Shruti Panchal, an employee of Yes Bank was a relationship manager in the bank's wealth management division. She with the help of other people, cash in money from one its client’s Rajesh Rathi mutual funds worth about Rs 66 lakh, leading to a loss of about Rs 34 lakh to the client.
In 2007 along with her superior approached Rajesh Rathi, a MD of Gandhinagar-based MGD Electronics, and suggested him to invest in mutual funds through the bank's wealth management services. He agreed and a total of Rs 1 crore was invested in four funds in December 2007. The mutual funds were in the name of the company.
When Rajesh came to know about the fraud he approached the police. But police refused to register a case. Then MGD Electronics moved the court. In view of this Gandhinagar court passed an order in a case of alleged forgery against Shruti Panchal. She had forged the signature of Rajesh Rathi, also prepared a duplicate company seal, changed bank mandates with forged signatures and the seal, and cash in money invested in mutual funds worth about Rs 66 lakh.
The court has also instructed the police to investigate other unnamed bank officers as there is possibility that she might have committed fraud with the help of other people. The court stated that people keep their money in banks as they find it safe, but due to such cases people can loose confidence in banks.
MGD Electronics has also filed a case against Yes Bank in consumer court. The next hearing of the case will be held on January 19.
Tuesday, December 29, 2009
Monday, November 23, 2009
Banks taking time for sanctioning loans, companies go for commercial paper
Banks are taking time to sanction loans. In the last one and half months the actual disbursement of loans have been very low, whether it is for short-term working capital or long term loans. The reason may be the borrowers with working capital requirements have found commercial paper as an alternate source for funding thus they are not using their entire sanctioned bank limits.
Regarding sanctioning of term loans, banks are taking long time to disburse loan as the bulk of sanctioned loans will be used for long-term infrastructure projects, unlike what used to be in the past. As a result this year in October, the banks lend around Rs 29,000 crore, the first month of the professed busy credit season, as against huge amount of Rs 1 lakh crore in the corresponding month of 2008.
However it is not possible to determine the size of unused sanctioned loans, but bankers presume that the total sanctioned loans to companies collectively can be estimated to Rs 2 lakh crore. According to a top banker, if the banks lend 10-15% of their respective sanctioned limits, the credit can pick up considerably.
Till then, banks are greatly dependent on retail credit loans to small and medium enterprises and agricultural loan disbursement for registering credit growth.
As for corporates with working capital requirements, commercial paper (CP) has become the most preferred fund raising instrument. Fund picked up via CPs for six months helps company to get good credit history around 5% a year, as against to 8-9% interest on bank loans. Thus it is clear that anybody can use the CP route for funds instead of going for working capital loans from banks, informed IDBI Gilts head of tresury S Raghavan.
Basically banks are facing the heat because of two reasons. In addition to their latest keenness for instruments like CPs or external commercial borrowings (ECB), the volume of the sanctioned bank term loans are not being disbursed due to higher growth period.
There is major gap between sanctioned loans and actual disbursement. Punjab National Bank chairman and managing director KR Kamath pointed out in case of term loans majority are taken for infrastructure projects, which generally have higher growth.
Whatever the reason may be, clearly fall in credit disbursement has pushed banks to their back foot. Now many of the lenders have to lend at rates which is below their cost of funds, due to this pressure on their interest rate margin is also increasing. Thus it is better to organize fund somewhere rather than to keep it idle, said a top official with a Mumbai-based public sector bank. There has been significant growth in country’s industrial output. Also banks credit growth has been slow. Thus it clearly indicates that companies are going for alternative sources of funds for investments or for their working capital requirement, Dena Bank executive director Bhaskar Sen pointed out.
In the beginning companies use their own resources to build a project, or erect a factory, in order to minimize the cost-carry. Due to this the growth period for bank loan disbursement gets longer, said Allahabad Bank executive director JP Dua.
Regarding sanctioning of term loans, banks are taking long time to disburse loan as the bulk of sanctioned loans will be used for long-term infrastructure projects, unlike what used to be in the past. As a result this year in October, the banks lend around Rs 29,000 crore, the first month of the professed busy credit season, as against huge amount of Rs 1 lakh crore in the corresponding month of 2008.
However it is not possible to determine the size of unused sanctioned loans, but bankers presume that the total sanctioned loans to companies collectively can be estimated to Rs 2 lakh crore. According to a top banker, if the banks lend 10-15% of their respective sanctioned limits, the credit can pick up considerably.
Till then, banks are greatly dependent on retail credit loans to small and medium enterprises and agricultural loan disbursement for registering credit growth.
As for corporates with working capital requirements, commercial paper (CP) has become the most preferred fund raising instrument. Fund picked up via CPs for six months helps company to get good credit history around 5% a year, as against to 8-9% interest on bank loans. Thus it is clear that anybody can use the CP route for funds instead of going for working capital loans from banks, informed IDBI Gilts head of tresury S Raghavan.
Basically banks are facing the heat because of two reasons. In addition to their latest keenness for instruments like CPs or external commercial borrowings (ECB), the volume of the sanctioned bank term loans are not being disbursed due to higher growth period.
There is major gap between sanctioned loans and actual disbursement. Punjab National Bank chairman and managing director KR Kamath pointed out in case of term loans majority are taken for infrastructure projects, which generally have higher growth.
Whatever the reason may be, clearly fall in credit disbursement has pushed banks to their back foot. Now many of the lenders have to lend at rates which is below their cost of funds, due to this pressure on their interest rate margin is also increasing. Thus it is better to organize fund somewhere rather than to keep it idle, said a top official with a Mumbai-based public sector bank. There has been significant growth in country’s industrial output. Also banks credit growth has been slow. Thus it clearly indicates that companies are going for alternative sources of funds for investments or for their working capital requirement, Dena Bank executive director Bhaskar Sen pointed out.
In the beginning companies use their own resources to build a project, or erect a factory, in order to minimize the cost-carry. Due to this the growth period for bank loan disbursement gets longer, said Allahabad Bank executive director JP Dua.
Friday, November 13, 2009
Pre-owned car loans to be offered at 9 percent by Syndicate Bank, M&M
Pre-owned car loans will be offered by Mahindra FirstChoice in a tie-up with Syndicate Bank. Mahindra FirstChoice Wheels is a multi-brand pre-owned car company of auto major Mahindra and Mahindra (M&M). The loan will be offered at an ‘industry first’ nine percent.
Shubhabrata Saha, CEO of Mahindra FirstChoice said pre-owned car have been an unorganized sector and pre-owned car loans rule at an interest of 16-17 per cent. Saha told Business Line, "Only 10 percent of the pre-owned market is in the organized sector and this small base allows us to work our way around with this sub-10 percent loan scheme. This is an entirely new ball game".
As the demand for pre-owned car has been projected to be very high thus Mahindra FirstChoice has confidently launched the ultra low-interest loan campaign with Syndicate Bank. In India the ownership ratio of new cars to pre-owned cars at present stands to 1:1. While in the U.S. and other western countries the ratio ranges from 1:2 to 1:2.5. And now India is also heading in this direction. It is believed the very low car ownership for every thousand people and profit from demographic dividends together is responsible to build a huge constrained demand in the market.
Shubhabrata Saha, CEO of Mahindra FirstChoice said pre-owned car have been an unorganized sector and pre-owned car loans rule at an interest of 16-17 per cent. Saha told Business Line, "Only 10 percent of the pre-owned market is in the organized sector and this small base allows us to work our way around with this sub-10 percent loan scheme. This is an entirely new ball game".
As the demand for pre-owned car has been projected to be very high thus Mahindra FirstChoice has confidently launched the ultra low-interest loan campaign with Syndicate Bank. In India the ownership ratio of new cars to pre-owned cars at present stands to 1:1. While in the U.S. and other western countries the ratio ranges from 1:2 to 1:2.5. And now India is also heading in this direction. It is believed the very low car ownership for every thousand people and profit from demographic dividends together is responsible to build a huge constrained demand in the market.
Wednesday, November 11, 2009
Future Group plan to offer loan, insurance cover at Big Bazaar
Kishore Biyani’s Future Group has revolutionized organized retailing in the nation, is stepping up his move to convert the group into a retail financial company. Working on this line the group is planning to exploit the millions of customers by offering schemes that walk into his stores to buy day to day grocery and clothing.
So, next time there can be chances that you might get a loan offer to buy a refrigerator or an insurance policy for your family when you pay for Aashirvad aatta at Big Bazaar, or a Proline tee-shirt at Pantaloons.
By giving such offers it is believed sale of consumer loans and investment options of Future Capital Holdings in the Big Bazaar, Central and Pantaloon shops will revive the financial services business that had failed to take off after a big hit in the initial stage of public offering during the bang. The group has also planned to launch credit cards with the nation’s largest card issuer, ICICI Bank but it did not take off. When ICICI Bank spokesperson was contacted in this regard, he refused to comment.
Kishore Biyani, Group CEO of Future Group explained, “The business will go through a virtual integration with retail because of the synergies of a common consumer”.
To explore the business the group hired former Goldman Sachs Group Inc executive Sameer Sain as vice-chairman and CEO of Future Capital Holdings and economist Roopa Purushothaman, who in 2003 gave her report on the same financial services firm, and had forecasted the emergence of BRIC nations as the next global growth drivers, to carry on its financial services business. But due to economic crisis the market crashed and the plans did not materialize as forecasted. Now the group is re-working on the plans.
Following this a common group Retail Financial Services team, has been formed which include finance and retail staff from Future Group, Future Capital Holdings (FCH) and Centrum Capital, a broking and wealth management firm where Future group holds stake, with common targets.
The group will incorporate the credit and personal investment products offered by FCH such as consumer loans, stock investing, forex and wealth management products from Centrum Capital and insurance products from the group’s joint venture, Future Generali, all on a common platform. The newly incorporated platform will directly extend to millions of customers that Future Group’s retail formats annually attract.
“What we have decided to do is closely integrate retail operations and the consumer financial services by creating common teams with joint targets,’’ said Sain. ``This will lead to better cohesion and collaboration to take advantage of the vast number of future group customers.’’
The group has not yet taken any decision to discard plans of launching a credit card in association with a bank which makes the concept of cross-selling easier. For instance, financial majors such as State Bank of India and ICICI Bank are in selling of slew of financial products from plain vanilla deposits, to stock trading, to insurance to mutual fund investments to even currency and other exotic derivatives to corporate clients helping them to earn thousands of crores in fees.
Future group cannot possible become a bank due to regulatory hurdles but it can grow in other areas of finance.
So, next time there can be chances that you might get a loan offer to buy a refrigerator or an insurance policy for your family when you pay for Aashirvad aatta at Big Bazaar, or a Proline tee-shirt at Pantaloons.
By giving such offers it is believed sale of consumer loans and investment options of Future Capital Holdings in the Big Bazaar, Central and Pantaloon shops will revive the financial services business that had failed to take off after a big hit in the initial stage of public offering during the bang. The group has also planned to launch credit cards with the nation’s largest card issuer, ICICI Bank but it did not take off. When ICICI Bank spokesperson was contacted in this regard, he refused to comment.
Kishore Biyani, Group CEO of Future Group explained, “The business will go through a virtual integration with retail because of the synergies of a common consumer”.
To explore the business the group hired former Goldman Sachs Group Inc executive Sameer Sain as vice-chairman and CEO of Future Capital Holdings and economist Roopa Purushothaman, who in 2003 gave her report on the same financial services firm, and had forecasted the emergence of BRIC nations as the next global growth drivers, to carry on its financial services business. But due to economic crisis the market crashed and the plans did not materialize as forecasted. Now the group is re-working on the plans.
Following this a common group Retail Financial Services team, has been formed which include finance and retail staff from Future Group, Future Capital Holdings (FCH) and Centrum Capital, a broking and wealth management firm where Future group holds stake, with common targets.
The group will incorporate the credit and personal investment products offered by FCH such as consumer loans, stock investing, forex and wealth management products from Centrum Capital and insurance products from the group’s joint venture, Future Generali, all on a common platform. The newly incorporated platform will directly extend to millions of customers that Future Group’s retail formats annually attract.
“What we have decided to do is closely integrate retail operations and the consumer financial services by creating common teams with joint targets,’’ said Sain. ``This will lead to better cohesion and collaboration to take advantage of the vast number of future group customers.’’
The group has not yet taken any decision to discard plans of launching a credit card in association with a bank which makes the concept of cross-selling easier. For instance, financial majors such as State Bank of India and ICICI Bank are in selling of slew of financial products from plain vanilla deposits, to stock trading, to insurance to mutual fund investments to even currency and other exotic derivatives to corporate clients helping them to earn thousands of crores in fees.
Future group cannot possible become a bank due to regulatory hurdles but it can grow in other areas of finance.
Friday, November 6, 2009
Banks likely to continue with special home loan schemes
Although in its monetary policy review the Reserve Bank of India has clearly signaled exit from its year-long accommodative monetary policy, still the major public and private sector banks appear to continue with their cheaper home loan schemes for some more time.
Country’s second largest lender, Punjab National Bank has extended its ‘Festival Bonanza Offer-2009’ for housing and car loans up to December 31, 2009. Also country’s largest lender, State Bank of India possibly continues its special home loan scheme offered at an interest rate of 8% starting from Rs 5 lakh. Although bank has not said anything on extension of the tenure of the scheme, it is believed that the scheme will continue beyond November 7, as it was the deadline given by the SBI.
An anonymous bank official told ET that bank’s home loan sector has grown by 30% at Rs 8,300 crore during the first half of the current financial year. While the bank has projected a growth of 33-34% by the end of the current financial year, according to which the home loan segment should grow by Rs 18,000 crore by the fiscal-end. Home loan cover 12-13% of the entire loan book of the bank.
As per its festival offer, PNB is extending housing loans up to Rs 30 lakh at a discounted interest rate of 8.50% per annum (fixed) for first three years and 2-2.5% below BPLR in subsequent years of loan tenure under floating option. Apart from this, the bank is also offering complete waiver of processing fee and documentation charges on housing loans up to Rs 30 lakh. Even the margin has been reduced to 15% on housing loans up to Rs 20 lakh .
The bank has also announced cut in the interest rate on car loans by 50 basis points along with relaxation in processing fee & documentation charges.
The NIM has been affected due to special home loan scheme, but bank’s main concern was about the fact that there was droopiness in credit pick-up during the first half. Moreover bank’s main focus is on putting more funds in those lending schemes which are getting popular day by day and home loan is one of them. A SBI official pointed out that there is increase in interest in home loan market.
On the other hand Axis Bank, the third largest private sector bank is aggressively promoting its home loan, which it is offering at an interest rate of 8% for the first year. And from the second year onwards, bank will charge floating rate of interest based on the bank’s mortgage reference rate. As per current MRR, the rate for the second year and after that will be 8.75% for loan amounts up to Rs 30 lakh and 9.25% for amounts above that.
Axis Bank is organizing ‘Home for All’ expos in major cities. In these expos bank will give on-spot approval and wave loan processing fees for prospective buyers who will be applying for loan during the expos. The expo is the result of tremendous success achieved in a similar event organized last year. In the expos there will be a showcase of wide array of properties, across price points (Rs 5 lakh to Rs 5 crore) and category of properties (site, flats, houses and villas). The first expo will be start in Bengaluru from November 6, 2009.
Country’s second largest lender, Punjab National Bank has extended its ‘Festival Bonanza Offer-2009’ for housing and car loans up to December 31, 2009. Also country’s largest lender, State Bank of India possibly continues its special home loan scheme offered at an interest rate of 8% starting from Rs 5 lakh. Although bank has not said anything on extension of the tenure of the scheme, it is believed that the scheme will continue beyond November 7, as it was the deadline given by the SBI.
An anonymous bank official told ET that bank’s home loan sector has grown by 30% at Rs 8,300 crore during the first half of the current financial year. While the bank has projected a growth of 33-34% by the end of the current financial year, according to which the home loan segment should grow by Rs 18,000 crore by the fiscal-end. Home loan cover 12-13% of the entire loan book of the bank.
As per its festival offer, PNB is extending housing loans up to Rs 30 lakh at a discounted interest rate of 8.50% per annum (fixed) for first three years and 2-2.5% below BPLR in subsequent years of loan tenure under floating option. Apart from this, the bank is also offering complete waiver of processing fee and documentation charges on housing loans up to Rs 30 lakh. Even the margin has been reduced to 15% on housing loans up to Rs 20 lakh .
The bank has also announced cut in the interest rate on car loans by 50 basis points along with relaxation in processing fee & documentation charges.
The NIM has been affected due to special home loan scheme, but bank’s main concern was about the fact that there was droopiness in credit pick-up during the first half. Moreover bank’s main focus is on putting more funds in those lending schemes which are getting popular day by day and home loan is one of them. A SBI official pointed out that there is increase in interest in home loan market.
On the other hand Axis Bank, the third largest private sector bank is aggressively promoting its home loan, which it is offering at an interest rate of 8% for the first year. And from the second year onwards, bank will charge floating rate of interest based on the bank’s mortgage reference rate. As per current MRR, the rate for the second year and after that will be 8.75% for loan amounts up to Rs 30 lakh and 9.25% for amounts above that.
Axis Bank is organizing ‘Home for All’ expos in major cities. In these expos bank will give on-spot approval and wave loan processing fees for prospective buyers who will be applying for loan during the expos. The expo is the result of tremendous success achieved in a similar event organized last year. In the expos there will be a showcase of wide array of properties, across price points (Rs 5 lakh to Rs 5 crore) and category of properties (site, flats, houses and villas). The first expo will be start in Bengaluru from November 6, 2009.
Tuesday, November 3, 2009
Private Banks increasing business in gold loans
The gold prices are posting big rise thus several private financing companies in order to increase their lending to add up their profits, have started increasing their business in gold loans. Since some of the big banks’ have taken decision of cutting personal loans there has been boost in gold loans.
As per media reports, finance companies are seeing 80-100% growth in their gold loan business as more and more borrowers are looking at gold jewelry as a collateral for loans.
With commercial banks cutting back personal loans has helped NBFCs who are engaged in disbursement of gold loans. Several NBFCs have specialized in gold loans and have attained strength from hassle-free and speedy disbursement of loans. The gold price in bullish market provides comfort level to the lenders as they find it very convenient as collateral.
The Muthoot Group, which maintains to be the country’s largest lender against gold, have asserted that in the next 2 years the company will be increasing its gold loans portfolio to over Rs 4,000 crore.
Banks are putting foot forward very cautiously as they do not want to take any unwanted risks on defaulters. While some of the companies having specialization in this business are targeting only rural farmers and needy customers.
Manappuram Group sources informed in the last 3-4 months company have witnessed the maximum growth. At present its loan book looks healthy showing over Rs 2,000 crore whereas till September 30 it stood at Rs 1728 crore. If the company continues to make profit, the group will be able to achieve over 80-100 per cent growth in 2-3 years’ time.
Now the commercial banks are showing interest in the gold loan business.
As per media reports, finance companies are seeing 80-100% growth in their gold loan business as more and more borrowers are looking at gold jewelry as a collateral for loans.
With commercial banks cutting back personal loans has helped NBFCs who are engaged in disbursement of gold loans. Several NBFCs have specialized in gold loans and have attained strength from hassle-free and speedy disbursement of loans. The gold price in bullish market provides comfort level to the lenders as they find it very convenient as collateral.
The Muthoot Group, which maintains to be the country’s largest lender against gold, have asserted that in the next 2 years the company will be increasing its gold loans portfolio to over Rs 4,000 crore.
Banks are putting foot forward very cautiously as they do not want to take any unwanted risks on defaulters. While some of the companies having specialization in this business are targeting only rural farmers and needy customers.
Manappuram Group sources informed in the last 3-4 months company have witnessed the maximum growth. At present its loan book looks healthy showing over Rs 2,000 crore whereas till September 30 it stood at Rs 1728 crore. If the company continues to make profit, the group will be able to achieve over 80-100 per cent growth in 2-3 years’ time.
Now the commercial banks are showing interest in the gold loan business.
Friday, October 30, 2009
Banks reject loans if your close relative is a defaulter
If any of your relative has defaulted on repayment then you might not get loan. Now banks decision for giving loans or issuing credit card are base on residential address rather than only borrower’s income.
Recently in one of the instance leading private bank rejected credit card application because one of his close relative names was on the defaulter list.
Last month Samar Roy planned to get credit card so he applied for it with a leading private sector bank. As he was earning a reasonably good salary and had not taken any loan, even no credit cards issued to his name.
But bank rejected his application on grounds of “unsatisfactory credit record”. When Roy contacted bank to know the reason, he was told that his application was rejected because his father, who is staying in the same residence, name is on the defaulter list.
Against Roy’s father there is a due of Rs 10,000, which he did not pay owing to a dispute with his credit card issuer. Thus bank reported him as a defaulter to the Credit Information Bureau, India (Cibil).
A banker informed, “In the current environment, in which banks are extremely cautious about lending, everyone has put in mechanisms to prevent defaults. Residential address is one such tool that is used more often in the case of unsecured loans and credit cards”.
Roy was advised that he should ask his father to resolve dues with other bank if he does not want loan applications to get rejected in future.
In case an applicant belongs to a business family and the address is blacklisted the possibility of loan rejection is higher.
There are some banks that have gone one step ahead, they have blacklisted whole localities. An executive with a multinational bank told, “Every bank has risk perception based on their experiences. Some even blacklist areas. Sometimes, even customers with a good profile are not given loans or credit cards because they live in a particular area”.
A banker told, “Such restrictions are put in place because a card-holder can easily ask for an add-on card. Since the dependent card is linked to the primary card, banks usually don’t check whether the add-on cardholder is a defaulter. The same applies to personal loans. Banks cannot detect who will be the end-user of the money”.
Normally, banks separate out applications of credit cards and loans in various categories. For instance many banks do not give loans or issue credit cards to the people working in export houses, business process outsourcing and aviation. Some banks ask for guarantor working in a more stable sector.
According to financial expert these steps taken by banks are part of fraud detection method followed by financial institutions worldwide, as in developed countries as identity thefts are on increase.
Thus Blacklisting addressed is one of the measures to prevent frauds.
In case of secured loans, banks decide on a case-to-case basis. For instance HDFC a leading private sector bank reject loan only when the relative is a joint applicant, not if a blood relative has defaulted.
HDFC spokesperson stated, “If they have applied jointly, we still assess whether it was a one-off case or the person concerned is a frequent defaulter. Further, in case of any dispute with a bank or any other lender we get the details before taking any decision”.
Recently in one of the instance leading private bank rejected credit card application because one of his close relative names was on the defaulter list.
Last month Samar Roy planned to get credit card so he applied for it with a leading private sector bank. As he was earning a reasonably good salary and had not taken any loan, even no credit cards issued to his name.
But bank rejected his application on grounds of “unsatisfactory credit record”. When Roy contacted bank to know the reason, he was told that his application was rejected because his father, who is staying in the same residence, name is on the defaulter list.
Against Roy’s father there is a due of Rs 10,000, which he did not pay owing to a dispute with his credit card issuer. Thus bank reported him as a defaulter to the Credit Information Bureau, India (Cibil).
A banker informed, “In the current environment, in which banks are extremely cautious about lending, everyone has put in mechanisms to prevent defaults. Residential address is one such tool that is used more often in the case of unsecured loans and credit cards”.
Roy was advised that he should ask his father to resolve dues with other bank if he does not want loan applications to get rejected in future.
In case an applicant belongs to a business family and the address is blacklisted the possibility of loan rejection is higher.
There are some banks that have gone one step ahead, they have blacklisted whole localities. An executive with a multinational bank told, “Every bank has risk perception based on their experiences. Some even blacklist areas. Sometimes, even customers with a good profile are not given loans or credit cards because they live in a particular area”.
A banker told, “Such restrictions are put in place because a card-holder can easily ask for an add-on card. Since the dependent card is linked to the primary card, banks usually don’t check whether the add-on cardholder is a defaulter. The same applies to personal loans. Banks cannot detect who will be the end-user of the money”.
Normally, banks separate out applications of credit cards and loans in various categories. For instance many banks do not give loans or issue credit cards to the people working in export houses, business process outsourcing and aviation. Some banks ask for guarantor working in a more stable sector.
According to financial expert these steps taken by banks are part of fraud detection method followed by financial institutions worldwide, as in developed countries as identity thefts are on increase.
Thus Blacklisting addressed is one of the measures to prevent frauds.
In case of secured loans, banks decide on a case-to-case basis. For instance HDFC a leading private sector bank reject loan only when the relative is a joint applicant, not if a blood relative has defaulted.
HDFC spokesperson stated, “If they have applied jointly, we still assess whether it was a one-off case or the person concerned is a frequent defaulter. Further, in case of any dispute with a bank or any other lender we get the details before taking any decision”.
Thursday, October 29, 2009
Banks reject loans if your close relative is a defaulter
If any of your relative has defaulted on repayment then you might not get loan. Now banks decision for giving loans or issuing credit card are base on residential address rather than only borrower’s income.
Recently in one of the instance leading private bank rejected credit card application because one of his close relative names was on the defaulter list.
Last month Samar Roy planned to get credit card so he applied for it with a leading private sector bank. As he was earning a reasonably good salary and had not taken any loan, even no credit cards issued to his name.
But bank rejected his application on grounds of “unsatisfactory credit record”. When Roy contacted bank to know the reason, he was told that his application was rejected because his father, who is staying in the same residence, name is on the defaulter list.
Against Roy’s father there is a due of Rs 10,000, which he did not pay owing to a dispute with his credit card issuer. Thus bank reported him as a defaulter to the Credit Information Bureau, India (Cibil).
A banker informed, “In the current environment, in which banks are extremely cautious about lending, everyone has put in mechanisms to prevent defaults. Residential address is one such tool that is used more often in the case of unsecured loans and credit cards”.
Roy was advised that he should ask his father to resolve dues with other bank if he does not want loan applications to get rejected in future.
In case an applicant belongs to a business family and the address is blacklisted the possibility of loan rejection is higher.
There are some banks that have gone one step ahead, they have blacklisted whole localities. An executive with a multinational bank told, “Every bank has risk perception based on their experiences. Some even blacklist areas. Sometimes, even customers with a good profile are not given loans or credit cards because they live in a particular area”.
A banker told, “Such restrictions are put in place because a card-holder can easily ask for an add-on card. Since the dependent card is linked to the primary card, banks usually don’t check whether the add-on cardholder is a defaulter. The same applies to personal loans. Banks cannot detect who will be the end-user of the money”.
Normally, banks separate out applications of credit cards and loans in various categories. For instance many banks do not give loans or issue credit cards to the people working in export houses, business process outsourcing and aviation. Some banks ask for guarantor working in a more stable sector.
According to financial expert these steps taken by banks are part of fraud detection method followed by financial institutions worldwide, as in developed countries as identity thefts are on increase.
Thus Blacklisting addressed is one of the measures to prevent frauds.
In case of secured loans, banks decide on a case-to-case basis. For instance HDFC a leading private sector bank reject loan only when the relative is a joint applicant, not if a blood relative has defaulted.
HDFC spokesperson stated, “If they have applied jointly, we still assess whether it was a one-off case or the person concerned is a frequent defaulter. Further, in case of any dispute with a bank or any other lender we get the details before taking any decision”.
Recently in one of the instance leading private bank rejected credit card application because one of his close relative names was on the defaulter list.
Last month Samar Roy planned to get credit card so he applied for it with a leading private sector bank. As he was earning a reasonably good salary and had not taken any loan, even no credit cards issued to his name.
But bank rejected his application on grounds of “unsatisfactory credit record”. When Roy contacted bank to know the reason, he was told that his application was rejected because his father, who is staying in the same residence, name is on the defaulter list.
Against Roy’s father there is a due of Rs 10,000, which he did not pay owing to a dispute with his credit card issuer. Thus bank reported him as a defaulter to the Credit Information Bureau, India (Cibil).
A banker informed, “In the current environment, in which banks are extremely cautious about lending, everyone has put in mechanisms to prevent defaults. Residential address is one such tool that is used more often in the case of unsecured loans and credit cards”.
Roy was advised that he should ask his father to resolve dues with other bank if he does not want loan applications to get rejected in future.
In case an applicant belongs to a business family and the address is blacklisted the possibility of loan rejection is higher.
There are some banks that have gone one step ahead, they have blacklisted whole localities. An executive with a multinational bank told, “Every bank has risk perception based on their experiences. Some even blacklist areas. Sometimes, even customers with a good profile are not given loans or credit cards because they live in a particular area”.
A banker told, “Such restrictions are put in place because a card-holder can easily ask for an add-on card. Since the dependent card is linked to the primary card, banks usually don’t check whether the add-on cardholder is a defaulter. The same applies to personal loans. Banks cannot detect who will be the end-user of the money”.
Normally, banks separate out applications of credit cards and loans in various categories. For instance many banks do not give loans or issue credit cards to the people working in export houses, business process outsourcing and aviation. Some banks ask for guarantor working in a more stable sector.
According to financial expert these steps taken by banks are part of fraud detection method followed by financial institutions worldwide, as in developed countries as identity thefts are on increase.
Thus Blacklisting addressed is one of the measures to prevent frauds.
In case of secured loans, banks decide on a case-to-case basis. For instance HDFC a leading private sector bank reject loan only when the relative is a joint applicant, not if a blood relative has defaulted.
HDFC spokesperson stated, “If they have applied jointly, we still assess whether it was a one-off case or the person concerned is a frequent defaulter. Further, in case of any dispute with a bank or any other lender we get the details before taking any decision”.
Wednesday, October 28, 2009
Lending rates not change in the next 3-4 months
The Reserve Bank of India has not changed the key rates in its second monetary policy review therefore retail and corporate loan rates are likely to remain unchanged. Bankers said there is no possibility of any increase in lending rates in the next three to four months.
Corporation Bank Executive Director Asit Pal said, "I do not see any change in the interest rates till March. There is no liquidity problem in the system and credit off- take is less than expected".
In its quarterly monetary policy RBI said the credit growth is unlikely to meet 20 per cent target.
RBI has increased the Statutory Liquidity Ratio (SLR), the minimum amount the bank must park in government securities, by one percentage point to 25 per cent but has not changed the repo rate at 4.75 per cent and reverse repo at 3.
Corporation Bank Executive Director Asit Pal said, "I do not see any change in the interest rates till March. There is no liquidity problem in the system and credit off- take is less than expected".
In its quarterly monetary policy RBI said the credit growth is unlikely to meet 20 per cent target.
RBI has increased the Statutory Liquidity Ratio (SLR), the minimum amount the bank must park in government securities, by one percentage point to 25 per cent but has not changed the repo rate at 4.75 per cent and reverse repo at 3.
RBI might ask banks to make more provisions for bad loans
In case the Reserve Bank of India issue instructions to the Indian banks to keep more funds as a cushion to cover losses occurring in view of loans extended to builders and also make more provisions related to bad loans.
Therefore banks will require setting aside 1% of a loan given to commercial real estate as a provision, which will be more from the present 0.4%. RBI governor D Subbarao has classified such loans, loans given to builders for construction of commercial properties like offices, malls, entertainment zones and hotels.
OP Bhatt, chairman, State Bank of India, pointed out that there will be marginal increase in interest rates of such loans. Most of the banks are giving loans to the builders at prime lending rate (PLR) or at a spread over the PLR.
According to Chanda Kochhar, CEO of ICICI Bank, “There is no issue of asset bubble as such. The provisioning of loans extended to commercial real estate was high previously. Subsequently, the credit flow to this sector fell, which impacted its activity. Now that the activity has picked up in this sector, RBI has raised provisioning requirement back to the old levels. But banks’ exposure towards commercial real estate sector is low. NBFCs and mutual funds are more active in this space.”
Earlier after the collapse of Lehman Brothers the credit lines across banks (globally) were freeze thus the provisioning for such loans was cut down from 1% to 0.4%.
RBI stated the increase in flow of credit in this sector and the restructuring of loans is mainly responsible for the increase in provisioning of such loans. M Narendra, executive director, Bank of India said, “Excess of credit to a particular sector is a concern for RBI, and thus, provisioning has been raised. This will reduce easy access to money (for builders). Hopefully, it should result in builders lowering the price of property, something most have refrained from doing so far”.
Moreover banks have been instructed to recover the provision coverage ratio (PCR) on bad loans to 70%. As all the banks follow asset classification norms, this range between 10% for sub-standard to 100% on loss loan and PCR is the overall provision on bad loans. Thus the banks will be expected to give up PCR amount from a loan in case they have to set aside that loan account. While after holding a meeting with RBI Mr Bhatt said, banks have put forward their request before the regulator to review the entire model of asset classification. While speaking to the media, he gave indication that banks might get more than one year time to adhere to the 70% norm.
However among banks, SBI’s PCR stands to 38% and ICICI Bank’s is 55% as of March 2009, while PNB’s PCR stood at 90%. Early this year, RBI had sent a paper to SBI in which it has asked the bank to raise its PCR to the industry average of 52%. But a lower PCR do not mean the bank has not made adequate provision.
Therefore banks will require setting aside 1% of a loan given to commercial real estate as a provision, which will be more from the present 0.4%. RBI governor D Subbarao has classified such loans, loans given to builders for construction of commercial properties like offices, malls, entertainment zones and hotels.
OP Bhatt, chairman, State Bank of India, pointed out that there will be marginal increase in interest rates of such loans. Most of the banks are giving loans to the builders at prime lending rate (PLR) or at a spread over the PLR.
According to Chanda Kochhar, CEO of ICICI Bank, “There is no issue of asset bubble as such. The provisioning of loans extended to commercial real estate was high previously. Subsequently, the credit flow to this sector fell, which impacted its activity. Now that the activity has picked up in this sector, RBI has raised provisioning requirement back to the old levels. But banks’ exposure towards commercial real estate sector is low. NBFCs and mutual funds are more active in this space.”
Earlier after the collapse of Lehman Brothers the credit lines across banks (globally) were freeze thus the provisioning for such loans was cut down from 1% to 0.4%.
RBI stated the increase in flow of credit in this sector and the restructuring of loans is mainly responsible for the increase in provisioning of such loans. M Narendra, executive director, Bank of India said, “Excess of credit to a particular sector is a concern for RBI, and thus, provisioning has been raised. This will reduce easy access to money (for builders). Hopefully, it should result in builders lowering the price of property, something most have refrained from doing so far”.
Moreover banks have been instructed to recover the provision coverage ratio (PCR) on bad loans to 70%. As all the banks follow asset classification norms, this range between 10% for sub-standard to 100% on loss loan and PCR is the overall provision on bad loans. Thus the banks will be expected to give up PCR amount from a loan in case they have to set aside that loan account. While after holding a meeting with RBI Mr Bhatt said, banks have put forward their request before the regulator to review the entire model of asset classification. While speaking to the media, he gave indication that banks might get more than one year time to adhere to the 70% norm.
However among banks, SBI’s PCR stands to 38% and ICICI Bank’s is 55% as of March 2009, while PNB’s PCR stood at 90%. Early this year, RBI had sent a paper to SBI in which it has asked the bank to raise its PCR to the industry average of 52%. But a lower PCR do not mean the bank has not made adequate provision.
Monday, October 26, 2009
Loans available, Banks following all guidelines stringently
Although the banks are offering home loans at 8% - 8.5% but it is not easy to get loans. Recently Brajesh Dhoot went to a private bank for a home loan bank offered him a loan at rate of 8.75 per cent for 20 years. The bank also agreed to pay 90 per cent of the total cost of the home.
After this, Dhoot started looking for a house. When he found a suitable apartment and he submitted the documents to the bank, but to his surprise he found the bank has changed the rules.
Though bank was offering 90 per cent of the total cost of the house, but the value of the property was reduced by 15 per cent. This is not the only case, banks agreeing to give loan, but have tightened norms. Some of the measures banks are taking are:
Direct selling agents (DSAs) told banks have reduced the loan-to-value (LTV) ratio by 5-10 per cent – this reduction has a significant effect if you are buying a house. Vinod Prajapati, a DSA told, “Earlier, banks used to lend up to 85-90 per cent of the agreement value (including registration and stamp duty charges). Today, the limit is 75-80 per cent.” For instance now ICICI Bank website shows the LTV ratio 80 per cent, previously it was 85 per cent.
According to industry sources banks are doing their own valuations. For instance if the value of the property is Rs 50 lakh according to the agreement and the bank executive puts the values at Rs 42 lakh, the bank will sanction the loan amount according to the latter’s valuation. Earlier also the banks used to do their own valuations but agreed to give loan according to the agreement value.
Another significant change banks are doing is fall in the installment-to-income ratio (IIR). On this basis bank decides the amount loan you are eligible for depending on your take-home salary. DSAs say there have been 5-10 per cent fall in IIRs.
According to financial expert, “The IIR is higher for those with lower salaries”. Suppose an individual is earning Rs 20,000 the IIR will be 55-60 per cent. While people earning between Rs 25,000 and Rs 50,000 the IIR will be 45-50 per cent.
In case of personal loan the things can be worse. If you do not have a salary account with the bank then you might not get a personal loan. According to a banker, “Even a person with a salary account will require a guarantor”.
DSAs are required to bunch an insurance product with a loan and this is done in cases where the bank is lending more or negotiating on some other criteria’s.
For sectors the banks have completely stopped lending which include business process outsourcing, software and exports were already in the black-list. To this list aviation has been added.
In case a loan applicant is working with a small company, banks have started checking the balance sheet of such firms to check their financial stability. If the customer is unable to provide the details, he is asked to get a company profile form filled by the employer.
In case of second-hand purchase the loan applicants have to do extra paperwork. Now it has become compulsory to submit occupancy certificate, commencement certificate and approval plans. But this is difficult as many old societies do not have all the papers with them.
Prajapati pointed out, “Even for a small deviation such as marginally increasing the LTV, the case paper now goes to higher authorities”. Over a year, junior executives were had the authority to take a call in such matters.
However the loans are available but banks are following all guidelines stringently. The potential borrowers are required to have an extra cash in hand to handle the last-minute situations.
After this, Dhoot started looking for a house. When he found a suitable apartment and he submitted the documents to the bank, but to his surprise he found the bank has changed the rules.
Though bank was offering 90 per cent of the total cost of the house, but the value of the property was reduced by 15 per cent. This is not the only case, banks agreeing to give loan, but have tightened norms. Some of the measures banks are taking are:
Direct selling agents (DSAs) told banks have reduced the loan-to-value (LTV) ratio by 5-10 per cent – this reduction has a significant effect if you are buying a house. Vinod Prajapati, a DSA told, “Earlier, banks used to lend up to 85-90 per cent of the agreement value (including registration and stamp duty charges). Today, the limit is 75-80 per cent.” For instance now ICICI Bank website shows the LTV ratio 80 per cent, previously it was 85 per cent.
According to industry sources banks are doing their own valuations. For instance if the value of the property is Rs 50 lakh according to the agreement and the bank executive puts the values at Rs 42 lakh, the bank will sanction the loan amount according to the latter’s valuation. Earlier also the banks used to do their own valuations but agreed to give loan according to the agreement value.
Another significant change banks are doing is fall in the installment-to-income ratio (IIR). On this basis bank decides the amount loan you are eligible for depending on your take-home salary. DSAs say there have been 5-10 per cent fall in IIRs.
According to financial expert, “The IIR is higher for those with lower salaries”. Suppose an individual is earning Rs 20,000 the IIR will be 55-60 per cent. While people earning between Rs 25,000 and Rs 50,000 the IIR will be 45-50 per cent.
In case of personal loan the things can be worse. If you do not have a salary account with the bank then you might not get a personal loan. According to a banker, “Even a person with a salary account will require a guarantor”.
DSAs are required to bunch an insurance product with a loan and this is done in cases where the bank is lending more or negotiating on some other criteria’s.
For sectors the banks have completely stopped lending which include business process outsourcing, software and exports were already in the black-list. To this list aviation has been added.
In case a loan applicant is working with a small company, banks have started checking the balance sheet of such firms to check their financial stability. If the customer is unable to provide the details, he is asked to get a company profile form filled by the employer.
In case of second-hand purchase the loan applicants have to do extra paperwork. Now it has become compulsory to submit occupancy certificate, commencement certificate and approval plans. But this is difficult as many old societies do not have all the papers with them.
Prajapati pointed out, “Even for a small deviation such as marginally increasing the LTV, the case paper now goes to higher authorities”. Over a year, junior executives were had the authority to take a call in such matters.
However the loans are available but banks are following all guidelines stringently. The potential borrowers are required to have an extra cash in hand to handle the last-minute situations.
Wednesday, October 21, 2009
Tata Capital offers auto loans at lowest interest rate of 10.5 per cent on new cars
Tata Capital, a subsidy of Tata Group Company has introduced its auto loans at attractive rates.
According to press release, "Tata Capital auto loans will be offered at very attractive rates to the discerning customer. Customers looking out for a quick and hassle-free way of getting an auto loan will now be able to avail the same through Tata Capital's offices across leading markets in India".
Company is offering auto loans at lowest interest rate of 10.5 per cent on all new car loans along with special waiver on processing and foreclosure charges.
The release stated the offer is being given on all fresh loan proposals and will be valid till October 31.
Tata Capital's Consumer Finance and Advisory Business Head, Jamshed Daboo informed, "While taking an auto loan seems simple enough, people are often left wanting for relevant advise and available finance options. Our well-trained advisory team will empower our customers with accurate information to help them take informed decisions."
Tata Capital had recently got into Consumer Finance and Advisory Business (CFAB) business, includes sales and service structure integrating all consumer finance and advisory products and services into a single network.
Tata Capital through CFAB will be offering various combined retail offering together, in the areas of consumer loan products and financial advisory services, including auto loans.
The release also stated company proposes to expand its business, following this in 71 cities it will be opening a chain of over 120 branch offices by December this year.
It added, through these branches company will be offering various combined retail offerings in the areas of consumer loan products and investment advisory services.
According to press release, "Tata Capital auto loans will be offered at very attractive rates to the discerning customer. Customers looking out for a quick and hassle-free way of getting an auto loan will now be able to avail the same through Tata Capital's offices across leading markets in India".
Company is offering auto loans at lowest interest rate of 10.5 per cent on all new car loans along with special waiver on processing and foreclosure charges.
The release stated the offer is being given on all fresh loan proposals and will be valid till October 31.
Tata Capital's Consumer Finance and Advisory Business Head, Jamshed Daboo informed, "While taking an auto loan seems simple enough, people are often left wanting for relevant advise and available finance options. Our well-trained advisory team will empower our customers with accurate information to help them take informed decisions."
Tata Capital had recently got into Consumer Finance and Advisory Business (CFAB) business, includes sales and service structure integrating all consumer finance and advisory products and services into a single network.
Tata Capital through CFAB will be offering various combined retail offering together, in the areas of consumer loan products and financial advisory services, including auto loans.
The release also stated company proposes to expand its business, following this in 71 cities it will be opening a chain of over 120 branch offices by December this year.
It added, through these branches company will be offering various combined retail offerings in the areas of consumer loan products and investment advisory services.
Wednesday, September 2, 2009
Union Bank home, auto loans segment pick up in current fiscal
Union Bank of India a state owned lender is expecting its home, auto loan portfolios to grow in the current fiscal but it added that it might not be possible for it to achieve the credit growth of 25 per cent which it had targeted for FY10.
Union Bank of India Chairman and Managing Director, M V Nair informed reporters although bank had targeted a growth of 25 per cent in the present fiscal but due to difficult market conditions it might be able to attain 20-22 per cent.
He added, "We had targeted a loan growth of 25 per cent in this fiscal. But in the present conditions, this is difficult to attain. Our credit is currently growing at 18.3 per cent. For the full fiscal, we may achieve 20-22 per cent".
Nair said in the current period bank has seen growth in its home, auto loans segments therefore is hopeful of increase in the credit off take of these segments in the coming months.
He added, "Our expectation is that the home loans will pick up in the next few months. There is a good demand for home loans. Auto loans have also started picking up."
Nair said in the current fiscal bank is also expecting its deposit portfolio to grow by 20-22 per cent and added till December the interest rates in the industry will remain stable and rise is possible only, if the credit growth picks up.
Nair informed although there were uncertainties in the market that liquidity in the system might get adversely affected due to government borrowing but the current indications show that the liquidity will not have any major impact.
In a reply about the impact of the weak monsoon on the growth of economy and rise in bad loans in the banking system Nair said, "It is too early to comment on the impact of monsoon."
The public-sector lender is classified under tier-II with headroom of Rs 2,500 crore expects to rises around Rs 500-crore by September.
Nair stated over the past few years bank is in the process of implementing strategies to grow its fee-based income and has seen a 40-45 per cent core fee-based income year-on-year.
Over the past five years the bank has invested around Rs 332 crore on the technology side including the implementation of core banking solution.
He said by end-fiscal bank plans to migrate 35 per cent of its total business to total business to core banking solution.
Currently bank’s 27 per cent business is being carried out through CBS.
Expressing views on the decision of RBI of putting cap of Rs 10,000 on third party ATM transactions and limit the free transactions to five a month, Nair said banks have to yet decide on the matter.
Nair informed, "We are yet to take a call on the matter, RBI has left that issue to the decision of banks".
Regarding expansion plan Nair said, Union Bank has taken decision to launch lobby banking in around 100 branches across the country at the same time it will offer relationship banking through another 300 branches for relationship banking.
Nair further added bank has brought two of its Regional Rural Banks (RRBs)— Kashi Gomti Samyut Gramin Bank and Rewa Sidhi Gramin Bank — under CBS.
Union Bank, in alliance with Banglore-based International Institute of Information Technology released a report on technology-led transformation of Indian banks.
Union Bank of India Chairman and Managing Director, M V Nair informed reporters although bank had targeted a growth of 25 per cent in the present fiscal but due to difficult market conditions it might be able to attain 20-22 per cent.
He added, "We had targeted a loan growth of 25 per cent in this fiscal. But in the present conditions, this is difficult to attain. Our credit is currently growing at 18.3 per cent. For the full fiscal, we may achieve 20-22 per cent".
Nair said in the current period bank has seen growth in its home, auto loans segments therefore is hopeful of increase in the credit off take of these segments in the coming months.
He added, "Our expectation is that the home loans will pick up in the next few months. There is a good demand for home loans. Auto loans have also started picking up."
Nair said in the current fiscal bank is also expecting its deposit portfolio to grow by 20-22 per cent and added till December the interest rates in the industry will remain stable and rise is possible only, if the credit growth picks up.
Nair informed although there were uncertainties in the market that liquidity in the system might get adversely affected due to government borrowing but the current indications show that the liquidity will not have any major impact.
In a reply about the impact of the weak monsoon on the growth of economy and rise in bad loans in the banking system Nair said, "It is too early to comment on the impact of monsoon."
The public-sector lender is classified under tier-II with headroom of Rs 2,500 crore expects to rises around Rs 500-crore by September.
Nair stated over the past few years bank is in the process of implementing strategies to grow its fee-based income and has seen a 40-45 per cent core fee-based income year-on-year.
Over the past five years the bank has invested around Rs 332 crore on the technology side including the implementation of core banking solution.
He said by end-fiscal bank plans to migrate 35 per cent of its total business to total business to core banking solution.
Currently bank’s 27 per cent business is being carried out through CBS.
Expressing views on the decision of RBI of putting cap of Rs 10,000 on third party ATM transactions and limit the free transactions to five a month, Nair said banks have to yet decide on the matter.
Nair informed, "We are yet to take a call on the matter, RBI has left that issue to the decision of banks".
Regarding expansion plan Nair said, Union Bank has taken decision to launch lobby banking in around 100 branches across the country at the same time it will offer relationship banking through another 300 branches for relationship banking.
Nair further added bank has brought two of its Regional Rural Banks (RRBs)— Kashi Gomti Samyut Gramin Bank and Rewa Sidhi Gramin Bank — under CBS.
Union Bank, in alliance with Banglore-based International Institute of Information Technology released a report on technology-led transformation of Indian banks.
Thursday, August 13, 2009
PSBs outperform their private competitors in loan recovery
Public sector banks (PSBs) since the last nine successive quarters have been performing much better than their competitors in the private sector. The PSBs net non-performing assets (NPAs) have been lower as a percentage of advances. They have even beaten their competitors in the recovery of loans.
The PSBs registered average net NPAs as a percentage of advances at 0.88% while the NPAs of private banks stood at 1.11%. As per the Sunday ET analysis of the banks present in the banking index of the, the Bankex private banks NPAs figure is much above the overall industry average of 0.98% by the quarter ending June, 2009. As per the figures for FY09 the net NPA of the industry has increased by 25% to Rs 21,848 crore.
According to FY09 figures private banks have net NPA amount to Rs 6,310 crore and the rest of the amount of Rs 15,538 crore is of public sector banks. The Kotak Mahindra Bank and ICICI bank, among the private banks had the highest net NPAs as a percentage of their advances amounted at 3.07% and 2.33%, respectively.
In contrast to this none of the PSBs NPA level is more than 2%. Few of the PSBs banks such as SBI, Indian Overseas Bank, IDBI Bank and Canara Bank have a little more than 1% of net NPA of their respective advances.
While all other PSBs listed in the index - Allahabad Bank, Oriental Bank of Commerce, Bank of India, Union Bank of India, Bank of Baroda and National Bank are having net NPA level of less than 1% of their respective advances. A loan is classified as NPA if the payments have not been made for a certain period of time generally for two consecutive quarters.
However the NPAs of the private sector banks in absolute terms stood relatively less as they had low advances. But then also the private sector banks saw a faster growth in their NPA. In FY09 their net NPAs increased by 32% from Rs 4,763 cr a year ago. In the preceding year also their net NPAs doubled. Even the public sector NPAs grew by about 23% for FY09.
The ICICI Bank and HDFC Bank are having the highest NPAs since they have large lending base. In case of PSBs, SBI is leading due to same reason. The UCO Bank CMD SK Goel pointed out the private banks do aggressive retail lending therefore, there is high possibility of loan turning into NPA is more.
Moreover the private banks have more dealing in the NPA-prone credit card businesses. On the other hand the PSBs do not have much exposure of retail loans lending. According to executive director at Bank of Rajasthan KK Sharma it is mainly concerned with the base effect.
As the private banks have lower base thus the NPA figures are higher in percentage terms. As per the RBI guidelines last year banks restructured their loans having dues for payment. Therefore the banks were saved having larger base of bad loans.
The PSBs registered average net NPAs as a percentage of advances at 0.88% while the NPAs of private banks stood at 1.11%. As per the Sunday ET analysis of the banks present in the banking index of the, the Bankex private banks NPAs figure is much above the overall industry average of 0.98% by the quarter ending June, 2009. As per the figures for FY09 the net NPA of the industry has increased by 25% to Rs 21,848 crore.
According to FY09 figures private banks have net NPA amount to Rs 6,310 crore and the rest of the amount of Rs 15,538 crore is of public sector banks. The Kotak Mahindra Bank and ICICI bank, among the private banks had the highest net NPAs as a percentage of their advances amounted at 3.07% and 2.33%, respectively.
In contrast to this none of the PSBs NPA level is more than 2%. Few of the PSBs banks such as SBI, Indian Overseas Bank, IDBI Bank and Canara Bank have a little more than 1% of net NPA of their respective advances.
While all other PSBs listed in the index - Allahabad Bank, Oriental Bank of Commerce, Bank of India, Union Bank of India, Bank of Baroda and National Bank are having net NPA level of less than 1% of their respective advances. A loan is classified as NPA if the payments have not been made for a certain period of time generally for two consecutive quarters.
However the NPAs of the private sector banks in absolute terms stood relatively less as they had low advances. But then also the private sector banks saw a faster growth in their NPA. In FY09 their net NPAs increased by 32% from Rs 4,763 cr a year ago. In the preceding year also their net NPAs doubled. Even the public sector NPAs grew by about 23% for FY09.
The ICICI Bank and HDFC Bank are having the highest NPAs since they have large lending base. In case of PSBs, SBI is leading due to same reason. The UCO Bank CMD SK Goel pointed out the private banks do aggressive retail lending therefore, there is high possibility of loan turning into NPA is more.
Moreover the private banks have more dealing in the NPA-prone credit card businesses. On the other hand the PSBs do not have much exposure of retail loans lending. According to executive director at Bank of Rajasthan KK Sharma it is mainly concerned with the base effect.
As the private banks have lower base thus the NPA figures are higher in percentage terms. As per the RBI guidelines last year banks restructured their loans having dues for payment. Therefore the banks were saved having larger base of bad loans.
Tuesday, August 11, 2009
Selecting the ideal loan repayment tenure
Which is the right tenure period for repayment of loan? Such questions are often discussed by the home loan borrowers as they do for repayment options or interest rates. The tenure of repayment is fixed in accordance to the age of the borrower, his income, job stability, retirement plans and other debt obligations. Now days the borrowers are more interested in clearing their debts as soon as possible due to uncertainties and increasing cost of essential commodities.
Long tenure
For instance a person takes a loan of Rs 20 lakhs for tenure of 25 years at the interest rate of 10%. Thus his monthly EMI will stand to Rs 18,100. as the tenure is long the EMI seems to be affordable. But the borrower should remember that the cost of borrowing will be high with the longer tenure.
Usually borrowers choose long tenure to increase the loan eligibility of the borrower. But a person whose retirement is closer is not eligible for a long tenure loan, beyond his working years.
Moreover long tenure loans are uncertain means the interest rates can change either ways or the inflation can go up to an unexpected figures. Then what will the state of the economy in all those years no one can predict anything about that. The experts say the borrowers who have opted for long tenure loan should take in consideration the fluctuation in interest rate and to be on safer side must save separately.
Short tenure loans
There are some borrowers who opt for short tenure as they do not want to be in trouble due to rate fluctuations. In case of shorter tenure loans the EMI amount will be big. Although it is the best way to clear loans faster but it is not possible always to keep aside a major portion of the salary to repay home loans while managing other routine monthly expenses.
For instance a person takes a loan of Rs 20 lakhs for a tenure of five years at a 10% interest rate, then his EMI amount will stand to Rs 42,500. the EMI amount will be big due to small tenure of repayment. Thus it would be difficult for most of the borrowers to manage the huge EMI repayments.
Choose tenure that suits your needs
Then in such case what should we do? Choose the middle path i.e. choose the tenure that suits your needs. In case it is difficult to manage huge EMI payments you can choose 10 to 15 year loan tenure. It is better for young borrowers that they should complete their repayment of home loan before they start saving for their children’s higher education. And the borrowers whose retirement is closer should repay their debts before the retirement. The people who do not have a regular income source it is quite a tough job for them.
Therefore a borrower takes a loan of Rs 20 lakhs for tenure of 10 years at the 10% interest rate its EMI comes out to be Rs 26,400. Generally borrowers prefer to repay their home loan in eight years, thus the 8-10 years can be ideal for a borrower who has not done planning for any immediate major expenses.
Long tenure
For instance a person takes a loan of Rs 20 lakhs for tenure of 25 years at the interest rate of 10%. Thus his monthly EMI will stand to Rs 18,100. as the tenure is long the EMI seems to be affordable. But the borrower should remember that the cost of borrowing will be high with the longer tenure.
Usually borrowers choose long tenure to increase the loan eligibility of the borrower. But a person whose retirement is closer is not eligible for a long tenure loan, beyond his working years.
Moreover long tenure loans are uncertain means the interest rates can change either ways or the inflation can go up to an unexpected figures. Then what will the state of the economy in all those years no one can predict anything about that. The experts say the borrowers who have opted for long tenure loan should take in consideration the fluctuation in interest rate and to be on safer side must save separately.
Short tenure loans
There are some borrowers who opt for short tenure as they do not want to be in trouble due to rate fluctuations. In case of shorter tenure loans the EMI amount will be big. Although it is the best way to clear loans faster but it is not possible always to keep aside a major portion of the salary to repay home loans while managing other routine monthly expenses.
For instance a person takes a loan of Rs 20 lakhs for a tenure of five years at a 10% interest rate, then his EMI amount will stand to Rs 42,500. the EMI amount will be big due to small tenure of repayment. Thus it would be difficult for most of the borrowers to manage the huge EMI repayments.
Choose tenure that suits your needs
Then in such case what should we do? Choose the middle path i.e. choose the tenure that suits your needs. In case it is difficult to manage huge EMI payments you can choose 10 to 15 year loan tenure. It is better for young borrowers that they should complete their repayment of home loan before they start saving for their children’s higher education. And the borrowers whose retirement is closer should repay their debts before the retirement. The people who do not have a regular income source it is quite a tough job for them.
Therefore a borrower takes a loan of Rs 20 lakhs for tenure of 10 years at the 10% interest rate its EMI comes out to be Rs 26,400. Generally borrowers prefer to repay their home loan in eight years, thus the 8-10 years can be ideal for a borrower who has not done planning for any immediate major expenses.
Thursday, August 6, 2009
Decline in bank loans and deposits segments
In the past few months commercial banks have witnessed strong growth in loans and deposits but on fortnight ended July 17 saw a dip in these segments.
As per the latest data released by Reserve Bank of India (RBI) the outstanding of bank loans has declined to Rs 27,77,567 crore as on July 17, which is down by Rs 21,185 crore from the previous fortnight’s levels. There has been decline in both food credit – loans given to Food Corporation of India for grain procurement—and non-food credit, comprising loans to individuals, farmers, corporates and other businesses, by by Rs 9,526 crore and Rs 11,659 crore respectively during the fortnight.
As per the latest data of bank lending, deposits and investments there might be indications of reversal of fund flows from and into the banking sector, as such the previous fortnight had coincided with a quarter-end, it is the time when banks usually are inclined to load their loan books, so that their balance sheet numbers look better.
Earlier M Narendra, executive director, Bank of India has said businesses can put borrowing on hold as they expecting rates to come down. Also many businesses preferred to wait for the budget to get a clear picture on the economic front. Mr Narendra further added, “Loan demand should gather momentum by the end of September with demand expected from agriculture and infrastructure sector”.
According to RBI report on the macro and monetary developments in the economy the oil and fertilizer companies have done the repayment of over Rs 18,000 crore until May this year depicting gloomy credit growth figure for the year. On the other hand there has been decline of Rs 12,727 crore to Rs 13,34,720 crore in bank investments in government and other approved securities, as on July 17. The dip in investment in government paper has been of Rs 12,427 crore while in other approved securities the dip is of Rs 300 crore.
In case of liabilities the deposits have also witnessed dip in the latest fortnight. As on July 17 the total deposits mobilized by banks stood to Rs 40,10,052 crore which is down by Rs 18,655 crore from the previous fortnight. There has been decline in both demand and term deposits, by Rs 16,275 crore and Rs 2380 crore respectively. A public sector bank officer pointed out currently banks are reducing deposit rates therefore many depositors are going slow on investing their money in deposits.
As per the latest data released by Reserve Bank of India (RBI) the outstanding of bank loans has declined to Rs 27,77,567 crore as on July 17, which is down by Rs 21,185 crore from the previous fortnight’s levels. There has been decline in both food credit – loans given to Food Corporation of India for grain procurement—and non-food credit, comprising loans to individuals, farmers, corporates and other businesses, by by Rs 9,526 crore and Rs 11,659 crore respectively during the fortnight.
As per the latest data of bank lending, deposits and investments there might be indications of reversal of fund flows from and into the banking sector, as such the previous fortnight had coincided with a quarter-end, it is the time when banks usually are inclined to load their loan books, so that their balance sheet numbers look better.
Earlier M Narendra, executive director, Bank of India has said businesses can put borrowing on hold as they expecting rates to come down. Also many businesses preferred to wait for the budget to get a clear picture on the economic front. Mr Narendra further added, “Loan demand should gather momentum by the end of September with demand expected from agriculture and infrastructure sector”.
According to RBI report on the macro and monetary developments in the economy the oil and fertilizer companies have done the repayment of over Rs 18,000 crore until May this year depicting gloomy credit growth figure for the year. On the other hand there has been decline of Rs 12,727 crore to Rs 13,34,720 crore in bank investments in government and other approved securities, as on July 17. The dip in investment in government paper has been of Rs 12,427 crore while in other approved securities the dip is of Rs 300 crore.
In case of liabilities the deposits have also witnessed dip in the latest fortnight. As on July 17 the total deposits mobilized by banks stood to Rs 40,10,052 crore which is down by Rs 18,655 crore from the previous fortnight. There has been decline in both demand and term deposits, by Rs 16,275 crore and Rs 2380 crore respectively. A public sector bank officer pointed out currently banks are reducing deposit rates therefore many depositors are going slow on investing their money in deposits.
Friday, July 31, 2009
Bankers say 1% interest subvention will increase offtake of housing loans
With the announcement of interest subvention of 1% on all home loans of up to Rs 10 lakh, by the finance minister Pranab Mukherjee dream of owning a house for lower and middle income group can become reality as the interest rate on housing loans are expected to reduce. The interest subvention of 1 per cent on all home loans of up to Rs 10 lakh will be provided with a stipulation that the cost of house should not to exceed Rs 20 lakh. The subvention will be provided only for one year.
In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.
A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.
In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.
Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.
In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”
According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.
Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.
According to real estate developers the decision is a much needed step.
Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.
Bankers say 1% interest subvention will increase offtake of housing loans
With the announcement of interest subvention of 1% on all home loans of up to Rs 10 lakh, by the finance minister Pranab Mukherjee dream of owning a house for lower and middle income group can become reality as the interest rate on housing loans are expected to reduce. The interest subvention of 1 per cent on all home loans of up to Rs 10 lakh will be provided with a stipulation that the cost of house should not to exceed Rs 20 lakh. The subvention will be provided only for one year.
In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.
A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.
In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.
Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.
In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”
According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.
Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.
According to real estate developers the decision is a much needed step.
Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.
In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.
A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.
In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.
Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.
In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”
According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.
Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.
According to real estate developers the decision is a much needed step.
Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.
Bankers say 1% interest subvention will increase offtake of housing loans
With the announcement of interest subvention of 1% on all home loans of up to Rs 10 lakh, by the finance minister Pranab Mukherjee dream of owning a house for lower and middle income group can become reality as the interest rate on housing loans are expected to reduce. The interest subvention of 1 per cent on all home loans of up to Rs 10 lakh will be provided with a stipulation that the cost of house should not to exceed Rs 20 lakh. The subvention will be provided only for one year.
In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.
A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.
In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.
Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.
In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”
According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.
Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.
According to real estate developers the decision is a much needed step.
Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.
Monday, July 27, 2009
Customers throng public sector banks for vehicle loans
Earlier customers used to flock the private banks for getting vehicle loans but now the customers are visiting public sector banks for vehicle loans. The reason for change in approach of the customer is not only the low interest rates but also the easy operations and transparency.
For instance Mr Sanjay Mukherjee, a government employee based in Kolkata has recently bought a four wheeler for which he applied for loan with United Bank of India and in couple of hours his loan was sanctioned and also charged lower interest rate than that is offered by many private banks.
An anonymous customer of State Bank of India told, “In the case of a public sector bank, we can directly deal with the branch manager or the bank employee who is well versed with the various schemes, whereas in the case of private banks, it is the intermediary, usually an agent who has very limited information”.
As per analysis report by Crisil Research over the last one year there has been increase in the market shares by more than 10% which has impacted the approach of the customers and prefer public sector banks for loans.
Mr Manoj Mohta, Head-Research, Crisil Research said, “Earlier, PSBs accounted for about 25-30 per cent of the total vehicle finance portfolio and private banks had 50 per cent share, but now the share of PSBs has moved up by more than 10 per cent to almost 40 per cent of the total finance in the sector.”
Mr Mohta stated in 2009-2010 the increase in vehicle loan can go up to 8-10 per cent due to strong foothold the public sector banks have and the growth in basic assets.
Previously PSBs gave loans to only their own customers or on a reference but now the PSBs are aggressively sanctioning vehicle loans and have also simplified the most of the clauses. Mr Tanuj S. Sandhu, Zonal Head-East, Honda Siel Cars India Ltd pointed out recently many of the PSBs have got into tie-ups with various manufacturers and the most important is the rise in the market share of the PSBs has given a strong base to the customers satisfaction in these banks.
Mr Sandhu added, “The PSBs have a greater reach in the eastern and northeastern regions, making them the natural choice for vehicle finance in these regions”.
He stated earlier PSBs’ had financed around 4-6 per cent of the total Honda vehicles financed, but now it has increased to more than 16 per cent.
In 2008-09 in the vehicle loan segment many of the public sector banks have reported 35-40 per cent growth and this year also these banks are expecting to attain a similar growth.
Mr Vijayendra, General Manager, Retail, Union Bank of India explained, “The growth usually picks up post-August and the momentum continues till January. We have witnessed a reasonable growth in the auto loan portfolio so far during this year”.
A senior official at a car manufacturing company pointed out, “Most of the PSBs have a wider reach and long association with their customers. They maintain a track record of their customers, which makes loan disbursal easier”.
Most of the private banks have almost stopped giving vehicle loans because of increase in the default rates. Moreover PSBs are not expecting any rise in their non-performing assets. Mr Mohta said in 2008-09 in car loan segment the gross NPA was 2.5-2.75 per cent which is expected to rise by 4-4.5 per cent in 2009-2010. He stated the rise in NPAs can be seen mainly due to the loans sanctioned in 2007-08 and in early months of 2008-09. “The recent origination might reflect lower NPAs partly due to tightening of the underwriting norms and reduction in interest rates.”
For instance Mr Sanjay Mukherjee, a government employee based in Kolkata has recently bought a four wheeler for which he applied for loan with United Bank of India and in couple of hours his loan was sanctioned and also charged lower interest rate than that is offered by many private banks.
An anonymous customer of State Bank of India told, “In the case of a public sector bank, we can directly deal with the branch manager or the bank employee who is well versed with the various schemes, whereas in the case of private banks, it is the intermediary, usually an agent who has very limited information”.
As per analysis report by Crisil Research over the last one year there has been increase in the market shares by more than 10% which has impacted the approach of the customers and prefer public sector banks for loans.
Mr Manoj Mohta, Head-Research, Crisil Research said, “Earlier, PSBs accounted for about 25-30 per cent of the total vehicle finance portfolio and private banks had 50 per cent share, but now the share of PSBs has moved up by more than 10 per cent to almost 40 per cent of the total finance in the sector.”
Mr Mohta stated in 2009-2010 the increase in vehicle loan can go up to 8-10 per cent due to strong foothold the public sector banks have and the growth in basic assets.
Previously PSBs gave loans to only their own customers or on a reference but now the PSBs are aggressively sanctioning vehicle loans and have also simplified the most of the clauses. Mr Tanuj S. Sandhu, Zonal Head-East, Honda Siel Cars India Ltd pointed out recently many of the PSBs have got into tie-ups with various manufacturers and the most important is the rise in the market share of the PSBs has given a strong base to the customers satisfaction in these banks.
Mr Sandhu added, “The PSBs have a greater reach in the eastern and northeastern regions, making them the natural choice for vehicle finance in these regions”.
He stated earlier PSBs’ had financed around 4-6 per cent of the total Honda vehicles financed, but now it has increased to more than 16 per cent.
In 2008-09 in the vehicle loan segment many of the public sector banks have reported 35-40 per cent growth and this year also these banks are expecting to attain a similar growth.
Mr Vijayendra, General Manager, Retail, Union Bank of India explained, “The growth usually picks up post-August and the momentum continues till January. We have witnessed a reasonable growth in the auto loan portfolio so far during this year”.
A senior official at a car manufacturing company pointed out, “Most of the PSBs have a wider reach and long association with their customers. They maintain a track record of their customers, which makes loan disbursal easier”.
Most of the private banks have almost stopped giving vehicle loans because of increase in the default rates. Moreover PSBs are not expecting any rise in their non-performing assets. Mr Mohta said in 2008-09 in car loan segment the gross NPA was 2.5-2.75 per cent which is expected to rise by 4-4.5 per cent in 2009-2010. He stated the rise in NPAs can be seen mainly due to the loans sanctioned in 2007-08 and in early months of 2008-09. “The recent origination might reflect lower NPAs partly due to tightening of the underwriting norms and reduction in interest rates.”
Tuesday, July 7, 2009
NBFCs face tough competition from PSBs, reduces auto loan rates
Recently the country’s largest lender State Bank of India (SBI) has launched SBI Ezee Car Loan Scheme under which it is offering 8 per cent for the first year and 10 per cent for the second and third year. Other public sector banks (PSBs) are signing agreements with auto companies to provide vehicle loans at reasonable rates. Seeing the competition from PSBs the Non-Banking Finance Companies (NBFCs) have decided to lower their rates on vehicle finance. Industry officials over the past few month NBFCs have brought down interest rates by 100-200 basis points or one-two percentage points.
Meanwhile the vehicle financing companies Tata Motors and Bajaj are also offering interest financial assistance schemes or cash-back up to a certain amount of the disbursed loan in case the customer does not default on monthly installments. According to industry officials after the revision of rates by NBFCs the gap between them and private financiers has reduced to 100-150 basis points from the 200-300 basis points.
Mr Ravi Todi, Joint Managing Director at Magma Fincorp said, “Car financing is difficult as competition from public sector banks is increasing. Our rates are now between 12 and 14 per cent”.
Mr Ramesh Iyer, Managing Director, Mahindra Finance informed, “We have reduced interest rates between 100 and 200 basis points from May-end to June. Earlier our rates were 14-15 per cent. Now they are 12.50-13 per cent. Our own ability to raise money has been quite good”.
Official at dealerships told in the last two-three months interest rates of the vehicle financing companies of Tata Motors have also reduced up to 300 basis points.
But a spokesperson for Tata Motors Finance did not disclosed about the reduction in the interest rates in spite of repeated queries from Business Line. But dealership sources informed that the current rates are now 12.50 per cent as against 15-16 per cent earlier.
An official working with Tata Motors Finance at one of the dealerships informed, “We are running a scheme under which we give back customer 2 per cent of the disbursed loan amount back if there is no default on a single equated monthly installment in the past three years. On four years, the cash-back is 2.5 per cent and five years 3 per cent”.
Mr Milind Bade, General Manager (Marketing) at Bajaj Auto, said it has been for a week now its financing company is offering an interest subvention of 6 per cent on its motorcycle XCD. Earlier in April, it had launched a scheme of 10 per cent rate on models such as Pulsar 150 and 180 cc for almost two months.
He added, “We come out with select schemes on certain products. It helps to pre-pone sales and a competitive rate acts as an enabler”.
Meanwhile the vehicle financing companies Tata Motors and Bajaj are also offering interest financial assistance schemes or cash-back up to a certain amount of the disbursed loan in case the customer does not default on monthly installments. According to industry officials after the revision of rates by NBFCs the gap between them and private financiers has reduced to 100-150 basis points from the 200-300 basis points.
Mr Ravi Todi, Joint Managing Director at Magma Fincorp said, “Car financing is difficult as competition from public sector banks is increasing. Our rates are now between 12 and 14 per cent”.
Mr Ramesh Iyer, Managing Director, Mahindra Finance informed, “We have reduced interest rates between 100 and 200 basis points from May-end to June. Earlier our rates were 14-15 per cent. Now they are 12.50-13 per cent. Our own ability to raise money has been quite good”.
Official at dealerships told in the last two-three months interest rates of the vehicle financing companies of Tata Motors have also reduced up to 300 basis points.
But a spokesperson for Tata Motors Finance did not disclosed about the reduction in the interest rates in spite of repeated queries from Business Line. But dealership sources informed that the current rates are now 12.50 per cent as against 15-16 per cent earlier.
An official working with Tata Motors Finance at one of the dealerships informed, “We are running a scheme under which we give back customer 2 per cent of the disbursed loan amount back if there is no default on a single equated monthly installment in the past three years. On four years, the cash-back is 2.5 per cent and five years 3 per cent”.
Mr Milind Bade, General Manager (Marketing) at Bajaj Auto, said it has been for a week now its financing company is offering an interest subvention of 6 per cent on its motorcycle XCD. Earlier in April, it had launched a scheme of 10 per cent rate on models such as Pulsar 150 and 180 cc for almost two months.
He added, “We come out with select schemes on certain products. It helps to pre-pone sales and a competitive rate acts as an enabler”.
Friday, July 3, 2009
YES Bank to hire staff, plans to double branch network
YES Bank will be increasing the strength of its employees as it is planning to expand its branch network. Managing Director Rana Kapoor pointed out as there is opportunity for growing business in corporate finance therefore it will be expanding its branch network.
In an interview Kapoor said the bank will be doubling its branch network to 250 by end 2010 and 750 by the end of 2015. Kapoor added, “We will also increase our staff count from the current 2,700 to 3,600 soon”.
Kapoor informed one of the major area at which bank is looking to increase count is the small and medium enterprise (SME) sector which severely needs good bankers.
Kapoor explained, “There is a compelling opportunity in the SME sector. Currently the SME segment accounts for 6 per cent of our loan book. I am hopeful that their share will reach 20 per cent in three years”.
Kapoor restate YES Bank is having indifference to the retail lending, because of enormous risks involved in that business.
Bank is having fewer branches, in comparison to the other private sector peers, might be also restricting plans to expand the retail lending business. At the end of the last financial year in March, YES Bank’s retail advances amounted to Rs 107 crore out of its total loan book of Rs 12,403 crore.
Kapoor further added that interest rates will probably remain stable for some time, or even ease a bit more.
He said, “But they will start inching up again in three to four months, once inflationary pressure begins to build up as a result of increase in prices of various asset classes”.
He informed YES Bank’s prime lending rate at present varies in a range of 7.5-12.5 per cent depending on the tenure of the loan.
In an interview Kapoor said the bank will be doubling its branch network to 250 by end 2010 and 750 by the end of 2015. Kapoor added, “We will also increase our staff count from the current 2,700 to 3,600 soon”.
Kapoor informed one of the major area at which bank is looking to increase count is the small and medium enterprise (SME) sector which severely needs good bankers.
Kapoor explained, “There is a compelling opportunity in the SME sector. Currently the SME segment accounts for 6 per cent of our loan book. I am hopeful that their share will reach 20 per cent in three years”.
Kapoor restate YES Bank is having indifference to the retail lending, because of enormous risks involved in that business.
Bank is having fewer branches, in comparison to the other private sector peers, might be also restricting plans to expand the retail lending business. At the end of the last financial year in March, YES Bank’s retail advances amounted to Rs 107 crore out of its total loan book of Rs 12,403 crore.
Kapoor further added that interest rates will probably remain stable for some time, or even ease a bit more.
He said, “But they will start inching up again in three to four months, once inflationary pressure begins to build up as a result of increase in prices of various asset classes”.
He informed YES Bank’s prime lending rate at present varies in a range of 7.5-12.5 per cent depending on the tenure of the loan.
Thursday, July 2, 2009
SBI, UBI revised BPLRs
The country’s largest bank, State Bank of India (SBI) has announced cut in its benchmark lending rate by half a percentage point to 11.75 per cent from this home, car and corporate loan customers will be benefited.
SBI informed the Bombay Stock Exchange the BPLR has been reduced by 50 basis points and will be effective from 29 June. At present bank BPLR is at 12.25 per cent. Earlier bank had reduced BPLR in January 2009 by 75 basis points.
It is expected the cut done by SBI will prompt other lenders to follow suit and can lead to greater demand for loans and stimulate consumption.
Before slashing BPLR SBI earlier this month had reduced deposit rates by 25 basis points across all maturities to bring down the cost of funds.
For a period of 181 days to less than one year, the rate has been reduced from 6.50 per cent to 6.25 per cent whereas for one year to less than 2-year, it was cut from 7.25 per cent to seven per cent.
For two-years to less than 1,000 days, the rate has been revised from 7.50 per cent to 7.25 per cent, then for 1,000-day tenure, the rate has been revised from 7.75 per cent to 7.50 per cent.
On the other hand United Bank of India (UBI) has reduced rate by 25 bps. Mr SC Gupta, United Bank of India chairman and managing director made an announcement of a cut in the bank’s BPLR by 25 basis points and will be effective from 1 July. After the revision the BPLR will stand reduced at 12 per cent.
Allahabad Bank a public sector bank informed before taking decision on next round of rate cuts it will take into consideration “several other factors”.
Speaking on the sidelines of a Banking Conclave Allahabad Bank chairman and managing director Mr KR Kamath told reporters, “The rates are being reviewed. The demand that interest rates should be made affordable is there, but several other factors should also be taken into account”.
SBI informed the Bombay Stock Exchange the BPLR has been reduced by 50 basis points and will be effective from 29 June. At present bank BPLR is at 12.25 per cent. Earlier bank had reduced BPLR in January 2009 by 75 basis points.
It is expected the cut done by SBI will prompt other lenders to follow suit and can lead to greater demand for loans and stimulate consumption.
Before slashing BPLR SBI earlier this month had reduced deposit rates by 25 basis points across all maturities to bring down the cost of funds.
For a period of 181 days to less than one year, the rate has been reduced from 6.50 per cent to 6.25 per cent whereas for one year to less than 2-year, it was cut from 7.25 per cent to seven per cent.
For two-years to less than 1,000 days, the rate has been revised from 7.50 per cent to 7.25 per cent, then for 1,000-day tenure, the rate has been revised from 7.75 per cent to 7.50 per cent.
On the other hand United Bank of India (UBI) has reduced rate by 25 bps. Mr SC Gupta, United Bank of India chairman and managing director made an announcement of a cut in the bank’s BPLR by 25 basis points and will be effective from 1 July. After the revision the BPLR will stand reduced at 12 per cent.
Allahabad Bank a public sector bank informed before taking decision on next round of rate cuts it will take into consideration “several other factors”.
Speaking on the sidelines of a Banking Conclave Allahabad Bank chairman and managing director Mr KR Kamath told reporters, “The rates are being reviewed. The demand that interest rates should be made affordable is there, but several other factors should also be taken into account”.
Wednesday, June 17, 2009
HDFC Bank tie-up with BIGFLIX.com to enhance net banking
HDFC Bank is India’s leading private bank has signed an agreement with BIGFlix.com DVD Rentals, India’s largest online and offline DVD rental service in order to promote HDFC Net Banking. Bank customers who register for net banking services will get a FREE TRIAL from BIGFlix DVD Rentals for a period of 14 days.
To increase and offer a wide range of experiences through partner benefits to its members, HDFC Bank has tied-up with BIGFlix.com, making it their first entertainment partner in the DVD rentals space. In this recession time HDFC card holders get a reason to rejoice as BIGFlix.com online move rental service has tied-up with HDFC bank under this it is offering all HDFC BANK net banking customers cardholders a special offer on the Rs 375/- one month one disc subscription plan.
The tie-up has come as a blessing for HDFC card holders as watching movies at a multiplex theatre is relatively an expensive affair these days. With BIGFlix.com, one can have the comfort of ordering the DVD of their favorite movies just by logging on to the website and the delivery will given and also picked-up from their doorsteps. Overall BIGFlix.com DVD rental will prove to be a very valuable for money entertainment option for all movie lovers.
‘HDFC Trial’ offer was introduced in 18 branches in Mumbai from 14th June. The procedure is just sign in for the HDFC Net Banking and gets a BIGFlix.com 14 day free trial offer. If the customer cancels the deal within the 14 days BIGFlix.com will pay the entire amount back to him.
Some special offers for payment:
a) If you register with your credit card and BIGFlix.com will credit the amount only after the free trial period is over
b) In case you book with your debit card – then BIGFlix.com will debit your account and then on cancellation before the 14 days free trial period BIGFlix.com will pay the entire amount back
At present the offer is available at the following HDFC Bank branches: Mumbai Central, Dadar, Vikhroli, Kamala Mills EC , Worli, Tulsiani, Hughes Road, Fort, Tirupati Apartments, Sion, CST (VT), Mulund (East), Chembur, Mulund (West), Powai, Parel, Dombivali and Bhandup
To increase and offer a wide range of experiences through partner benefits to its members, HDFC Bank has tied-up with BIGFlix.com, making it their first entertainment partner in the DVD rentals space. In this recession time HDFC card holders get a reason to rejoice as BIGFlix.com online move rental service has tied-up with HDFC bank under this it is offering all HDFC BANK net banking customers cardholders a special offer on the Rs 375/- one month one disc subscription plan.
The tie-up has come as a blessing for HDFC card holders as watching movies at a multiplex theatre is relatively an expensive affair these days. With BIGFlix.com, one can have the comfort of ordering the DVD of their favorite movies just by logging on to the website and the delivery will given and also picked-up from their doorsteps. Overall BIGFlix.com DVD rental will prove to be a very valuable for money entertainment option for all movie lovers.
‘HDFC Trial’ offer was introduced in 18 branches in Mumbai from 14th June. The procedure is just sign in for the HDFC Net Banking and gets a BIGFlix.com 14 day free trial offer. If the customer cancels the deal within the 14 days BIGFlix.com will pay the entire amount back to him.
Some special offers for payment:
a) If you register with your credit card and BIGFlix.com will credit the amount only after the free trial period is over
b) In case you book with your debit card – then BIGFlix.com will debit your account and then on cancellation before the 14 days free trial period BIGFlix.com will pay the entire amount back
At present the offer is available at the following HDFC Bank branches: Mumbai Central, Dadar, Vikhroli, Kamala Mills EC , Worli, Tulsiani, Hughes Road, Fort, Tirupati Apartments, Sion, CST (VT), Mulund (East), Chembur, Mulund (West), Powai, Parel, Dombivali and Bhandup
Wednesday, April 29, 2009
Few takers of travel loans due to high interest rates and slump bites
This year the tour operators are getting very less bookings for outbound travel even though the season has set in. The reason being there are few takers of travel loans as these loans are clubbed under the personal loan segment and for some banks this segment is not a top priority or have stopped giving personal loans. According to tour operators the decrease in demand may be due to economic slowdown and higher interest rates for travel loans. Tour operators say generally people choose to take travel loans for outbound travel especially to destinations like Europe, US, Australia and New Zealand among others. Summer holidays (April-July) alone account for 60% of the total outbound travel in a year. Last year around 10 million Indians traveled abroad.
According to Karan Anand, head, relationships and supplier management at Cox & Kings, "The concept of travel loans is still at a nascent stage. But it was beginning to catch up. However, we don't expect to see the same kind of growth we saw last year.'' Last year around 5-7% of the total travelers took travel loan, as many believe traveling abroad as a luxury. Cox & Kings has a tie-up with Citibank for the same.
At present there is enough of liquidity in the banking system but banks are unwilling to disburse loans as they fear could be on the default category. Another most important reason why travelers are keeping away from taking loan as the interest rate on personal loans come is high (12-19%) in comparison to housing, auto or education loan among others. Moreover, operators believe that people might be uncertain to undertake expensive holidays, at a higher interest rate, when in India pays are being slashed and also there are job cuts.
On the other hand bankers say that they don't have any data on travel loans, as they club it along with personal loans. An official working with a foreign bank stated, "We don't offer travel loans. Anyone who applies for a personal loan can use it for whatever purpose he wants to. We don't ask them any questions’’. He further added, "All we look at is the person's credentials, history, and his repaying capacity''.
Another private lender pointed out banks might not be interested in disbursing personal loans as they are unsecured and carry a heavy default risk. He added, "When somebody is going through financial difficulties, he or she is not likely to default on the housing loan. Most likely they are going to default on their personal loans first, then the car loan and only then they would think of defaulting on the housing loan. That is why personal loans are considered risky by banks''.
According to Karan Anand, head, relationships and supplier management at Cox & Kings, "The concept of travel loans is still at a nascent stage. But it was beginning to catch up. However, we don't expect to see the same kind of growth we saw last year.'' Last year around 5-7% of the total travelers took travel loan, as many believe traveling abroad as a luxury. Cox & Kings has a tie-up with Citibank for the same.
At present there is enough of liquidity in the banking system but banks are unwilling to disburse loans as they fear could be on the default category. Another most important reason why travelers are keeping away from taking loan as the interest rate on personal loans come is high (12-19%) in comparison to housing, auto or education loan among others. Moreover, operators believe that people might be uncertain to undertake expensive holidays, at a higher interest rate, when in India pays are being slashed and also there are job cuts.
On the other hand bankers say that they don't have any data on travel loans, as they club it along with personal loans. An official working with a foreign bank stated, "We don't offer travel loans. Anyone who applies for a personal loan can use it for whatever purpose he wants to. We don't ask them any questions’’. He further added, "All we look at is the person's credentials, history, and his repaying capacity''.
Another private lender pointed out banks might not be interested in disbursing personal loans as they are unsecured and carry a heavy default risk. He added, "When somebody is going through financial difficulties, he or she is not likely to default on the housing loan. Most likely they are going to default on their personal loans first, then the car loan and only then they would think of defaulting on the housing loan. That is why personal loans are considered risky by banks''.
Wednesday, April 22, 2009
Private Banks to stop auto loan biz for commercial & passenger vehicles
Private Banks are planning to close the loan segment for commercial and passenger vehicles as they have not received any clear guidelines from the Reserve Bank of India which prevents them from the repossession of the vehicles from defaulting borrowers.
The bankers communicated their views in a recent meeting with RBI and finance ministry officials in the presence of auto industry representatives. On the other hand the government and the banking regulator do not consider repossession as unlawful provided banks carry out this activity according to a set of procedure.
An anonymous finance ministry official informed, “Repossession of any mortgaged property is not illegal as misunderstood by some of the borrowers. The government is working out with the RBI and the auto industry to bring out guidelines, which will help end the ambiguity regarding recovery and repossession”.
In India more than 80% of all the vehicles are financed. According to industry estimates auto loan portfolio of all banks put together stands around Rs 1,00,000 crore.
The official stated, “The RBI will come up with detailed guidelines, empowering banks to auction repossessed vehicles”. He stated, “It may also include norms on getting repossessed vehicle back from the banks”. Even the public sector banks agreed to this that in the absence of proper repossession norms their business has got badly affected. But their better financial position has allowed them to continue offer auto loans in spite of risk involved.
Unwillingness of banks in offering auto loans can clearly be seen in the recent finance ministry data, which indicates that fresh sanctions of auto loans have come down for the 15 days ended March 13. The figures also depict the case of public sector banks. Fresh loans to auto sector have come down to Rs 767 crore for the fortnight ended March 13, from Rs 971 crore for the previous fortnight.
Since last few months’ private sector banks have been experiencing negative growth in their credit flow in almost all sectors, as per the data available with the RBI. Until now none of the private banks have, publicly disclosed their plans to stop offering auto loans.
An anonymous executive working with a Mumbai-based private bank stated, “We are lending on a case-to-case basis. The bank has to keep in mind the creditworthiness of the borrower. We are playing conservatively and going slow”. The matter has also been brought in front of the Cabinet Secretary for the discussion in his recent meeting with the chief of top bankers and industry representatives.
The bankers communicated their views in a recent meeting with RBI and finance ministry officials in the presence of auto industry representatives. On the other hand the government and the banking regulator do not consider repossession as unlawful provided banks carry out this activity according to a set of procedure.
An anonymous finance ministry official informed, “Repossession of any mortgaged property is not illegal as misunderstood by some of the borrowers. The government is working out with the RBI and the auto industry to bring out guidelines, which will help end the ambiguity regarding recovery and repossession”.
In India more than 80% of all the vehicles are financed. According to industry estimates auto loan portfolio of all banks put together stands around Rs 1,00,000 crore.
The official stated, “The RBI will come up with detailed guidelines, empowering banks to auction repossessed vehicles”. He stated, “It may also include norms on getting repossessed vehicle back from the banks”. Even the public sector banks agreed to this that in the absence of proper repossession norms their business has got badly affected. But their better financial position has allowed them to continue offer auto loans in spite of risk involved.
Unwillingness of banks in offering auto loans can clearly be seen in the recent finance ministry data, which indicates that fresh sanctions of auto loans have come down for the 15 days ended March 13. The figures also depict the case of public sector banks. Fresh loans to auto sector have come down to Rs 767 crore for the fortnight ended March 13, from Rs 971 crore for the previous fortnight.
Since last few months’ private sector banks have been experiencing negative growth in their credit flow in almost all sectors, as per the data available with the RBI. Until now none of the private banks have, publicly disclosed their plans to stop offering auto loans.
An anonymous executive working with a Mumbai-based private bank stated, “We are lending on a case-to-case basis. The bank has to keep in mind the creditworthiness of the borrower. We are playing conservatively and going slow”. The matter has also been brought in front of the Cabinet Secretary for the discussion in his recent meeting with the chief of top bankers and industry representatives.
Bank offers schemes for Nano
Tata Nano is said to be a common man car promising value for money with its low pricing. On the other hand banks which are the preferred lenders for the car are offering various schemes. The schemes being offered by the banks are almost uniform in their charges and interest rates; only the quick and efficient service provided by them will help them score over their competitors.
The Nano loan schemes are being offered mainly by the public sector banks, with the big daddy, State Bank of India along with its associate banks is setting the movement in terms of interest rates and down payment. Other public sector banks are Central Bank of India, Union Bank of India, Indian Bank, Corporation Bank and Punjab National Bank. The private sector players include ICICI Bank and Kerala-based Federal Bank.
SBI’s, potential Nano customer is an employed professional drawing Rs 75,000 a year or a self-employed person making Rs 1 lakh a year.
SBI in its scheme is offering a Nano booking loan product with a one-time upfront booking fee of Rs 2,999 for the base model (which has an ex-showroom price of Rs 1.2 lakh in Delhi), Rs 3,499 for the intermediate model (Rs 1.40 lakh) and Rs 3,999 (Rs 1.70 lakh) for the high-end model.
An SBI official pointed out the eligibility criteria has been relaxed as the Tata Nano is designed to meet the demands of low-income customers.
If the customer name gets listed in the list of the lucky ones to get allotment of Nano, then the booking loan can be converted to a SBI Nano car loan. The loan will be provided up to a maximum of seven years at 11.75-12 per cent interest. The margin requirement for the loans will be set to 15 per cent. That is, for Rs 1 lakh loan, the customer would have to pay Rs 15,000 upfront to get the bank to give a loan for Rs 85,000.
Union Bank of India has set the minimum down payment for the base model at Rs 2,950 for the booking amount, for the second model it is Rs 3,459 and for the higher model it is Rs 3,952.
In case a customer wants to take a car loan by himself for the Nano, the bank’s auto loans rate is 11 per cent for three years and 11.25 per cent for three to five years.
An official from the bank told, “We expect very good response from rural and semi-urban areas.”
Corporation Bank has also set Rs 2,999 as down payment for the booking amount of the base model, Rs 3,744 for the second model and Rs 4,231 for the third model. The bank is charging 11 per cent in case the customer opts for a car loan once he or she gets allotment.
An official from the bank explained that at these rates, the monthly repayment will stand to Rs 3,274 per lakh for a three-year loan, Rs 2,187 on a five-year loan and Rs 1,739 for a seven-year loan.
ICICI Bank is hoping to take benefit from on its online booking facility through both the bank’s Web site and ICICI Direct.com, informed Mr N.R. Narayanan, General Manager, retail loans, He added, “We are very bullish about the Nano booking online as it offers huge convenience to our customers. ICICI Direct also has a lot of customers who log on for share trading”. The bank is offering car loans at 13.5 per cent for three to five years.
The Nano loan schemes are being offered mainly by the public sector banks, with the big daddy, State Bank of India along with its associate banks is setting the movement in terms of interest rates and down payment. Other public sector banks are Central Bank of India, Union Bank of India, Indian Bank, Corporation Bank and Punjab National Bank. The private sector players include ICICI Bank and Kerala-based Federal Bank.
SBI’s, potential Nano customer is an employed professional drawing Rs 75,000 a year or a self-employed person making Rs 1 lakh a year.
SBI in its scheme is offering a Nano booking loan product with a one-time upfront booking fee of Rs 2,999 for the base model (which has an ex-showroom price of Rs 1.2 lakh in Delhi), Rs 3,499 for the intermediate model (Rs 1.40 lakh) and Rs 3,999 (Rs 1.70 lakh) for the high-end model.
An SBI official pointed out the eligibility criteria has been relaxed as the Tata Nano is designed to meet the demands of low-income customers.
If the customer name gets listed in the list of the lucky ones to get allotment of Nano, then the booking loan can be converted to a SBI Nano car loan. The loan will be provided up to a maximum of seven years at 11.75-12 per cent interest. The margin requirement for the loans will be set to 15 per cent. That is, for Rs 1 lakh loan, the customer would have to pay Rs 15,000 upfront to get the bank to give a loan for Rs 85,000.
Union Bank of India has set the minimum down payment for the base model at Rs 2,950 for the booking amount, for the second model it is Rs 3,459 and for the higher model it is Rs 3,952.
In case a customer wants to take a car loan by himself for the Nano, the bank’s auto loans rate is 11 per cent for three years and 11.25 per cent for three to five years.
An official from the bank told, “We expect very good response from rural and semi-urban areas.”
Corporation Bank has also set Rs 2,999 as down payment for the booking amount of the base model, Rs 3,744 for the second model and Rs 4,231 for the third model. The bank is charging 11 per cent in case the customer opts for a car loan once he or she gets allotment.
An official from the bank explained that at these rates, the monthly repayment will stand to Rs 3,274 per lakh for a three-year loan, Rs 2,187 on a five-year loan and Rs 1,739 for a seven-year loan.
ICICI Bank is hoping to take benefit from on its online booking facility through both the bank’s Web site and ICICI Direct.com, informed Mr N.R. Narayanan, General Manager, retail loans, He added, “We are very bullish about the Nano booking online as it offers huge convenience to our customers. ICICI Direct also has a lot of customers who log on for share trading”. The bank is offering car loans at 13.5 per cent for three to five years.
Wednesday, March 25, 2009
Home Loan: It’s Need in Building a New Home
It is the dream of every individual to have his own home. If you are planning to build a new home, it is best to avail a good home loan. With the help of home loan, you not only get a home of your own but also save money in the long run.
What is a home loan?
Home loan is a plan in which a lender offers money to the borrower to build his home. On the other hand, the borrower has to pay back the loan amount with interest according to the terms of the agreement within a fixed period of time.
Nowadays, people often avail home loan while building a new home. It not only helps the borrowers to reduce taxes but also saves money. To help borrowers with different financial budget, different home loan companies have come up with generous lending rates and schemes. For those who cannot afford to pay the initial down payment, there are many organizations offering “zero down payment option”.
What are the documents needed in a home loan?
There are various types of home loans available in the market. Different financial organizations offer different loan plans to suit the need of their customers. But to avail a home loan, there are certain documents that you will need. Given below is the list of some of the documents that are needed in home loan:
• Personal id proof such as passport, driver’s license etc
• Photograph (passport size)
• Proof of date of birth
• Residence proof such as rent receipt or loan statement
• Current liability proof which include credit card statements, loan statements etc
• Income proof such as salary slips, financial statements etc
Before you avail a home loan, check out the interest rates offered by various banks and finance organizations to know about the current scenario of the market. You can also take the help of online information to be up-to-date about the home loan quotes. Avail a good home loan option and fulfill your wish of building a new home.
What is a home loan?
Home loan is a plan in which a lender offers money to the borrower to build his home. On the other hand, the borrower has to pay back the loan amount with interest according to the terms of the agreement within a fixed period of time.
Nowadays, people often avail home loan while building a new home. It not only helps the borrowers to reduce taxes but also saves money. To help borrowers with different financial budget, different home loan companies have come up with generous lending rates and schemes. For those who cannot afford to pay the initial down payment, there are many organizations offering “zero down payment option”.
What are the documents needed in a home loan?
There are various types of home loans available in the market. Different financial organizations offer different loan plans to suit the need of their customers. But to avail a home loan, there are certain documents that you will need. Given below is the list of some of the documents that are needed in home loan:
• Personal id proof such as passport, driver’s license etc
• Photograph (passport size)
• Proof of date of birth
• Residence proof such as rent receipt or loan statement
• Current liability proof which include credit card statements, loan statements etc
• Income proof such as salary slips, financial statements etc
Before you avail a home loan, check out the interest rates offered by various banks and finance organizations to know about the current scenario of the market. You can also take the help of online information to be up-to-date about the home loan quotes. Avail a good home loan option and fulfill your wish of building a new home.
Tuesday, March 17, 2009
PSBs to offer cheaper loans to farmers to buy tractors
Government is trying to get cheaper loans for farmers to buy tractors. The government is having talks with Indian Banks’ Association (IBA), the apex banking body to provide loan for this segment. An anonymous senior government official told that the government has formed a special cell, to examine credit flow into this segment. The cell will have officials from the ministry of heavy industries and IBA.
After the approval of this proposal the leading public sector banks will offer cheaper loans for tractors to boost farming which is facing set back due to slow economy. In India nine out of every 10 tractors bought are financed by banks.
He added, “The government is in talks with all leading public sector banks to make sure loans are easily available. A formula can be worked out to lower the interest rate or a special scheme can be put into place”. Even IBA official confirmed that such a proposal was under consideration.
It is expected cheaper loans may come as a big help for tractor manufacturers in the current slow down. Tractor Manufacturers’ Association president LD Mittal informed, “We have been pushing for a special scheme for tractor loans as farmers are being denied credit. Apart from bringing down the interest rates, relaxing the borrowing norms is very important. If the norms are not relaxed, it would be difficult to give a boost to agriculture credit”.
Bankers pointed out loans through this facility might be available at 10%-11% as against the prevailing rate of 14%-15%. In the beginning some banks such as State Bank of India and Punjab National Bank may start the offer.
Friday, March 6, 2009
Banks suggest for restructuring loan out standings for small-loan borrowers
The Reserve Bank of India (RBI) has received suggestions from several banks regarding lower provisions on restructuring loan out standings with small-ticket borrowers. Earlier the apex bank had directed the banks to make a provision of 5% on all restructured loans with an out standing due of Rs 1 crore or less.
In an interview given to the ET senior bankers said that as a large number of restructured accounts are below Rs 1 crore, a 5% provisioning will damage the profits. According to some banks the provisioning should be reduced to 2%.
For reorganized accounts with outstanding dues of over Rs 1 crore, banks will require to calculate the net present value in order to arrive at the provisioning requirement. For instance if a borrower has to make a higher net payment to the bank post restructuring (than what it would have had to pay if the loan was not restructured) no provision is required.
But if the net payment to the bank post restructuring is less, the bank has to formulate a provision based on the loss it suffers on the account.
Indian Overseas Bank executive director G Narayanan pointed out, "On one hand, RBI allows restructuring of loans to revive the economy and on the other hand, steep provisioning norm pinches the profit and loss of banks".
Union Bank of India executive director TY Prabhu explained, "For the banking sector, a bulk of accounts, which would be restructured, belongs to the less-than Rs 1 crore categories. But that does not necessarily mean that the economic loss incurred by banks in restructuring these loans is as steep as 5%. There is a case for lowering the provision".
On the other hand RBI has given banks the choice to either calculate the provision on each account of Rs 1 crore or make a provision on the portfolio, which comprise loans of less than Rs 1 crore. But banks prefer making a flat provision on the portfolio as calculating the provisioning amount on each account is a tiresome process.
According to sources the decision to make a 5% flat provision was taken on an RBI study, which depicted losses suffered by banks, while as per past data are about 5%. In August ’08 RBI had taken a decision to fix a 5% provision.
As per circular issued by RBI: "If due to lack of expertise/appropriate infrastructure, a bank finds it difficult to ensure computation of diminution in the fair value of advances extended by small/rural branches, as an alternative to the methodology prescribed above for computing the amount of diminution in the fair value, banks will have the option of notionally computing the amount of diminution in the fair value and providing therefore, at 5% of the total exposure, in respect of all restructured accounts where the total dues to bank(s) are less than Rs 1 crore till the financial year ending March 2011. The position would be reviewed thereafter."
Wednesday, March 4, 2009
PSU Banks take leading position in auto loan segment
Public sector banks are leading in auto loan segments. PSBs have lent Rs 22,000 passenger car and two-wheeler loan market. Thus the private sector banks who used to be the leading lenders have been overtaken by their public sector counterparts. The increased delinquencies has led the private sector reduce their coverage in the auto loan segment.
Big PSU banks such as SBI, Bank of Baroda, PNB, Canara Bank, Syndicate Bank, Bank of India and Union Bank of India every month in cooperation are lending around Rs 1,000 crore in the Rs 1,800 crore auto loan market whereas the remaining amount is being lent by the private banks. Earlier a year ago the private banks were the leader of the auto loan market with a joint market share of 75-80%.
The loans offered by the PSU banks are largely in the range of up to Rs 3 lakh and are thus lending to two-wheelers in addition to smaller cars like Alto, WagonR, Santo and Indica.
Hyundai Motor India senior vice-president (sales & marketing) Arvind Saxena notify, "PSU banks are offering lower interest rate and so customers are opting for them. Secondly, these banks restrict their ticket size of loans and thereby mostly finance small cars, which form around 76% of the total auto market. Besides they have a wide reach in small cities and rural areas where there is growth."
Although PSU banks have become the higher lenders in the auto segment then also the HDFC Bank is maintaining its lead as the single largest player in auto loans with 30% market share. But the sharp reduction done by other private banks such as ICICI, Kotak Mahindra and Axis has brought down the share of private banks considerably over the past few months.
Till early 2008 ICICI bank held the position of market leader in auto loans later it significantly cut down the lending. ICICI Bank's Head vehicle finance N R Narayanan told, "We have decreased our exposure in the market and now our total loan size is now reduced to around Rs 500 crore annually. We have a large portfolio of the auto vehicles already financed in the past and are focusing on managing it."
According to General Motors vice-president (marketing & sales) Ankush Arora, "Competitive interest rates and easy lending being offered by PSU banks has increase their share. For instance, the share of cars financed by SBI alone has now gone to 15 % for our cars from mere 2% of last year."
Syndicate Bank has just made an entry into the auto financing and initially it has recently entered the auto finance market in the initial stage has kept a portfolio of Rs 1,000 crore for auto finance. Syndicate Bank general manger (Retail Banking) B R Pai notifies, "Auto loan forms a small component of our total consumer finance portfolio of Rs 20,000 crore, but we will increase it subsequently.
We are offering one of the most competitive interest rate of 12% to our priority customers like Hyundai Motors and aim to grab a market share of 10% in the next few years."
Wednesday, February 18, 2009
HFCs, banks sign agreement to boost home loan segment
To boost home loan segment banks and housing finance companies (HFCs) have decided to get into partnership. Usually banks and housing finance companies (HFCs) are known to compete sternly on the home loan segment.
In fact they have agreed to work together to grow business by using their respective expertise and sharing the loan books.
Recently an agreement has been signed between Mumbai-based Dewan Housing Finance Corp and state-run Punjab & Sind Bank (PSB).
Dewan Housing is also carrying out talks with Kolkata-based United Bank of India (UBI) for inking a similar arrangement. General Insurance Corporation (GIC)-promoted GIC Housing Finance (GICHF), in a row, said in a statement that it is open to exploring this model.
Dewan Housing vice-chairman & managing director Kapil Wadhawan told ET, “This is first time that banks and HFCs are coming together to grow business through a loan syndication model. We will originate and process home loans by leveraging these banks’ extensive branch network.”
In fact they have agreed to work together to grow business by using their respective expertise and sharing the loan books.
Recently an agreement has been signed between Mumbai-based Dewan Housing Finance Corp and state-run Punjab & Sind Bank (PSB).
Dewan Housing is also carrying out talks with Kolkata-based United Bank of India (UBI) for inking a similar arrangement. General Insurance Corporation (GIC)-promoted GIC Housing Finance (GICHF), in a row, said in a statement that it is open to exploring this model.
Dewan Housing vice-chairman & managing director Kapil Wadhawan told ET, “This is first time that banks and HFCs are coming together to grow business through a loan syndication model. We will originate and process home loans by leveraging these banks’ extensive branch network.”
Tuesday, February 17, 2009
Not easy to get loans from banks
Now getting loans from banks have become difficult as banks are closely scrutinizing your credit history. This will be applicable even though you have defaulted in repaying a paltry loan sum taken several years ago.
Banks are logging on to data supplied by the Credit Information Bureau of India (CIBIL). CIBIL provides information on the credit history of commercial and individual borrowers to its members that include all banks, financial institutions, non-banking financial companies and housing finance companies.
A HDFC Bank official stated, “Even if a person had defaulted on a payment of Rs 500 several years ago, we will take that into consideration. Recently we rejected a loan application because the person defaulted on an amount of Rs 28,000 in 2006. We checked his record from CIBIL”.
While a year ago, banks would have pursued you to take loans irrespective of your ‘track record’. But now it has become history, and this is causing heartburn among consumers. Leading auto dealers like Magnum Honda and Cauvery Ford have informed of a 15%-20 % decline in new loan distribution to potential customers of mid-size cars on the basis of CIBIL data. While the rejection figure in the purchase of small cars have gone up by 25%-30 %.
Banks are also rejecting home loans on account of this. A real estate developer stated, “Though there are genuine home buyers, what is affecting the market now is the fact that they are not getting loans.”
CIBIL collects data from all members and categorize borrowers into two broad categories: a positive and a negative list. In case you default on payments or have outstanding dues even to credit card companies, your name is moved from the positive list to the negative list. And it is this negative list to which banks refer while issuing fresh loans now.
B R Pai, GM (retail banking) of Syndicate Bank remarked, “We don’t lend to people if their names appear in the negative list of CIBIL, unless they come with a clean chit or a no-dues certificate from the bank”.
Incidentally, names can be shifted in the negative list even though the borrower has cleared the entire amount as CIBIL updates the list only on a quarterly basis.
Banks are logging on to data supplied by the Credit Information Bureau of India (CIBIL). CIBIL provides information on the credit history of commercial and individual borrowers to its members that include all banks, financial institutions, non-banking financial companies and housing finance companies.
A HDFC Bank official stated, “Even if a person had defaulted on a payment of Rs 500 several years ago, we will take that into consideration. Recently we rejected a loan application because the person defaulted on an amount of Rs 28,000 in 2006. We checked his record from CIBIL”.
While a year ago, banks would have pursued you to take loans irrespective of your ‘track record’. But now it has become history, and this is causing heartburn among consumers. Leading auto dealers like Magnum Honda and Cauvery Ford have informed of a 15%-20 % decline in new loan distribution to potential customers of mid-size cars on the basis of CIBIL data. While the rejection figure in the purchase of small cars have gone up by 25%-30 %.
Banks are also rejecting home loans on account of this. A real estate developer stated, “Though there are genuine home buyers, what is affecting the market now is the fact that they are not getting loans.”
CIBIL collects data from all members and categorize borrowers into two broad categories: a positive and a negative list. In case you default on payments or have outstanding dues even to credit card companies, your name is moved from the positive list to the negative list. And it is this negative list to which banks refer while issuing fresh loans now.
B R Pai, GM (retail banking) of Syndicate Bank remarked, “We don’t lend to people if their names appear in the negative list of CIBIL, unless they come with a clean chit or a no-dues certificate from the bank”.
Incidentally, names can be shifted in the negative list even though the borrower has cleared the entire amount as CIBIL updates the list only on a quarterly basis.
Thursday, January 22, 2009
PSU bank request relaxation in 75% risk weight on small home loans
The public sector banks are requesting the Reserve Bank of India (RBI) to either completely waive or substantially relax the 75 per cent risk weight that banks are required to attach to such home loans. Banks are following in line with Government’s diktat to extend home loans of up to Rs 20 lakh at concessional rates of interest thus they are ‘sacrificing their interests’ by offering home loans at subsidized interest rate of up to 9.25 per cent.
Dr K. Ramakrishnan, Chief Executive, Indian Banks’ Association pointed out, “Besides paring interest rates on home loans up to Rs 20 lakh, public sector banks have also brought down the loan-to-value ratio, and are providing borrowers free life insurance. Hence, banks have sought relaxation in risk weights on home loans to free up capital.”
At present the Government is not giving any subvention (financial support to make good the gap between market rate and the rate at which they expect these banks to lend) to public sector banks (PSBs) for offering home loans at subsidized interest rates. Banks argue that if the central bank gives relaxation on risk-weights, which will ease pressure on capital.
Banks want this relaxation in risk weights in their consultation with the RBI Deputy Governor, Dr Rakesh Mohan. On January 15 a meeting was organized, it was a part of the central bank’s exercise to consult stakeholders before the third quarterly review of monetary policy on January 27.
As per the housing loan scheme launched early last month by PSBs, interest rate on home loans of up to Rs 5 lakh of 20 years’ tenure would not exceed 8.5 per cent for the first five years, while the same for loans from Rs 5 lakh to Rs 20 lakh will not exceed 9.25 per cent.
As homes are reasonably priced in Tier-II cities and Tier-III towns, therefore PSBs are receiveing a good response to the concessional scheme for loans up to Rs 20 lakh. But this is not true in the case of the larger cities.
As per PSB official, as per the current deposit rates and statutory allocation towards SLR and CRR, most PSBs have to finance the interest rates they offer on home loans up to Rs 20 lakh.
Thus Bankers are of view that the RBI is more likely to reduce the risk weight to 50 per cent rather than waive the risk weight.
Monday, January 5, 2009
HDFC, BoR, Canara Bank announced cut in lending rates
Private sector lenders HDFC and Bank of Rajasthan following the RBI lines rolled down the lending rates giving relief for both existing and new borrowers while the state-owned Canara Bank has cut the rate for SME.
HDFC country's largest housing finance company has cut the lending rate by 50 basis points for loans of more than Rs 20 lakh for both existing and new customers and has also introduced a new slab for sub-Rs 20 lakh.
After this the loans of up to Rs 20 lakh will draw an interest rate of 10.25 per cent and the rates for loans above this level has been set at 11.25 per cent, down from 11.75 per cent. The new rates will come into effect from Monday.
According to a bank statement Bank of Rajasthan has reduced the rates on its home loans under 'Apna Ghar Scheme' by 1.50 per cent on maturity tenure of up to 10 years and one per cent for maturity tenure of over 10 years.
While the Bangalore-based Canara Bank reduced lending rates as much as 100 basis points for micro enterprises while for small and medium enterprises the reduction will be 50 basis points.
HDFC Ltd has also announced cut in deposit rates by 50 basis points across all maturities.
"The advantage of a cut in retail prime lending rates (RPLR) will accrue to all the existing floating rate customers over a period of next three months based on their respective reset dates," HDFC said in a statement.
Banks announcement of reducing rates has come within 24 hours of Home Minister P Chidambaram announcing in Parliament that the government will convince banks to reduce loans for existing home loan borrowers as well.
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