Home Loan insight – Interview with Bank of Baroda
In line with our central theme of homemaking we are presenting excerpts from our interview with Bank of Baroda’s retail loan factory Manager – Mr. Mukund Hari Jachak.
Aavaas: Sir, please tell us more about “Retail loan factory” concept.
Mr. Jachak: One and half years back in March ’06, Bank of Baroda launched project Parivartan to cater to different customers and their needs. The most prominent of these were Retail segment, corporate segment and Agriculture segment.
Under the Retail category we cover car loans, home loans, mortgage based loans. The concept of the retail loan factory is analogous to an assembly line where there is an input and a quick and efficient output.
Aavaas: How many such RLF units are there across the country?
Mr. Jachak: There are more than 13 retail loan factories across the country. Mumbai was the first to be launched and it was followed by Chennai, New Delhi , Bangalore etc. We have also launched RLF in some non-metro cities.
Aavaas: How do you choose the staff for RLF?
Mr. Jachak: We train our own bank employees specially for the retail loan factory operations. The two main units of RLF are the sales/marketing side and the back-end/processing side.
Aavaas: What are the trends in the market for home loans and home improvement loans?
Mr. Jachak: We started our operations in Chennai from May 2006. Our offerings from the day of inception include home loans and home improvement loans. The latter caters primarily to purchase of consumer electronic goods, furniture etc. We also cater to the needs of those who are willing to procure a second home in addition to one they already have.
Aavaas: Are there any numbers for your operation which has spanned over 12 months?
Mr. Jachak: Yes, as on 31st March ’07, we have already approved and sanctioned over 2000 loan applications.
1500 to 1600 of these were for people seeking to pay for their first home.
Roughly 300 were people purchasing their second home.
The remaining loans, about 60-80, were given to those who wanted to improve/renovate their homes.
Aavaas: Tell us something about competition. What sets Bank of Baroda apart from them?
Mr. Jachak: What matters the most for customer is peace of mind. He or she should be able to obtain a hassle free and transparent loan. Till recently, Bank of Baroda being a public sector undertaking, it was impression amongst the customers tedious procedures and delays in sanctioning. This gave customers the impression that we were not customer friendly.
Now with the introduction of Retail loan factory this has changed. The list of documents to be submitted is provided to the customer at the very beginning. It is easier for the customers to comply with the list and our processing times have reduced dramatically. We try to provide a single point solution to our customers.
Aavaas: Was hassle free processing the only reason why some customers chose private banks over PSU banks?
Mr. Jachak: Yes. Customers tended to go to private banks even though their interest rates were higher than what we had to offer. The only positive which existed in private bank offerings was the hassle-free disbursal. But with RLF being introduced at our Bank, this has changed.
Aavaas: What are the benefits of banking with a PSU Bank like Bank of Baroda?
Mr. Jachak: The biggest advantage with PSU banks, especially our Bank is the transparency. We do not distinguish among our customers. We treat them all equally well regardless of their paying power. We do not believe in discriminating customer on the count of interest rate offering.
Aavaas: How is the competition between Private banks and Bank of Baroda ?
Mr. Jachak: Competition is always there. But we believe our competitive rates, transparent offerings and quick processing will win us many more customers.
Aavaas: Please tell us something about pre-closure terms offered by Bank of Baroda.
Mr. Jachak: One of our biggest differentiating factors from some others is that we do not charge people any pre-closure charges on the outstanding amount, as long as they are paying from their own sources. Private Banks charge a percentage penalty on the whole outstanding.
There is one exception here- If the borrower wishes to transfer the loan from BOB to another bank, then we would charge a pre-closure on the outstanding amount. This is typically 2% of the outstanding.
Aavaas: Tell us something about renovation loans and the amounts offered by the bank.
Mr. Jachak: Renovation or home improvement is a matter of personal choice based on the mindset of people. Typically, high net worths people and higher income group people tend to renovate their homes periodically.
We offer upto 10 lakh rupees to people who wish to perform renovation to their homes. The upper limit can be relaxed based on the repaying capacity of the customer.
Aavaas: How are the personal loans different from home/home improvement loans.
Mr. Jachak: First the personal loans have a very high percentage of interest but are offered without any security. The only criterion is the pay slip. This is not the case for home/home improvement loans. The rate of interest is much lower but we need to have collateral. Usually the property (immovable) is the security for home/home improvement loans.
Aavaas: Are the interest rates for home loans same as that for home renovation loans?
Mr. Jachak: sightly higher say 25 basis points to 75 basis points.
Aavaas: Do customers prefer floating or fixed rate of interest?
Mr. Jachak: Whenever fixed rates are at lower end customers prefers fixed rate option.Fixed rates were low during the year 2005 and stared northward from middle of 2006. At present fixed rates are higher therefore customers prefer floating rate option.
Aavaas: Please tell us something about your processing times
Mr. Jachak: From the time we receive the complete application, the time for processing starts. Various checks are performed for a given application.
- valuation of property
- whether the property is as per approved plan
- legal aspects
- inspection of proposed property and current place of residence.
All above tasks including validation and sanction are completed in 6 working days.The sanction proposal is placed in banks branch as per customer’s choice. Having accepted terms and conditions of sanction customer executes documents and then loan is disbursed.This tasks take up to maximum 4 working days. Overall our cycle time is 10 working days till the disbursement stage.
Aavaas: What is the USP or Bank of Baroda?
Mr. Jachak: We have heard from many of our customers that, private banks are very prompt in disbursing loans. But after that it is very tough for the customer to contact the bank in case they have some concerns.
With us, customer satisfaction is our top priority. We treat them at par even after the loan is disbursed. Moreover, with our core-banking solution, they are not a customer of a particular branch but a customer of the bank.
Our biggest strength is that both pre sales and post sales service to the customer is equally sound and guaranteed.
We would like to thank Mr. Jachak and Bank of Baroda for their time and patience. Hopefully, you are better informed about home loans after reading this. We hope to do more of these interviews with people in home industry circles. In case you think you have something unique to offer customers, please get in touch with us. We would love to do more of these informative pieces.
And yes, in case you want to get in touch with Mr. Jachak or Bank of Baroda, kindly drop us a line. (contact us)
Interview Conducted by : Williams
Interview recorded by : Vivek
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