks.
Foreign Banks: The banks that are headquartered outside India and operate from their wholly-owned subsidiaries or branches in the country are Foreign Banks. They serve as an important segment of the commercial banking sector. In India, the foreign banks include
Royal Bank of Scotland, Bank of America, Barclays Banks, Deutsche Bank, etc.
2. HOUSING LOAN
Home is a dream of every person that shows the quantity of efforts, sacrifices luxuries and above all gathering funds little by little to afford one’s dream. Home is a shelter to person where he rests and feels comfortable. The demand of home loans has increased dramatically. To fulfill this intention many banks are providing home loans to the people who want to have their home. Today, home loans are available in the market at very low interest rates that meet the demands of the buyers. When a person purchases a home, he or she will be investing a huge amount of cash.
2.1 Types of home loan
There are different types of home loans available in the market to cater the needs of borrower’s.
• Home Purchase Loan
• Home Improvement Loan
• Home Extension Loan
• Home Conversion Loan
• Home Construction Loan
• Land Purchase Loan
• Bridge Loan
a. Home Purchase Loan: These are the basic home loans for the purchase of a new home.
ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal IMPACT FACTOR: 2.104 (ISSN NO. 2456-1037) Vol.03, Issue 09, Conference (IC-RASEM) Special Issue 01, September 2018 Available Online: www.ajeee.co.in/index.php/AJEEE
2 a. These loans are given for
the purchase of a new or already built home.
b. Home Improvement Loan: These loans are given for the implementation of repair works and renovations in a home already owned by the customer. Loan may be required for external construction works like structural repairs, waterproofing or internal works like tiling and flooring, plumbing or any other repairing etc.
c. Home Construction Loan: These loans are available for the construction of a new home.
Depending upon the fact that when customer bought the land, the lending party would or would not include the land cost as a component, to value the total cost of the property.
d. Home Extension Loan: Home Extension Loans are given for expanding or extending an existing home. For this kind of loan, customer may need to have requisite approvals from the relevant municipal corporation.
e. Home Conversion Loan: This loan is taken by the customers wherein the borrower has already taken a home loan to finance his current home, but wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan and fulfills the money required for new home.
f. Land Purchase Loan: Land Purchase Loans are available for purchase of land for home construction as well as investment purposes. Therefore, customer can be granted this loan even if customer is not planning to construct any building on it in the near future.
g. Top up loans: Enchasing the investment in a house without having to dispose it off to fund various needs related to Higher Education, Purchase of Furniture and Business Requirements.
3. ROLE OF HOUSING FINANCE COMPANIES IN INDIA
As per the NHHP-1998, the HFCs are expected to:
• redefine their role and divert from their traditional approach to housing finance;
• develop and expand their reach to meet the needs of people;
• devise schemes to lend at affordable rates to those who are in need of housing finance support;
• mobilise resources from provident funds, insurance funds, mutual funds, etc., for house building activities; and
• develop innovative instruments to mobilise domestic savings.
REFERENCES
1. Sangwan, P. and Bhan, K. (2012), “A Comparative Analysis on Home Loans of Public and Private Sector Banks in India” 2 (9), 121-126.
2. Rao, T.S. (2013), “A study on comprehensive problems of H.D.F.C. and S.B.I. loan takers in Andhra Pradesh State”, Innovative Journal of Business and Management, 123-127.
3. Gupta, V. P. and Aggarwal, P. K. (2013),
“Comparative study of customer satisfaction in Public and Private Sector Banks in India”, Global Journal of Business Management, 7(1), 16-26.
4. Garg, P. and Sharma, R. (2014), “Home Loan: A Comparative Analysis of S.B.I. and H.D.F.C. Bank”, International Journal of Scientific Research, 3(10), 2277-8179.
5. Kumaraswami, M. and Nayan, J. (2014),
“Marketing of Housing Finance- A Comparative Study of Public and Private Sector Banks”, Global Research Analysis, 2 (3), 116-120.
6. Geete, V. and Thakur, A. (2014), “A comparative study of home loan scheme of private Sector Bank and public sector bank (with special reference to S.B.I. and H.D.F.C.)” International Journal of Research in Management and Social Science, 2(2), 12-21.
7. Gupta, U. and Sinha, R. (2015), “A Comparative Study on Factors Affecting Consumer’s Buying Behavior towards Home Loans (With Special Reference to State Bank of India And Life Insurance Corporation, Allahabad)”, IOSR-Journal of Business and Management 17 (2), 13 - 17.
