Thinking of Home Loans? Think Small Finance Banks

The focus of small finance banks is on mid- and lower-income categories and unserved and underserved sections including small business units and small, marginal farmers. These banks offer basic banking services including accepting deposits and lending. Talking of loans, small finance banks (SFBs) are a real blessing if you need finance for purchase of land (remember that no other scheduled commercial bank offers this unique finance). This article assesses the home-loan component of five SFBs along standard parameters and while at it, also describes the basic banking services that they provide vis-à-vis cooperative banks and regional rural banks.

SFBs Compared:  AU (Land Purchase & Home Construction), Utkarsh (Home Loan), Ujjivan (Composite Home Loan), Equitas (Home Finance) and ESAF (New House Construction).

We chose the five small finance banks for this study based on consumer feedback and product structure. The parameters on which we have compared them include availability of loan for land purchase, maximum and minimum repayment period, foreclosure/prepayment charge, maximum and minimum loan, maximum and minimum rate of interest, maximum and minimum eligibility age, margin percentage, processing charge, late-payment charge on EMI, cheque-dishonour charge, and applicability of Pradhan Mantri Awas Yojana (PMAY) subsidy. We gave the highest weightage (25 points) to consumer feedback, which helped in determining product quality as well as the most important and beneficial variables. These variables have a direct bearing on the product structure. Our questionnaire covering various features of the loans received responses from a cross-section of product users.

Parameters Compared

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