Wednesday, May 13, 2009

Banks increasing their portfolios to achieve big

The micro-finance sector is growing fast in the country therefore leading private and foreign banks are ready to make big investments to increase their MFI operations in the country.

The banks besides offering funds to the famished microfinance institutions (MFIs), they are also launching schemes and providing training in management skills to support the growth of tiny units.

Foreign lender Royal Bank of Scotland (RBS) has made a plan to increase its microfinance portfolio. At present it amounts to Rs 300 crore and it is has planned to increase it to Rs 450 crore by the end of this fiscal.

At present the UK-based lender is giving direct funds to around 30 MFIs across the country and has tied-up with another 41 MFI units in order to provide them training to build up the administrative skills and strong business model.

RBS Vice-President Moumita Sen Sarma informed, "Despite the financial crisis, MFIs have been the least affected as they have managed to maintain the quality of the business. RBS will continue to expand its MFI portfolio and expects to grow the size to Rs 450 crore by the fiscal-end".

She stated that the lender did not expect any deterioration in the asset quality of MFI units in 2009-10.

ICICI Bank, India's largest private-sector lender, is also planning to considerably increase its operations in the sector in the current fiscal. According to the data available over the last one year, ICICI Bank has almost doubled its MFI portfolio to Rs 2,600 crore and is expecting the growth by at least 20 per cent in 2009-10.

ICICI Bank General Manager (Agri, Rural and Micro Banking) Kumar Ashish pointed out, "We could nearly double our MFI portfolio over the last year. We have been working closely with 30 top MFIs to finance their projects and look forward for more such tie-ups in the future."

Ashish added the bank is also providing training to various other MFIs through its sister organization ICICI Foundation.

He further added bank will take precaution while lending in view of the downturn and related risks in the economy but it has no plans to cut down on its MFI portfolio.

HSBC another foreign banking major also has plans to increase its MFI portfolio. The lender is currently having tie-ups with 21 MFIs across the country.

HSBC Group General Manager and CEO Naina Lal Kidwai informed, "We are shortly launching a project in rural Maharashtra with a leading MFI... HSBC assists the MFIs to build up a strong business model in a number ways".

StanChart launched pre-paid card ‘SmartTravel FX card’

Standard Chartered Bank has launched a gold pre-paid travel card ‘SmartTravel FX card’. The card has been loaded with a unique feature; using card the payments can be made in three international currencies – US dollar, Euro and Sterling Pound.

In a release issued by the bank stated there is no limit on pre-loaded amount but should be within prescribed limits of the Reserve Bank for international travel.

Moreover the transactions done by using this card will be treated as local transactions as the billing will be done in the base currency therefore it will not incur additional cross-currency charges levied on all international and credit cards.

Standard Chartered’s General Manager, Consumer Transaction Banking, Sai Narain, stated, "the new SmartTravel FX card combines extraordinary convenience with safety. The currencies in which the card is denominated are universally accepted, which makes the card valid across most countries Indians travel to."

Tuesday, May 5, 2009

Banks fail to find buyers for attached properties

The number of attached immovable properties is growing fast but banks are finding difficulty to find buyers for these properties. The attached properties are the one whose owners fail to pay the dues/EMIs therefore banks attach such properties from time to time.

According to bank sources every year in Delhi and NCR region more than 125 properties are attached. It is believed this figure might increase as the world is facing a massive market downturn.

Earlier three months ago outside a big kothi in West Patel Nagar a small board used to hang on the gate inviting attention of almost all the passers-by. On the board in bold letters following slogan was written, "This property is attached by the ... bank. Trespassers will be prosecuted."

With the introduction of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) banks have got plenty of powers to take physical possession of properties that are financed by them. In case the borrowers become regular offenders and do not pay EMIs to the bank, along with interest for six months in a row, then banks act speedily.

In case the borrower continues to be the defaulter bank serves a show cause notice to pay the money within 30 days. Sunder Khatri, legal expert on property matters said if the borrower doesn’t act within next 15 days, the bank seals the property. Khatri told after the fixed time banks inform the police station that a particular owner of the property has failed to pay the loan amount to the bank, therefore they will seal his property.

A senior official of SBI told that when bank officials seal any property, they make sure that the local police officials are also present there. Although due to courtesy of securitization acts, banks are able to attach properties in certain circumstances, but the problem starts when banks try to dispose of the property in order to recover their money with interest.

According to VK Suri, an expert on banking affairs as banks have to sell the attached properties and the payment is to done in white money, more often than not, buyers evade buying such properties. More over banks accept payment only through a cheque, thus the new buyer has to pay a huge stamp duty. This creates a big difficulty for the new buyer.

Sunil Jindal, director of SVP group, says that in our country there is no controller for the realty sector so the issue of black money in this business cannot be settled and solved. Jindal added that though everybody knows that black money has a significant role in realty business, till date the government has not taken any corrective measures. In case the government takes some steps to settle the issue of black money, banks will start getting buyers for the attached properties.

A banker acknowledged due to the white money payment provision, people do not take interest in buying attached properties. Suri said therefore banks are left with very few options to deal with this situation, he added, "Attached properties only add to their growing list of non-performing assets."

Therefore, public sector companies buy the attached properties. As the companies prefer to make payments through cheques thus, they buy these properties. But generally banks fail to find any other buyer for attached properties.