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''.
Wednesday, April 29, 2009
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.
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