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Introduction to banking.

Extracts from this essay...

Introduction

Introduction to banking One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and this has been enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered to issue directives / advices on interest rates on deposits and other aspects regarding conduct of deposit accounts from time to time. With liberalization in the financial system and deregulation of interest rates, banks are now free to formulate deposit products within the broad guidelines issued by RBI . This policy document on deposits outlines the guiding principles in respect of formulation of various deposit products offered by the Bank and terms and conditions governing the conduct of the account. The document recognizes the rights of depositors and aims at dissemination of information with regard to various aspects of acceptance of deposits from the members of the public, conduct and operations of various deposits accounts, payment of interest on various deposit accounts, closure of deposit accounts, method of disposal of deposits of deceased depositors, etc., for the benefit of customers. It is expected that this document will impart greater transparency in dealing with the individual customers and create awareness among customers of their rights. The ultimate objective is that the customer will get services they are rightfully entitled to receive without demand. While adopting this policy, the bank reiterates its commitments to individual customers outlined in Bankers' Fair Practice Code of Indian Banks' Association. This document is a broad framework under which the rights of common depositors are recognized. Detailed operational instructions on various deposit schemes and related services will be issued from time to time UTI Introduction UTI Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established.

Middle

lakh The applicant should be above 24 years of age and less than 60 years Both Mode of disbursement By credit to SB account of the borrower The loan will be credited to the borrower's Savings Bank Account with the Branch, by pay order favoring the borrower, or as per the borrower's instructions Both Security NIL 3rd party guarantee of a person of satisfactory means is desirable but not mandatory SBI Availing the loan Contacting the bank or its sales personals. Online approval or ohone banking. UTI Prepayment No prepayment penalties. Reduce your interest burden and optimally utilize your surplus funds by prepaying the loan A pre-payment (more than 75% in one year of the capital outstanding) penalty of 1% of capital outstanding will be imposed, in case of pre payment of the loan. SBI Documents Minimal. Income certificate, Address Proof and disclosure of loans with other banks. Passport / Voter's identity Card / Driving License & Photograph Latest salary slips showing all deductions or Form 16 along with recent salary certificate. Last six months bank statement. SBI in terms of fewer documents. Comparative Results. Upon comparing SBI and UTI on granting personal Loans, SBI stand out to be advantageous with respect to interest rate. SBI charges less processing fee and make no penalty fee for prepayment. Uti bank Stress its repayment. Giving a long term to repay. In case of document and securitization, SBI is being lenient and asks for less docs. But UTI insists on more docs and 3rd party guaranties. Educational Loan Sl No Loan Product / Criteria State Bank Of India UTI Favors 1 Educational Loans Interest Rate 10.5% p.a. and 11.5% p.a. - Simple Interest, during the moratorium period upto Rs. 4 lacs, At PLR, currently not exceeding 12% p.a. above Rs. 4 lacs, At 1% above PLR, currently not exceeding 13% p.a SBI Repayment Period 5-7 years, commencing a year after the course period or six months after obtaining a job, whichever happens earlier The loan would be repayable in a maximum of 84 installments from the commencement of repayment.

Conclusion

and 8.5% p.a. on daily reducing balances 9.75% to 10.75% for Fixed rates depending upon the term and 7.75% to 8 for floating rate. SBI Processing fee 0.25% 1% SBI Margin 15% in the case of normal product. 25% in case of Improvement/ renovation loans 50% in case of loans against property. (On valuation) 15% for new house/ flat 20% for old house/ flat 20% for repairs and renovation SBI Loan amount Up to 60 times the net monthly income Rs.1 lakh & Maximum - Rs.50 lacs 48 times of net monthly salary in case of salaried persons , whichever is less SBI Repayment 20 years 20 years Prepayment Penalties Nil 2% SBI Eligibility 21 years 24years SBI Security As per bank's extant instructions Equitable Mortgage of the property to be financed, by way of deposit of title deeds. In the case of property under construction interim security such as units of UTI, NSCs, demat shares, bank deposits, LIC policy, and such other investments that are acceptable to the Bank will be obtained for 50% of the loan amount till completion / possession of the property. Where demat shares are offered as collateral security, the margin to be maintained is 50% of market value. Alternatively third party guarantee of a person of adequate means to be obtained for this interim period only Both Comparative results. On comparing the interest rate between the two banks, SBI is lending at a cheaper rate when compared with UTI bank. SBI also outsmarts UTI in case of fewer margin and less processing fee. So SBI in opt for housing loans. Conclusion On comparing both the banks for various loan products, SBI has greater advantage over UTI bank. The reason behind SBI granting less interest rate is because they have a wider coverage of customers and the years of establishments. UTI is new bank and they are in a state to grant lesser rate. UTI is evolving and they have to tap the market, deep. So that they can emerge into hardcore banking as SBI.

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