__Retail Banking__

**CAIIB-RETAIL BANKING-LAST MINUTE REVISION-CASE STUDY : 11**The formula to calculate the periodic payments, as available in the website of NHB, is as under:

Installment Amount = (PV*LTVR*I)/ ((1+I)n-1)

Where, PV = Property Value;

LTVR = LTV Ratio;

n = No. of Installment Payments;

I = the value of I will depend on Disbursement Frequency selected.

A Hypothetical Example

Value of the property Rs. 50,00,000 Rs 50,00,000

Loan Amount 80% 90%

Loan Tenor 15 years 15 years

Rate of interest 10% 10.50%

Monthly installment Rs. 9651. Rs 10,368

Quarterly installment Rs. 29,414. Rs 31,638

Yearly installment Rs. 1,25, 895 Rs 1,36,116

It can be obtained from Valuation Tables.

The factor for redemption of Re 1 at the end of 25 years @ 5% compound interest is 0.021 from the table (see Appendix given in book).

Thus the sinking fund for redeeming original capital of Rs. 15 lacs will be 15,00,000 x 0.021 = 315000.