The country's largest lender State Bank of India (SBI) has not taken any final decision about continuing its home loan teaser rates but it has hiked short-term corporate loan rates by 0.25-50 basis points.
SBI chairman OP Bhatt, said, “With surplus liquidity gradually disappearing from the system, we have re-priced certain segments of our short-term corporate loans by 0.25-0.50 bps upwards.” He added at present bank has no plans of hiking its deposit rates and agreed that liquidity will remain in the system. SBI said the public sector units will be giving out close to Rs 18,000 crore for 3G auctions.
“We have got requests and demands for that kind of money. At the maximum we will lend Rs 18,000 crore. Having said that, we are still having a surplus liquidity of Rs 26,000,” Bhatt said. On an average there is still a fair amount of liquidity in the system. If you see, the 10-year government security bond is close to 7.40%. There is not much pressure on the liquidity at the moment. It is too early to say if the impact on liquidity will have a temporary or a permanent impact on the liquidity condition,
Meanwhile, Union Bank of India CMD MV Nair said the bank would be giving out Rs 2,000 crore for 3 G auctions. “Liquidity will not be impacted with the money flowing out as we already sitting on adequate liquidity,” he said. Regarding bad loans, Bhatt said in the last few quarters NPAs have decreased and that the worst is over. Talking about recent credit growth numbers, Bhatt agreed there is no improvement in credit growth and it can be due to the drooping season.
He added, “Usually in April there is always a negative growth. So it is too early to say if it is because of the slack season or if there is more to it”.
Thursday, May 27, 2010
Wednesday, May 26, 2010
NHB launches reverse mortgage loan-enabled annuity scheme for senior citizens
The reverse mortgage loan (RML) scheme has been specially designed to help senior citizens to get finances to meet their expenses without depending on others. National Housing Bank (NHB) has restructured its reverse mortgage loan. With its new reverse mortgage loan – enabled annuity scheme ensures to offer senior citizens assured lifetime payments instead of the earlier cap of 20 years, thus NHB is expecting there will be more takers of the product. With a view to expand its pool of RML facilitators NHB is having talks with banks and insurance companies.
In just first four and half months since the launch of reverse mortgage loan-enabled annuity scheme (RMLeA) scheme NHB has been able to sanction 40 loans estimating to Rs 100 crore. However in the beginning RML received very low response in India, thus NHB believes that new offering is more attractive to borrowers in terms of higher payments and better risk mitigation.
RV Verma, executive director, NHB explained, “Annuity link provides comfort to participants. The original RML format has seen fairly good response. However, senior citizens were apprehensive about the scheme because of the cap on 20 years on payments. We should see a much bigger offtake in the coming days.”
The lenders pointed out that in the original RML scheme has some limitations which includes the cap of 20 years on payments to senior citizens as well as low quantum of payments. Also, higher the interest rate, lower was the payment. To counter this, NHB launched annuity linked plan in which lifetime payment is made even after the completion of the fixed term of 20 years and also promises nearly 1.5 times higher annuity as compared with the earlier one.
The Central Bank of India in collaboration with Star Union Dai-ichi Life Insurance Co. has launched RML annuity scheme. Verma said the talks are being undertaken to bring major banks and insurance players into the scheme.
He also said that NHB is trying to get tax exemption for annuities offered to senior citizens under its RMLeA scheme with the Central Board of Direct Taxes. To provide information about RML in India, NHB has set up counseling centers in various cities including Delhi, Mumbai, Bangalore, Chennai and Hyderabad.
In just first four and half months since the launch of reverse mortgage loan-enabled annuity scheme (RMLeA) scheme NHB has been able to sanction 40 loans estimating to Rs 100 crore. However in the beginning RML received very low response in India, thus NHB believes that new offering is more attractive to borrowers in terms of higher payments and better risk mitigation.
RV Verma, executive director, NHB explained, “Annuity link provides comfort to participants. The original RML format has seen fairly good response. However, senior citizens were apprehensive about the scheme because of the cap on 20 years on payments. We should see a much bigger offtake in the coming days.”
The lenders pointed out that in the original RML scheme has some limitations which includes the cap of 20 years on payments to senior citizens as well as low quantum of payments. Also, higher the interest rate, lower was the payment. To counter this, NHB launched annuity linked plan in which lifetime payment is made even after the completion of the fixed term of 20 years and also promises nearly 1.5 times higher annuity as compared with the earlier one.
The Central Bank of India in collaboration with Star Union Dai-ichi Life Insurance Co. has launched RML annuity scheme. Verma said the talks are being undertaken to bring major banks and insurance players into the scheme.
He also said that NHB is trying to get tax exemption for annuities offered to senior citizens under its RMLeA scheme with the Central Board of Direct Taxes. To provide information about RML in India, NHB has set up counseling centers in various cities including Delhi, Mumbai, Bangalore, Chennai and Hyderabad.
Thursday, May 13, 2010
Banks planning to expand loan against gold segment to boost their lending biz
Giving loan against gold has boosted lending business of banks, thus many banks and non-banking finance companies are planning to expand this business. In the past few months monetization of the yellow metal has increased in the country. Previously loan against gold was limited to south Indian states where NBFCs like Mannapuram General Finance and Muthoot Finance have strong hold and are aggressively expanding their base in this segment.
According to Ajay Mitra, managing director- India, Middle East & Turkey, and World Gold Council, the monetization of yellow metal will open new sector and increase the circulation of roughly 18,000 tones (worth approximately Rs 30 lakh crore at current prices) back into the economy.
Mitra further said, “Acceptance of gold for loans by banks and financial institutions is an important development that will infuse greater confidence in gold as an asset class. With banks entering gold bar business, availability of infrastructure for storage, and with medallions being accepted for securitization purposes, the role of gold is surely bound to change from a commodity to a monetized asset that would encourage consumers to invest more in gold, a time-tested secure and now a monetized asset class.”
The banks like State Bank of India (SBI), Andhra Bank and HDFC Bank have already entered into this segment with big boom.
Up till now the total anticipated market size of loans against gold is marked at Rs 1,20,000 crore in which 50% of market share is of organized sector like banks and financial institutions. And rest of gold is being deposited with NBFCs and small players like money lenders. SBI has a loan portfolio of Rs 300 crore against gold.
Biju Pillai, executive vice-president & business head, gold loans, HDFC Bank, told, “The bank’s portfolio has been growing at over 60% year-on-year for the last two years. With the opportunity being vast, we will continue to look to grow this portfolio. We plan to increase the number of branches offering gold loans from 150 to 600 over the course of next year.”
Pillai said, there is variation in interest rates which lies between 12% and 15.25%, depending on the tenure of the loan and borrowers’ relationship with the bank.
Andhra Bank, a state-owned bank in just eight-month has witness growth in the segment thus it has ambitious plans to offer loans against gold through all its branches within a couple of month.
M Anjaneya Prasad, general manager (Mumbai zone) of Andhra Bank, said, “We have projected the target to achieve Rs 50-crore loan disbursement as against Rs 10 crore in 2009-10.’’ At present gold loan is being provided at 60 branches of the bank
“We are planning to involve all the branches of the bank for the business by June.’’ Generally Andhra Bank gives 75% of value of gold pledged as loan and is planning to have one value per branch for the appraisal of gold while finalizing loans.
Prasad told the customers will have to bore the fee to be charged by the value.
An anonymous senior official of Mannapuram General Finance, the traditional player of the segment said, the company is targeting to achieve a business growth of Rs 4,500 crore under the segment as against Rs 2,550 crore in 2009-10.
The official added, “Thus, we are looking at a business growth of 50-100% under the segment during the current financial year.”
NBFC offer rate of interest between 12% and 21% depending on the value of the gold pledged.
The rate of interest for the NBFC varies between 12% and 21% depending on the value of the gold pleged.
Though the repayment period can be stretched to one year, in most of cases, Mannapuram gets its loans repaid by customers over a period of 100 days, said the official.
According to Ajay Mitra, managing director- India, Middle East & Turkey, and World Gold Council, the monetization of yellow metal will open new sector and increase the circulation of roughly 18,000 tones (worth approximately Rs 30 lakh crore at current prices) back into the economy.
Mitra further said, “Acceptance of gold for loans by banks and financial institutions is an important development that will infuse greater confidence in gold as an asset class. With banks entering gold bar business, availability of infrastructure for storage, and with medallions being accepted for securitization purposes, the role of gold is surely bound to change from a commodity to a monetized asset that would encourage consumers to invest more in gold, a time-tested secure and now a monetized asset class.”
The banks like State Bank of India (SBI), Andhra Bank and HDFC Bank have already entered into this segment with big boom.
Up till now the total anticipated market size of loans against gold is marked at Rs 1,20,000 crore in which 50% of market share is of organized sector like banks and financial institutions. And rest of gold is being deposited with NBFCs and small players like money lenders. SBI has a loan portfolio of Rs 300 crore against gold.
Biju Pillai, executive vice-president & business head, gold loans, HDFC Bank, told, “The bank’s portfolio has been growing at over 60% year-on-year for the last two years. With the opportunity being vast, we will continue to look to grow this portfolio. We plan to increase the number of branches offering gold loans from 150 to 600 over the course of next year.”
Pillai said, there is variation in interest rates which lies between 12% and 15.25%, depending on the tenure of the loan and borrowers’ relationship with the bank.
Andhra Bank, a state-owned bank in just eight-month has witness growth in the segment thus it has ambitious plans to offer loans against gold through all its branches within a couple of month.
M Anjaneya Prasad, general manager (Mumbai zone) of Andhra Bank, said, “We have projected the target to achieve Rs 50-crore loan disbursement as against Rs 10 crore in 2009-10.’’ At present gold loan is being provided at 60 branches of the bank
“We are planning to involve all the branches of the bank for the business by June.’’ Generally Andhra Bank gives 75% of value of gold pledged as loan and is planning to have one value per branch for the appraisal of gold while finalizing loans.
Prasad told the customers will have to bore the fee to be charged by the value.
An anonymous senior official of Mannapuram General Finance, the traditional player of the segment said, the company is targeting to achieve a business growth of Rs 4,500 crore under the segment as against Rs 2,550 crore in 2009-10.
The official added, “Thus, we are looking at a business growth of 50-100% under the segment during the current financial year.”
NBFC offer rate of interest between 12% and 21% depending on the value of the gold pledged.
The rate of interest for the NBFC varies between 12% and 21% depending on the value of the gold pleged.
Though the repayment period can be stretched to one year, in most of cases, Mannapuram gets its loans repaid by customers over a period of 100 days, said the official.
Thursday, May 6, 2010
Banks witness dip in deposits & loan demand; park funds in mutual fund schemes
By the end of fortnight on April 23 banks have witnessed reduction in loan demand and deposits. According to RBI's latest data the deposits have dipped by Rs 23,328 crore during the fortnight ending April 23 to Rs 4,506,747 crore. Both demand deposits and term deposits have dipped by Rs 20,834 crore and Rs 2,494 crore, respectively, during the fortnight.
During the fortnight as on April 23 the loans have dipped to 1,437,363 crore from Rs 26,483 crore. On the other hand both food credit- loans given to the government for food procurement and non-food credit- loans to individuals and businesses, have dipped by Rs 170 crore and Rs 26,313 crore, respectively. While investments in government and other approved securities have dipped by Rs 17,169 crore to Rs 1,437,363 crore during the fortnight.
Generally in the beginning of the fiscal banks do not focus much on business as they are busy in previous year’s accounts. The Indian economy is almost back on the track and industry is also reviving, thus banks are expecting loan demand to increase so the focus will be on increasing the deposits to fund the loan demand. DL Rawal, chairman and managing director of Dena Bank, said, this year credit demand will increase as corporates will be taking the loan amount which was sanctioned last year. He told his bank’s loan book is growing by 22% this year.
S Sridhar, CMD of Central Bank of India also said his bank is witnessing strong demand for loans (25%) and added, the bank will be focusing on raising low-cost certificate of deposits to raise resources to meet the growing loan demand.
However RBI in its annual monetary policy statement has given indication about loan growth at 20% for FY11, way above 16.9% loan growth achieved in FY10.
As banks are not seeing any increase in the loan demand banks are parking their funds in mutual funds. Although latest figures are not available but, approximately the banks have collectively parked more than Rs 100,000 crore in various mutual fund schemes.
During the fortnight as on April 23 the loans have dipped to 1,437,363 crore from Rs 26,483 crore. On the other hand both food credit- loans given to the government for food procurement and non-food credit- loans to individuals and businesses, have dipped by Rs 170 crore and Rs 26,313 crore, respectively. While investments in government and other approved securities have dipped by Rs 17,169 crore to Rs 1,437,363 crore during the fortnight.
Generally in the beginning of the fiscal banks do not focus much on business as they are busy in previous year’s accounts. The Indian economy is almost back on the track and industry is also reviving, thus banks are expecting loan demand to increase so the focus will be on increasing the deposits to fund the loan demand. DL Rawal, chairman and managing director of Dena Bank, said, this year credit demand will increase as corporates will be taking the loan amount which was sanctioned last year. He told his bank’s loan book is growing by 22% this year.
S Sridhar, CMD of Central Bank of India also said his bank is witnessing strong demand for loans (25%) and added, the bank will be focusing on raising low-cost certificate of deposits to raise resources to meet the growing loan demand.
However RBI in its annual monetary policy statement has given indication about loan growth at 20% for FY11, way above 16.9% loan growth achieved in FY10.
As banks are not seeing any increase in the loan demand banks are parking their funds in mutual funds. Although latest figures are not available but, approximately the banks have collectively parked more than Rs 100,000 crore in various mutual fund schemes.
Wednesday, May 5, 2010
Muthoot Finance plans to start gold loan biz in UK
Muthoot Finance has plans to start gold loans business in UK. For this the company has approached banking regulators in the UK, officials of Muthoot Group said.
It is a major non-banking finance player in India having more than 1,700 branches and 60 tonne of gold in its custody. Muthoot Group managing director George Alexander Muthoot informed, “There is a large NRI population in the UK and we see potential in Europe for gold loans even from foreigners. We have opened an office in London and will start operations as soon as we get approval."
The group is offering remittance services in US and Dubai. Recently in Dubai, group has launched a new company, Muthoot Exchange, has been launched to handle the service. He added, "We are handling one lakh units worth Rs 250 crore of remittance annually and expect it to increase substantially with the US operation."
Firm 90% of revenue comes from gold loans, and it is aiming to do business of Rs 14,800 crore from gold loans and Rs 5,100 crore from gold bonds this fiscal. During 2009 fiscal company achieved a recorded growth of 119% through distribution of gold loans. During the fiscal company achieved revenue of Rs 7,401 crore by lending gold and earned Rs 3,102 crore from gold bonds. The firm is planning to open 1,075 new branches this fiscal out of which 575 will be opened in South India and 500 in the North. The group also has interests in financial and commodity broking, IT, power generation, media, healthcare, education, infrastructure, plantations and hospitality.
It is a major non-banking finance player in India having more than 1,700 branches and 60 tonne of gold in its custody. Muthoot Group managing director George Alexander Muthoot informed, “There is a large NRI population in the UK and we see potential in Europe for gold loans even from foreigners. We have opened an office in London and will start operations as soon as we get approval."
The group is offering remittance services in US and Dubai. Recently in Dubai, group has launched a new company, Muthoot Exchange, has been launched to handle the service. He added, "We are handling one lakh units worth Rs 250 crore of remittance annually and expect it to increase substantially with the US operation."
Firm 90% of revenue comes from gold loans, and it is aiming to do business of Rs 14,800 crore from gold loans and Rs 5,100 crore from gold bonds this fiscal. During 2009 fiscal company achieved a recorded growth of 119% through distribution of gold loans. During the fiscal company achieved revenue of Rs 7,401 crore by lending gold and earned Rs 3,102 crore from gold bonds. The firm is planning to open 1,075 new branches this fiscal out of which 575 will be opened in South India and 500 in the North. The group also has interests in financial and commodity broking, IT, power generation, media, healthcare, education, infrastructure, plantations and hospitality.
Banks speed up sanctioning of loans, companies picking up cautiously
Although banks have speed up sanctioning of loans but they are crying out as companies are not picking up even half the money. According to SS Ranjan, deputy managing director and CFO, State Bank of India, the nation’s largest lender, “Our sanctions grew by around Rs 60,000 crores in the last financial year. Of that undisbursed loans stand at about Rs 45,000 crores.” Thus bank has not started getting interest on three-fourths of the loans it had sanctioned last year.
Suresh Ganapathy, head of Macquarie Securities Group’s financial research team said, “Corporates are very cautious about capacity expansion due to which there is a lag in sanctions and disbursements.”
Bank of India is facing the similar problem, it had sanctioned loan of around Rs 48,000 crore by the end of March 31 this year.
M Narendra, executive director of India’s No. 4 lender said, “Our undisbursed sanctions are about Rs 25,000 crore. Projects are taking time to get implemented.” “We charged an average interest of 10% on what we disbursed.”
Even the private sector and smaller banks are facing the same problem.
Jaideep Iyer, president, financial management at Yes Bank informed that in the last financial year bank had sanctioned Rs 22,000 crore, which was 73% more than in fiscal 2009, but from this two-third or around Rs 15,000 crore, is still undisbursed.
Since in the last fiscal the credit growth was slow, net interest income (the difference between interests earned and interest paid) of banks had slowed down, informed Vaibhav Agrawal, vice-president-research, Angel Broking.
Last year loans sanctioned by banks, around third were for infrastructure projects, stated Indranil Sen Gupta and Dick Li, analysts with Bank of America-Merrill Lynch, in a report on March 25. For this year, they predict 35% rise in infrastructure loans. According to RBI data there has been growth of 42.3% in infrastructure loans between April 1, 2009, and February 26, 2010.
N Sivaraman, executive vice president (financial services), Larsen & Toubro pointed out, “In the first 12 months post sanction, only 20% to 30% of a loan gets disbursed because projects get caught up in various approvals. Usually a major part of disbursements happen after 18 to 30 months of sanction.”
According to E Sudhir Reddy, chairman & managing director, IVRCL Infrastructures & Projects, one of India’s biggest road builders it’s the nature of the beast. “If you take up NHAI (National Highways Authority of India) projects, they take a lot of time (to execute),” he explained.
Reddy quickly adds that it’s not because of poor execution. “Project executions have been fine,” he said.
At present IVRCL is working on three development projects, three road projects and one desalination plant.
Pradeep Singh, vice-chairman and managing director, IDFC Projects, another lender, have the same view. “There is usually a time lag and because there has been a significant increase in sanctions the gap is more pronounced this time,” Singh said.
IDFC Projects is currently developing a 1050 mw power project in Chhattisgarh, Madhya Pradesh.
According to some in the last quarter of last fiscal the banks speed up sanctioning of loans is a clear attempt to bulk up their loan book - called ‘window-dressing’.
“Most banks were showing loan growth of around 16%. But to ratchet this up, they went on a sanctions binge in the last quarter of the last fiscal. Not all of these were disbursed by the time the year ended,” said Abizer Diwanji, executive director and head of financial services at KPMG, the audit firm.
“Credit growth will gather pace primarily driven by infrastructure this year too,” Diwanji said.
As Indian economy is expected to grow at around 8%, therefore Reserve Bank of India has predicted a growth of around 20% in loans by the end of the current fiscal on March 31, 2011.
On the other hand analysts are expecting rise in non-infrastructure loan after September.
“Retail loans are already leading the turnaround in credit demand in a repeat of 2003-05. Anecdotes suggest the urban consumer is returning to borrow - especially, for housing - as confidence improves with better job prospects,” Sen Gupta and Li said in another note last week.
“We expect corporate loan demand to pick up in second half. Industrial credit had shown a lag even in the last upturn. Most banks have already reported an increase in loan sanctions. These should translate into higher disbursals as corporates gain better growth visibility,” they said.
Suresh Ganapathy, head of Macquarie Securities Group’s financial research team said, “Corporates are very cautious about capacity expansion due to which there is a lag in sanctions and disbursements.”
Bank of India is facing the similar problem, it had sanctioned loan of around Rs 48,000 crore by the end of March 31 this year.
M Narendra, executive director of India’s No. 4 lender said, “Our undisbursed sanctions are about Rs 25,000 crore. Projects are taking time to get implemented.” “We charged an average interest of 10% on what we disbursed.”
Even the private sector and smaller banks are facing the same problem.
Jaideep Iyer, president, financial management at Yes Bank informed that in the last financial year bank had sanctioned Rs 22,000 crore, which was 73% more than in fiscal 2009, but from this two-third or around Rs 15,000 crore, is still undisbursed.
Since in the last fiscal the credit growth was slow, net interest income (the difference between interests earned and interest paid) of banks had slowed down, informed Vaibhav Agrawal, vice-president-research, Angel Broking.
Last year loans sanctioned by banks, around third were for infrastructure projects, stated Indranil Sen Gupta and Dick Li, analysts with Bank of America-Merrill Lynch, in a report on March 25. For this year, they predict 35% rise in infrastructure loans. According to RBI data there has been growth of 42.3% in infrastructure loans between April 1, 2009, and February 26, 2010.
N Sivaraman, executive vice president (financial services), Larsen & Toubro pointed out, “In the first 12 months post sanction, only 20% to 30% of a loan gets disbursed because projects get caught up in various approvals. Usually a major part of disbursements happen after 18 to 30 months of sanction.”
According to E Sudhir Reddy, chairman & managing director, IVRCL Infrastructures & Projects, one of India’s biggest road builders it’s the nature of the beast. “If you take up NHAI (National Highways Authority of India) projects, they take a lot of time (to execute),” he explained.
Reddy quickly adds that it’s not because of poor execution. “Project executions have been fine,” he said.
At present IVRCL is working on three development projects, three road projects and one desalination plant.
Pradeep Singh, vice-chairman and managing director, IDFC Projects, another lender, have the same view. “There is usually a time lag and because there has been a significant increase in sanctions the gap is more pronounced this time,” Singh said.
IDFC Projects is currently developing a 1050 mw power project in Chhattisgarh, Madhya Pradesh.
According to some in the last quarter of last fiscal the banks speed up sanctioning of loans is a clear attempt to bulk up their loan book - called ‘window-dressing’.
“Most banks were showing loan growth of around 16%. But to ratchet this up, they went on a sanctions binge in the last quarter of the last fiscal. Not all of these were disbursed by the time the year ended,” said Abizer Diwanji, executive director and head of financial services at KPMG, the audit firm.
“Credit growth will gather pace primarily driven by infrastructure this year too,” Diwanji said.
As Indian economy is expected to grow at around 8%, therefore Reserve Bank of India has predicted a growth of around 20% in loans by the end of the current fiscal on March 31, 2011.
On the other hand analysts are expecting rise in non-infrastructure loan after September.
“Retail loans are already leading the turnaround in credit demand in a repeat of 2003-05. Anecdotes suggest the urban consumer is returning to borrow - especially, for housing - as confidence improves with better job prospects,” Sen Gupta and Li said in another note last week.
“We expect corporate loan demand to pick up in second half. Industrial credit had shown a lag even in the last upturn. Most banks have already reported an increase in loan sanctions. These should translate into higher disbursals as corporates gain better growth visibility,” they said.
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