When poor co-ordination deprives you of a home loan...

Finance

Recently I spoke to a friend of mine who wanted to a buy a flat in Kolkata while he was working in Mumbai.

He wanted to use my expertise on home loans to suggest solutions for a problem that he was facing in getting a loan. He approached a bank in Kolkata who said they would have given him the loan as both the property and his income papers were in order, but they asked him to visit their branch in Mumbai to get a loan as he was working in Mumbai.

When we came back to Mumbai after finalising the property in Kolkata, he approached the branch of the same bank only to be informed to visit a branch in Kolkata as the property is in Kolkata and they need to value the property before giving the loan.

This friend had already paid Rs 51,000 for booking amount and if he was unable to book the flat, the developer would return only 50 per cent of the booking amount (after negotiations as the developer was not ready to return a penny out of it). The property was ready to be occupied with all title documents and his loan eligibility added up to more than Rs 20 lakh (he needed only Rs 14 lakh).  

I decided to do some research on the same, as the number of people moving to other cities for work has been increasing significantly and this may be a common problem faced by quite a few of them who either have plans of relocating or buying a property for their parents in their “home” city.

We did a round of mystery shopping apart from speaking to the major home loan players. Here is what we found. When we spoke to the players officially each of the players said that such loans are no problem as they have a single common system across the country. However the situation on the ground was a little different.

From among the lenders we spoke to as mystery shoppers only two banks followed up on our initial call (we had dangled the bait of Rs 70 lakh home loan).  Even the official we spoke to in another bank’s branch assured us that they would be able to do the transaction subject to their normal credit and operational checks.

The other two private sector banks and the one foreign bank that we spoke to (or visited) as mystery customers either told us that they could not do such a deal or did not respond back after taking down the initial details.  We already knew a few direct sales agencies (DSAs) and we thought of getting this answered from them also.

We spoke to a large DSA based out of Mumbai who serviced many banks. Their feedback corroborated our own findings on mystery shopping.  Another DSA we spoke to in Mumbai (who did not work with either of the first two banks) said he would be able to get the transaction done provided the project in Kolkata was pre-approved by any of the banks he worked for. 

I also did a bit of informal talking with the private sector banks that had turned down (or did not show much interest in) our mystery shopper. What came out was that none of them had an effective loan origination system across the country and unless the loan amount was big enough the amount of effort required to co-ordinate with another city was just not justified.

Each office is driven by its own key result areas (KRA) and as legal checking work done for another office was not counted as part of their KRAs, this clearly did not enjoy any priority.  

What it boiled down to was that a loan that was clearly falling within their credit and legal norms of the bank was being given up simply because of the mismatch of KRAs between the two branch offices.

For a determined customer this would still be possible but it might take a lot more time than usual. The only saving grace to come out of this story was that at least for a few lenders India was still a “single” country.

(The author is CEO, apnapaisa.com, a price comparison engine for loans, insurance and investments.)