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”.
Friday, July 31, 2009
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”.
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