Now stamp papers will be available only at sub-registrar offices. Earlier nationalized banks issued stamp papers of smaller denominations and also printed the same but now selling as well as printing of stamp papers by banks will be completed stopped. The banks will only sell till they clear the stocks.
However stamp paper vending was officially stopped by banks from October. According to a letter sent to the stamps and registration department, the banks will not do fresh printing of the papers anymore.
Inspector general of registration and commissioner of stamps K R Niranjan told The Times of India, "Banks will not print stamp papers and will clear the stocks. We have made alternative arrangements to supply stamp papers at sub-registrar offices. A stamp certificate will be given for the money deposited which will act as a stamp paper till we introduce e-stamping".
After the much-hyped Telgi stamp paper scam, government authorized four banks - State Bank of Mysore, State Bank of India, State Bank of Hyderabad and Corporation Bank- to sell stamp papers in the denominations of Rs 20, Rs 50 and Rs 100. Among these banks SBM used to sell a large number of stamp papers. These stamp papers of lesser value are used for writing agreements, affidavits and mortgage deeds.
The SBM official told, the government had requested the bank to continue to print stamp papers up to March 2009 to keep e-stamping rolling. But when the implementation got delayed, the bank was asked to continue issuing stamp papers from April to June, which was later extended till September.
The printing of stamp papers is a high security risk job so the banks require three months to print the papers.
Friday, October 30, 2009
Using stolen ATM card man withdraw Rs 1.35 lakh
With the help of closed-circuit television (CCTV) installed at an ATM centre in Thuraipakkam police was able to catch the ATM card thief who withdraw Rs 1.35 lakh from a stolen card.
Shastri Nagar Crime Inspector Mathiarasu told S Geetha, a local resident living on First Main Road filed a complaint about her stolen credit card. Her husband, Shankar, is an engineer and worked in a Gangotri Thermal Plant in Jharkhand. Geetha owned a Bank of Baroda ATM card, which she lost on September 30 while returning from T Nagar to Adyar. More than 10 days had passed that she realized that she had lost her card. As on Sunday bank is closed, next day when she went to the bank, she found that Rs 1.35 lakh had been withdrawn from her account. She filed a complaint of lost credit card at the Shastri Nagar police station.
A special police team headed by Mathiarasu investigating the case found that the withdrawals have been done at ATM centers of several banks in Thuraipakkam area. The team on scrutinizing the CCTV tapes obtained from ATM centers found that at one ATM center, the thief first used his own card to withdraw Rs 300 cash before using the stolen one.
The police traced his address and picked up the suspect from Kelambakkam. During the interrogation police came to know about his details that his name was Tirupathi, aged 29, son of Krishnamurthy of Jolarpet and was working at construction site in Adyar. Police arrested him and remanded to judicial custody.
Shastri Nagar Crime Inspector Mathiarasu told S Geetha, a local resident living on First Main Road filed a complaint about her stolen credit card. Her husband, Shankar, is an engineer and worked in a Gangotri Thermal Plant in Jharkhand. Geetha owned a Bank of Baroda ATM card, which she lost on September 30 while returning from T Nagar to Adyar. More than 10 days had passed that she realized that she had lost her card. As on Sunday bank is closed, next day when she went to the bank, she found that Rs 1.35 lakh had been withdrawn from her account. She filed a complaint of lost credit card at the Shastri Nagar police station.
A special police team headed by Mathiarasu investigating the case found that the withdrawals have been done at ATM centers of several banks in Thuraipakkam area. The team on scrutinizing the CCTV tapes obtained from ATM centers found that at one ATM center, the thief first used his own card to withdraw Rs 300 cash before using the stolen one.
The police traced his address and picked up the suspect from Kelambakkam. During the interrogation police came to know about his details that his name was Tirupathi, aged 29, son of Krishnamurthy of Jolarpet and was working at construction site in Adyar. Police arrested him and remanded to judicial custody.
Thursday, October 29, 2009
Axis Bank centralized banking processes, increase efficiency using Polaris
Axis bank using Polaris Software's Intellect Business Process Studio (BPS) has centralized its various banking processes such as trade finance, cards and cheque truncation.
Axis Bank sources stated it has done away with MICR cheque clearing after cheque truncation process, as it was a paper-based cheque clearing process. With this the cheque processing time has reduced and operational efficiency has increased. This has also enabled in improving risk management and control.
Charanjeev Singh, vice president Information Technology, Axis Bank informed, "We carried out a detailed vendor selection process evaluating more than a few vendors and found Polaris cheque truncation solution unique and customized to Indian banking. It has rich functionality and ease of use".
According to Axis Bank sources in the beginning the Intellect BPS platform has been set up for cheque truncation in NCR region. Using this platform bank is able to process one lakh cheques a day. Also, the bank has extended the pr-built solutions, which have been provided as part of the common Intellect BPS platform, to its trade finance and credit card processing services. The application has been modified according to Axis Bank’s requirements. With the set up of trade finance solution at bank branches it has become easy to capture information.
In the back office also the same solution has been set up, to process letters of credit and trade bills for India and foreign countries. Also in the back office the set up of credit card processing solution has changed the whole process to paperless through its document management and workflow capabilities. According to bank sources the platform has made possible to streamline its processes through centralized operations across its back offices in India.
Singh said, "Polaris' Intellect BPS gave us a better perspective of business and technology in terms of the reusable framework. We recognize Polaris' domain expertise and their ability to add value to us at strategic level".
Axis Bank sources stated it has done away with MICR cheque clearing after cheque truncation process, as it was a paper-based cheque clearing process. With this the cheque processing time has reduced and operational efficiency has increased. This has also enabled in improving risk management and control.
Charanjeev Singh, vice president Information Technology, Axis Bank informed, "We carried out a detailed vendor selection process evaluating more than a few vendors and found Polaris cheque truncation solution unique and customized to Indian banking. It has rich functionality and ease of use".
According to Axis Bank sources in the beginning the Intellect BPS platform has been set up for cheque truncation in NCR region. Using this platform bank is able to process one lakh cheques a day. Also, the bank has extended the pr-built solutions, which have been provided as part of the common Intellect BPS platform, to its trade finance and credit card processing services. The application has been modified according to Axis Bank’s requirements. With the set up of trade finance solution at bank branches it has become easy to capture information.
In the back office also the same solution has been set up, to process letters of credit and trade bills for India and foreign countries. Also in the back office the set up of credit card processing solution has changed the whole process to paperless through its document management and workflow capabilities. According to bank sources the platform has made possible to streamline its processes through centralized operations across its back offices in India.
Singh said, "Polaris' Intellect BPS gave us a better perspective of business and technology in terms of the reusable framework. We recognize Polaris' domain expertise and their ability to add value to us at strategic level".
Wednesday, October 28, 2009
South Indian Bank largest service provider of NPS among 21 banks
South Indian Bank (SIB), Kerala based lender is the largest service provider of the “New Pension System” (NPS), launched by the central government amongst the 21 banks and financial institutes which have been authorized for pension and investment scheme.
The SIB through its 134 authorized branches offer this service, the bank sources informed.
V.A. Joseph, managing director and chief executive of the bank informed, “This scheme will empower subscribers to plan their retirement and pension. This is a good investment tool”.
NPS is a social security scheme and the employees falling under the age group of 18-55 are eligible for this scheme.
The scheme has been executed by the Pension Fund Regulatory and Development Authority (PFRDA).
Last week, SIB launched this service for its NRI customers and the service was launched by Oscar award winner Resul Pookutty.
SIB in the first quarter this fiscal had posted the highest ever quarterly net profit of Rs.60.11 crore as against Rs.38.62 crore reported during the same period in the last year, accounting the growth of 55.64 percent.
Recently the bank has been honored with the 10th “Financial Express” Awards for “India’s Best Banks” in the traditional banks’ category.
The SIB through its 134 authorized branches offer this service, the bank sources informed.
V.A. Joseph, managing director and chief executive of the bank informed, “This scheme will empower subscribers to plan their retirement and pension. This is a good investment tool”.
NPS is a social security scheme and the employees falling under the age group of 18-55 are eligible for this scheme.
The scheme has been executed by the Pension Fund Regulatory and Development Authority (PFRDA).
Last week, SIB launched this service for its NRI customers and the service was launched by Oscar award winner Resul Pookutty.
SIB in the first quarter this fiscal had posted the highest ever quarterly net profit of Rs.60.11 crore as against Rs.38.62 crore reported during the same period in the last year, accounting the growth of 55.64 percent.
Recently the bank has been honored with the 10th “Financial Express” Awards for “India’s Best Banks” in the traditional banks’ category.
Monday, October 26, 2009
Banks hoping credit growth to recover in second half
The loan growth of Indian banking industry has dropped to a 12-year low, which is likely to compress the central bank’s room for maneuver during the quarterly monetary policy review. While bankers and companies on their part are saying still there are indications of trends changing.
First week of October saw slow down in loan growth by 10.8% from 29.5% a year ago as against the central bank’s estimation of 20% expansion for all of fiscal 2010.
In policy review the Reserve Bank of India (RBI) has to first look at the sluggish credit growth before taking a call on reversing its accommodative policy. If the loan growth had been in accordance to the RBI’s estimated lines then clearly there would have been a rate hike, stated economists. RBI will be making its quarterly announcement on 27 October.
Although the loan growth has been slow but banks’ investment in bonds has grown 40.9% in the past one year until October in comparison to a mere 3.2% last year the reason is the banks have bought debt with no takers for loans.
According to bankers now the credit will start picking up. M.V. Nair, chairman of the Indian Banks’ Association (IBA) pointed out the apex bankers will try to influence as firms are coming back for loans as lenders have started offering loan at “an affordable rate”.
Nair stated, “We are seeing proposals going up significantly in the past one or two months, which shows that the confidence level of the firms is increasing”.
Up till now borrowers have been complaining that banks’ have been unwilling to give loan and about their risk aversion.
“Lenders have sanctioned Rs3,200 crore to double our cement capacity to 24 million tonnes in three years and we will draw money in phases,” said Puneet Dalmia, managing director, Dalmia Cements (Bharat) Ltd, the second largest cement maker in south India.
Binani Cement Ltd is also likely to draw money from banks. The company is planning to to build a 2.5-million-tonne cement plant in Gujarat. “The lenders have sanctioned Rs400 crore and we will draw it as soon as we get the limestone licence from the government of Gujarat,” said M.K. Chattopadhaya, chief financial officer of Binani Cement.
Generally when the economy growth is slow, firms usually try to cut down their costs by cutting inventory and capital expenditure plans and this directly impacts bank loan growth. As per IBA study the cost of borrowing for firms, as a percentage of gross profit, has dropped from an average of 35% in the third quarter of fiscal 2009 to 23% in fourth quarter.
Certainly, low credit growth does not essentially points towards the weak industrial activity. On the other hand Indian firms are raising money from capital markets and through introduction of shares with institutional investors, which in turn has reduced their dependency on the banking system. According to analysts this is going to continue as long as the equity market is doing good business.
Though sanctions have been given, but companies did not move ahead with new projects between October 2008 and April this year due to global economic recovery and its effect on domestic consumption remain uncertain.
However they have started taking loans for their infrastructure projects and fresh loan applications for utilities, road and power projects are also increased.
M.D. Mallya, chairman and managing director of Bank of Baroda, “Infrastructure projects are spread over years and loans sanctioned to them are not availed in the same year. Existing projects were already availing loans sanctioned to them earlier”. “Now new sanctions are also picking up in this sector.”
Andhra Bank chief R.S. Reddy told that his bank’s credit growth was 32% in the first half and in the second half “it should increase even more.”
“Almost all of the peer public sector bank chairmen I interact with tell me that their loan growth has been at least 18%,” said K.R. Kamath, chief of Kolkata-based Allahabad Bank.
Now almost all public sector banks claim that lending to the industries is steadily moving while the foreign private banks lending process is slow.
Neeraj Swaroop, regional chief executive (India and South Asia), Standard Chartered Bank, stated his bank is one of them.
“We are going slowly on unsecured loans; this is our business model,’’ said Swaroop.
Paresh Sukthankar, executive director, HDFC Bank Ltd stated, “We are seeing a pickup in retail and corporate credit’’.
First week of October saw slow down in loan growth by 10.8% from 29.5% a year ago as against the central bank’s estimation of 20% expansion for all of fiscal 2010.
In policy review the Reserve Bank of India (RBI) has to first look at the sluggish credit growth before taking a call on reversing its accommodative policy. If the loan growth had been in accordance to the RBI’s estimated lines then clearly there would have been a rate hike, stated economists. RBI will be making its quarterly announcement on 27 October.
Although the loan growth has been slow but banks’ investment in bonds has grown 40.9% in the past one year until October in comparison to a mere 3.2% last year the reason is the banks have bought debt with no takers for loans.
According to bankers now the credit will start picking up. M.V. Nair, chairman of the Indian Banks’ Association (IBA) pointed out the apex bankers will try to influence as firms are coming back for loans as lenders have started offering loan at “an affordable rate”.
Nair stated, “We are seeing proposals going up significantly in the past one or two months, which shows that the confidence level of the firms is increasing”.
Up till now borrowers have been complaining that banks’ have been unwilling to give loan and about their risk aversion.
“Lenders have sanctioned Rs3,200 crore to double our cement capacity to 24 million tonnes in three years and we will draw money in phases,” said Puneet Dalmia, managing director, Dalmia Cements (Bharat) Ltd, the second largest cement maker in south India.
Binani Cement Ltd is also likely to draw money from banks. The company is planning to to build a 2.5-million-tonne cement plant in Gujarat. “The lenders have sanctioned Rs400 crore and we will draw it as soon as we get the limestone licence from the government of Gujarat,” said M.K. Chattopadhaya, chief financial officer of Binani Cement.
Generally when the economy growth is slow, firms usually try to cut down their costs by cutting inventory and capital expenditure plans and this directly impacts bank loan growth. As per IBA study the cost of borrowing for firms, as a percentage of gross profit, has dropped from an average of 35% in the third quarter of fiscal 2009 to 23% in fourth quarter.
Certainly, low credit growth does not essentially points towards the weak industrial activity. On the other hand Indian firms are raising money from capital markets and through introduction of shares with institutional investors, which in turn has reduced their dependency on the banking system. According to analysts this is going to continue as long as the equity market is doing good business.
Though sanctions have been given, but companies did not move ahead with new projects between October 2008 and April this year due to global economic recovery and its effect on domestic consumption remain uncertain.
However they have started taking loans for their infrastructure projects and fresh loan applications for utilities, road and power projects are also increased.
M.D. Mallya, chairman and managing director of Bank of Baroda, “Infrastructure projects are spread over years and loans sanctioned to them are not availed in the same year. Existing projects were already availing loans sanctioned to them earlier”. “Now new sanctions are also picking up in this sector.”
Andhra Bank chief R.S. Reddy told that his bank’s credit growth was 32% in the first half and in the second half “it should increase even more.”
“Almost all of the peer public sector bank chairmen I interact with tell me that their loan growth has been at least 18%,” said K.R. Kamath, chief of Kolkata-based Allahabad Bank.
Now almost all public sector banks claim that lending to the industries is steadily moving while the foreign private banks lending process is slow.
Neeraj Swaroop, regional chief executive (India and South Asia), Standard Chartered Bank, stated his bank is one of them.
“We are going slowly on unsecured loans; this is our business model,’’ said Swaroop.
Paresh Sukthankar, executive director, HDFC Bank Ltd stated, “We are seeing a pickup in retail and corporate credit’’.
Dhanalakshmi Bank plans to launch venture capital fund & AMC biz
Dhanalakshmi Bank, Thrissur-based lender official informed that next year bank is planning to launch a venture capital fund and an asset management company (AMC).
Dhanalakshmi Bank Managing Director and CEO Amitabh Chaturvedi told reporters, "We are planning to launch our venture capital fund in the first-quarter of the next financial year while the asset management company will be floated in the last quarter of this fiscal".
He told bank is hoping to receive regulators approval for both its businesses by December.
He informed Dhanalakshmi Bank will be first floating a wholly-owned venture capital company which will launch the venture capital fund.
Chaturved told the bank has to yet finalize the business model of the venture capital fund and added that, "the initial corpus of the fund will be $150-million."
He declined to reveal any further details and said, "The AMC business would be through a joint venture with an existing player".
Dhanalakshmi Bank with an aim to establish itself to a pan-India bank from a regional bank, it is planning to re-work on its branch and ATM networks across the country.
At present the bank has a strong base in the southern part of the country, and has 207 branches which include 26 extension centers.
"We want to have a pan-India presence and hence will be opening 66 branches across the country by the end of 2009," Chaturvedi said.
Out of 66 branches, Dhanalakshmi Bank has recently opened 27 branches in states such as Rajasthan, Punjab, Uttar Pradesh, Gujarat and Andhra Pradesh, among others.
"We presently have 78 ATMs and in the next 10 days we will be launching 100 more across the country," he said.
"We are on a growth path and will create a solid institution at Dhanalakshami Bank," Chaturvedi said.
Regarding RBI's monetary policy which is to be announced later this month, he said that no major announcement is expected.
"There is enough liquidity in the system and credit has just started picking-up. I do not expect any rate change in the policy," Chaturvedi said.
Dhanalakshmi Bank Managing Director and CEO Amitabh Chaturvedi told reporters, "We are planning to launch our venture capital fund in the first-quarter of the next financial year while the asset management company will be floated in the last quarter of this fiscal".
He told bank is hoping to receive regulators approval for both its businesses by December.
He informed Dhanalakshmi Bank will be first floating a wholly-owned venture capital company which will launch the venture capital fund.
Chaturved told the bank has to yet finalize the business model of the venture capital fund and added that, "the initial corpus of the fund will be $150-million."
He declined to reveal any further details and said, "The AMC business would be through a joint venture with an existing player".
Dhanalakshmi Bank with an aim to establish itself to a pan-India bank from a regional bank, it is planning to re-work on its branch and ATM networks across the country.
At present the bank has a strong base in the southern part of the country, and has 207 branches which include 26 extension centers.
"We want to have a pan-India presence and hence will be opening 66 branches across the country by the end of 2009," Chaturvedi said.
Out of 66 branches, Dhanalakshmi Bank has recently opened 27 branches in states such as Rajasthan, Punjab, Uttar Pradesh, Gujarat and Andhra Pradesh, among others.
"We presently have 78 ATMs and in the next 10 days we will be launching 100 more across the country," he said.
"We are on a growth path and will create a solid institution at Dhanalakshami Bank," Chaturvedi said.
Regarding RBI's monetary policy which is to be announced later this month, he said that no major announcement is expected.
"There is enough liquidity in the system and credit has just started picking-up. I do not expect any rate change in the policy," Chaturvedi said.
Banks witness rise in disbursal of gold loans
Earlier to take loan against gold was considered as social stigma, but now this has totally disappeared. Now people consider buying gold as their savings which can be used to raise funds for meeting urgent requirements. Women especially living in cities are becoming economically independent and take active part in the decision making process thus easily give their gold ornaments to avail loan against it.
Not only the people living in urban and semi-urban areas, even the farmers and rural folk are taking loan against gold ornaments as it is a simple process in comparison to long complex and expensive procedure involved in mortgaging property to get loan.
Recently a newly married couple was spotted at the South Delhi branch of a non-banking finance company that had come to take loan against the bride’s gold ornaments for their week-long honeymoon to Mauritius, the picturesque Indian Ocean Island that lies east of Madagascar. Regarding this bride’s logic was that as she is not going to wear all of the ornaments she has received during her wedding, so they have decided to take loan against the jewelry for the trip. Both the newly-weds are well-employed therefore they will return the principle along with interest within a month of receiving their salaries.
From the above instance it is clear among the Indian middle and upper middle classes the resistance for gold is fading away also because of the record price rise of the yellow metal, which in turn has led to increase in disbursals of such loans mainly by NBFCs such as 122-year-old Kochi-based Muthoot Finance.
George Alexander Muthoot, managing director, The Muthoot Group , which claims to be the country’ s largest lender against gold stated, “Apart from the price rise, the social stigma earlier attached to gold loans has almost totally disappeared and they are now widely recognized as acceptable means of raising funds for meeting urgent requirements by all segments of society”. According to a staffer from an NBFC people thinking attached to pledging gold has changed due to Hindi film industry and serials which has inexorably portrayed women parting with their gold as a deep tragedy.
Now more and more people are taking loan against gold to finance their children’s education, particularly for meeting donation demands, which a bank will not entertain, car purchases, holiday trips or even to put up margin money for a home buy as the
tenure of such loans is typically up to three or six months.
Also taking loan against gold is more advantageous than taking personal loans as the interest rate on such loans is low (Muthoot, for instance, has a base rate of 13% while banks are known to charge PLR + 200-400 bps — a bp is one-hundredth of a percentage point — for personal loans, which could work out to as high as 15-16% on an annualized basis), non-penalty for pre-payment, hassle-free documentation and speedy disbursal of the loan.
Anil Rego, CEO of Bangalore-based financial planning firm Right Horizons says, “Borrowing against their gold jewellery is an option that individuals falling in the middle-income category are increasingly looking at”. “The primary reason is that the gold rate has shot up, and, second, they are realizing that the interest rate is lower than unsecured loans. In addition, the cash crunch arising out of the global slowdown has resulted in people considering this option.”
although NBFCs such as Muthoot and Manappuram are most popular avenues for gold loans than banks, as banks lack their gold assessing capabilities, but according to a senior PSU banker this year banks have witnessed a rise in disbursals as well as the number of accounts.
Manappuram, whose web site classifies it as the country’s largest listed and highest credit rated gold loan company, has witnessed a 15% year-on-year increase in the number of persons taking gold loans during the first six months of the current fiscal to 105,265, and a 28% increase in disbursals to Rs 2,105 crore. During the same period, Muthoot has saw a robust 75% increase in the number of persons taking gold loans at 35,000 and an 81% increase in the amount disbursed at Rs 9,091 crore.
HDFC Bank, a private lender is also actively promoting gold loans, has seen its business grow by over 60% year-on year in this segment. “There has been a change in the mindset of customers opting for gold loans with borrowers being more open to pledge their jewellery and taking loans against the same to meet their short-term financial requirements,” reiterates Biju Pillai, business head (PL, LAS, GL, Home Loans), HDFC Bank.
According to AC Mahajan, CMD, Canara Bank, “The recent spurt in the prices of gold has increased the eligible amount of loan and helped in boosting agri loans against the pledge of gold. Such loans are primarily used for composite needs of raising crop and meeting consumption needs, which are normally given by way of kissan credit card”.
The amount of loans disbursed by NBFCs such as Muthoot and banks such as HDFC bank ranged from Rs 50,000 to Rs 3-4 lakh and Rs 25,000-10 lakh respectively. Mr Muthoot while confirming said, “The higher the per gram rate the higher is the interest rate and vice versa on the advance”. In this the banks and NBFCs to be on safe side also keep a reasonable margin in the event of non-payment of interest by the borrower.
In this fiscal year through October standard gold of 99.5% purity prices has averaged Rs 14,903 per 10 gm so far, up 21% from the average rate of Rs 12,349 in the year-ago period. The rise has followed the international rate, which last week had hit a record high of $1070.40 an ounce due to a steadily weakening dollar due to the mounting deficit in the US and increased fund deployment in riskier assets across the globe in light of easy monetary policies.
Not only the people living in urban and semi-urban areas, even the farmers and rural folk are taking loan against gold ornaments as it is a simple process in comparison to long complex and expensive procedure involved in mortgaging property to get loan.
Recently a newly married couple was spotted at the South Delhi branch of a non-banking finance company that had come to take loan against the bride’s gold ornaments for their week-long honeymoon to Mauritius, the picturesque Indian Ocean Island that lies east of Madagascar. Regarding this bride’s logic was that as she is not going to wear all of the ornaments she has received during her wedding, so they have decided to take loan against the jewelry for the trip. Both the newly-weds are well-employed therefore they will return the principle along with interest within a month of receiving their salaries.
From the above instance it is clear among the Indian middle and upper middle classes the resistance for gold is fading away also because of the record price rise of the yellow metal, which in turn has led to increase in disbursals of such loans mainly by NBFCs such as 122-year-old Kochi-based Muthoot Finance.
George Alexander Muthoot, managing director, The Muthoot Group , which claims to be the country’ s largest lender against gold stated, “Apart from the price rise, the social stigma earlier attached to gold loans has almost totally disappeared and they are now widely recognized as acceptable means of raising funds for meeting urgent requirements by all segments of society”. According to a staffer from an NBFC people thinking attached to pledging gold has changed due to Hindi film industry and serials which has inexorably portrayed women parting with their gold as a deep tragedy.
Now more and more people are taking loan against gold to finance their children’s education, particularly for meeting donation demands, which a bank will not entertain, car purchases, holiday trips or even to put up margin money for a home buy as the
tenure of such loans is typically up to three or six months.
Also taking loan against gold is more advantageous than taking personal loans as the interest rate on such loans is low (Muthoot, for instance, has a base rate of 13% while banks are known to charge PLR + 200-400 bps — a bp is one-hundredth of a percentage point — for personal loans, which could work out to as high as 15-16% on an annualized basis), non-penalty for pre-payment, hassle-free documentation and speedy disbursal of the loan.
Anil Rego, CEO of Bangalore-based financial planning firm Right Horizons says, “Borrowing against their gold jewellery is an option that individuals falling in the middle-income category are increasingly looking at”. “The primary reason is that the gold rate has shot up, and, second, they are realizing that the interest rate is lower than unsecured loans. In addition, the cash crunch arising out of the global slowdown has resulted in people considering this option.”
although NBFCs such as Muthoot and Manappuram are most popular avenues for gold loans than banks, as banks lack their gold assessing capabilities, but according to a senior PSU banker this year banks have witnessed a rise in disbursals as well as the number of accounts.
Manappuram, whose web site classifies it as the country’s largest listed and highest credit rated gold loan company, has witnessed a 15% year-on-year increase in the number of persons taking gold loans during the first six months of the current fiscal to 105,265, and a 28% increase in disbursals to Rs 2,105 crore. During the same period, Muthoot has saw a robust 75% increase in the number of persons taking gold loans at 35,000 and an 81% increase in the amount disbursed at Rs 9,091 crore.
HDFC Bank, a private lender is also actively promoting gold loans, has seen its business grow by over 60% year-on year in this segment. “There has been a change in the mindset of customers opting for gold loans with borrowers being more open to pledge their jewellery and taking loans against the same to meet their short-term financial requirements,” reiterates Biju Pillai, business head (PL, LAS, GL, Home Loans), HDFC Bank.
According to AC Mahajan, CMD, Canara Bank, “The recent spurt in the prices of gold has increased the eligible amount of loan and helped in boosting agri loans against the pledge of gold. Such loans are primarily used for composite needs of raising crop and meeting consumption needs, which are normally given by way of kissan credit card”.
The amount of loans disbursed by NBFCs such as Muthoot and banks such as HDFC bank ranged from Rs 50,000 to Rs 3-4 lakh and Rs 25,000-10 lakh respectively. Mr Muthoot while confirming said, “The higher the per gram rate the higher is the interest rate and vice versa on the advance”. In this the banks and NBFCs to be on safe side also keep a reasonable margin in the event of non-payment of interest by the borrower.
In this fiscal year through October standard gold of 99.5% purity prices has averaged Rs 14,903 per 10 gm so far, up 21% from the average rate of Rs 12,349 in the year-ago period. The rise has followed the international rate, which last week had hit a record high of $1070.40 an ounce due to a steadily weakening dollar due to the mounting deficit in the US and increased fund deployment in riskier assets across the globe in light of easy monetary policies.
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