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.
Thursday, August 13, 2009
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.
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