A memorandum of understanding was inked between Axis Bank, a private lender and a car manufacturer Honda Siel Cars India. Under this agreement bank will provide vehicle finance to dealers of Honda Siel.
The car maker in a statement said as per the agreement Axis bank is one of the preferred financier of Honda Siel Cars India (HSCI).
HSCI Director (Marketing) T Natsume informed, "With this tie-up Honda Siel and Axis Bank have agreed to pool their resources together to make accessible organized finance at competitive rates to our dealers and customers across the country for purchase of Honda cars."
Axis Bank has also agreed to provide finance to the dealers of Honda Siel on their vehicle stock as well as provide retail finance for auto loans.
Expressing views on the MoU, Axis Bank executive director (Retail Banking, SME and Agri) SK Chakrabarti said, "This agreement will further give us the opportunity to provide our customers more value added services at competitive rates and expose them to our various offerings. This partnership with Honda Siel will benefit the Honda Siel dealers' network as well as the retail auto loan customers."
Axis Bank has a network of 938 branches widespread across 583 cities all over India.
Tuesday, December 29, 2009
Monday, December 28, 2009
Still some banks are reluctant in giving education loans
In Thiruvananthapuram some of the banks have been reluctant in disbursing education loans even though government had instructed banks not to refuse education loan to any deserving child, and this is creating problems in inter-bank relations in some centers in the State. The matter was raised in a note circulated for discussion at the latest meeting of the State Level Bankers’ Committee (SLBC).
As per existing norms the bank branch situated nearest to the permanent residence of the applicant has to sanction the education loan. But the question of proximity has created confusion amongst the bank branches where in places many bank branches exist.
According to note the unwillingness shown by many banks in giving education loans is putting deserving candidates in to problem they have to run from one bank to the other. On the other hand the banks which are willing to give loan to students are flooded with loan applications and also have to take up application of those students who are coming from areas close to the branches of the ‘reluctant’ banks.
The note added due to this unhealthy relationship is getting created between banks, besides inconvenience the students are facing in getting education loans.
This issue brought in to notice of SLBC by the Lead Bank Manager of Ernakulam district, and has requested SLBC to issue specific guidelines in this matter to remove confusions in sanctioning education loans.
The note also stated even the rate of interest charged on education loans vary from bank to bank. Generally nationalized banks charge a lower rate of interest than private sector banks. Thus deserving candidates are forced to go in for high-interest education loans because they are staying closer to bank branches charging high interest rates.
The note has requested to provide rationalized interest rate on education loans to overcome this problem.
After the guidelines were issued by the Indian Bankers’ Association (IBA) earlier, some of the banks have reduced the amount of education loans for nursing students. This is also the reason for student’s agitation against some of the banks. At this the IBA, re-looked into the matter and allowed the banks to follow the fee structure approved by various State governments. Though some of the banks have to still issue the appropriate guidelines to their branches in this regard, the note said.
As per existing norms the bank branch situated nearest to the permanent residence of the applicant has to sanction the education loan. But the question of proximity has created confusion amongst the bank branches where in places many bank branches exist.
According to note the unwillingness shown by many banks in giving education loans is putting deserving candidates in to problem they have to run from one bank to the other. On the other hand the banks which are willing to give loan to students are flooded with loan applications and also have to take up application of those students who are coming from areas close to the branches of the ‘reluctant’ banks.
The note added due to this unhealthy relationship is getting created between banks, besides inconvenience the students are facing in getting education loans.
This issue brought in to notice of SLBC by the Lead Bank Manager of Ernakulam district, and has requested SLBC to issue specific guidelines in this matter to remove confusions in sanctioning education loans.
The note also stated even the rate of interest charged on education loans vary from bank to bank. Generally nationalized banks charge a lower rate of interest than private sector banks. Thus deserving candidates are forced to go in for high-interest education loans because they are staying closer to bank branches charging high interest rates.
The note has requested to provide rationalized interest rate on education loans to overcome this problem.
After the guidelines were issued by the Indian Bankers’ Association (IBA) earlier, some of the banks have reduced the amount of education loans for nursing students. This is also the reason for student’s agitation against some of the banks. At this the IBA, re-looked into the matter and allowed the banks to follow the fee structure approved by various State governments. Though some of the banks have to still issue the appropriate guidelines to their branches in this regard, the note said.
Monday, December 7, 2009
Karur Vysya Bank in the top league for its efficiency and financial strength
Karur Vysya Bank is a smallest bank in India with a market cap of just over Rs 2,000 crore is positioned in the top league due to its efficiency and financial strength. The bank mainly operates in South India. But now it is expanding its reach in other parts of the country. By the end of FY 2009 there were around 312 branches. Recently bank has a proposal to open more branches and take the total number of branches to 350 by the end of current financial year. The bank is expanding its branch network speedily and this will help the bank in increasing its base of low current account and savings account deposits, which will help in decreasing the cost of funds.
According to recent study conducted by ET Intelligence Group, Karur Vysya Bank is positioned among the 10 top banks in three of the four main parameters. As per financial strength the bank is positioned at 4th place 6th on efficiency and 7th in terms of shareholder's return. Bank is fundamentally strong as well as good in terms of rewarding its shareholders.
Banks net interest margin (NIM) is reported to be in excess of 3% in the last nine financial years. Only few of Indian Banks have been able to achieve this feat. The Indian Banks average return on assets (RoA) stood at 1% in FY 2009, whereas Karur Vysya Bank has posted 1.5% RoA, which means the bank positioned very high in regard to utilization of its assets.
Moreover banks net non-performing assets (NPA) stood at 0.25% of net advances at the end of FY 2009 which shows bank performs well on the quality of the assets also. There are only three banks - Punjab National Bank, Andhra Bank and Indian Bank which have reported better asset quality than Karur Vysya Bank. In FY 2010, the asset quality has further improved as net NPA was just 0.22% of net advances at the end of Sept'09 quarter.
Thus the bank’s performance has been praiseworthy in the current fiscal. Its loan book has grown much faster than the other banks in the industry. By the end of Sept'09 year-on-year basis its loan book had grown by 23.2% as against of just 13% growth in the gross bank’s credit in the same period.
The more praiseworthy fact is its net interest income has increased by 28.6% y-o-y in the six months ending Sept'09. Interest expense is deducted from interest earned to calculate net interest income. Last year when interest rates had moved up banks spreads had shrink, due to which most of the banks up till now, had reported flat net interest income in this fiscal. In such condition, Karur Vysya Bank 29% growth in net interest income shows its buoyancy in tough times, which in turn has helped it in protecting its spreads. However bank has reported 74% growth in its profits in the first half of the current fiscal.
Even more praiseworthy is the fact that its net interest income has grown by 28.6% yo-y in the six months ending Sept'09. Net interest income is calculated by deducting interest expense from interest earned. As interest rate shot up last year, banks witnessed shrinkage in spreads. As a result, most of the banks have reported flat net interest income in this fiscal so far. In such a situation, 29% growth in net interest income shows Karur Vysya Bank's resilience in tough times, which has helped it in protecting its spreads. The bank posted 74% growth in its profits in the first half of the current fiscal.
Currently bank stock is trading at 1.5 times its book value which is close to all-time high valuations. Also at current prices its dividend yield amounts at 3.2%. Therefore the conservative investors can invest in this stock to earn profit. Bank’s valuations are in comparison to its peers like Federal Bank, City Union Bank and South Indian Bank. Moreover its dividend yield is highest among its peers. From this valuation it becomes clear that Karur Vysya Bank provides unique combination of reasonable valuations, high dividend yield and growth potential.
According to recent study conducted by ET Intelligence Group, Karur Vysya Bank is positioned among the 10 top banks in three of the four main parameters. As per financial strength the bank is positioned at 4th place 6th on efficiency and 7th in terms of shareholder's return. Bank is fundamentally strong as well as good in terms of rewarding its shareholders.
Banks net interest margin (NIM) is reported to be in excess of 3% in the last nine financial years. Only few of Indian Banks have been able to achieve this feat. The Indian Banks average return on assets (RoA) stood at 1% in FY 2009, whereas Karur Vysya Bank has posted 1.5% RoA, which means the bank positioned very high in regard to utilization of its assets.
Moreover banks net non-performing assets (NPA) stood at 0.25% of net advances at the end of FY 2009 which shows bank performs well on the quality of the assets also. There are only three banks - Punjab National Bank, Andhra Bank and Indian Bank which have reported better asset quality than Karur Vysya Bank. In FY 2010, the asset quality has further improved as net NPA was just 0.22% of net advances at the end of Sept'09 quarter.
Thus the bank’s performance has been praiseworthy in the current fiscal. Its loan book has grown much faster than the other banks in the industry. By the end of Sept'09 year-on-year basis its loan book had grown by 23.2% as against of just 13% growth in the gross bank’s credit in the same period.
The more praiseworthy fact is its net interest income has increased by 28.6% y-o-y in the six months ending Sept'09. Interest expense is deducted from interest earned to calculate net interest income. Last year when interest rates had moved up banks spreads had shrink, due to which most of the banks up till now, had reported flat net interest income in this fiscal. In such condition, Karur Vysya Bank 29% growth in net interest income shows its buoyancy in tough times, which in turn has helped it in protecting its spreads. However bank has reported 74% growth in its profits in the first half of the current fiscal.
Even more praiseworthy is the fact that its net interest income has grown by 28.6% yo-y in the six months ending Sept'09. Net interest income is calculated by deducting interest expense from interest earned. As interest rate shot up last year, banks witnessed shrinkage in spreads. As a result, most of the banks have reported flat net interest income in this fiscal so far. In such a situation, 29% growth in net interest income shows Karur Vysya Bank's resilience in tough times, which has helped it in protecting its spreads. The bank posted 74% growth in its profits in the first half of the current fiscal.
Currently bank stock is trading at 1.5 times its book value which is close to all-time high valuations. Also at current prices its dividend yield amounts at 3.2%. Therefore the conservative investors can invest in this stock to earn profit. Bank’s valuations are in comparison to its peers like Federal Bank, City Union Bank and South Indian Bank. Moreover its dividend yield is highest among its peers. From this valuation it becomes clear that Karur Vysya Bank provides unique combination of reasonable valuations, high dividend yield and growth potential.
Kotak Bank appears as a leading private sector bank in India
Kotak Mahindra Bank a new generation bank has become of the leading players in the private banking sector in India. In the interview given to ET NOW, C Jayaram, executive director of Kotak Mahindra Bank for the first time revealed its assets under management and said, “We have emerged as one of the leading players in the industry with assets under management in the range of Rs 13,000 crore.”
An anonymous senior official working with a foreign bank said, “Assets under management of Rs 13,000 crore will surely put Kotak in the top two, if not the number one player in the space”.
Mostly private banks very rarely disclose information about their assets under management, but players like DSP Merrill Lynch, Deutsche Bank and Kotak Mahindra Bank have always been recognized as key players in this segment. But, both DSP Merrill Lynch and Deutsche Bank do not disclose their assets under management as a matter of policy.
Kotak Mahindra Bank categorizes its private banking clients, as individuals having capacity to invest surplus of over Rs 5 crore (or $1 million). The same trend is followed by other banks also.
Mr Jayaram said in the past year also, Kotak’s client base in the private banking business was quite big and the at present bank is having a clientele base of 1,500 from net worth families. He added, “There is a large base of HNIs in the country. This has been rising and will be on the rise. There are more people being added to the universe every year, and it’s a function of the way India is progressing”.
In the next few years bank will be looking for expansion of their business in the private banking sector.
On the other hand wealth managers believe Indian HNIs are searching for alternate asset classes.
Mr Jayaram said, “Initially, this was a space where there were very few asset classes. But the new generation of HNIs is moving away from just equity and fixed income into other asset classes like real estate, commodities, private equity and structured products”.
He also believes that newer and younger HNIs are ready for aggressive expansion into new asset classes, to get higher returns. According to geographical location these banks get largest clientele base of HNIs from Mumbai, Delhi and Bangalore.
An anonymous senior official working with a foreign bank said, “Assets under management of Rs 13,000 crore will surely put Kotak in the top two, if not the number one player in the space”.
Mostly private banks very rarely disclose information about their assets under management, but players like DSP Merrill Lynch, Deutsche Bank and Kotak Mahindra Bank have always been recognized as key players in this segment. But, both DSP Merrill Lynch and Deutsche Bank do not disclose their assets under management as a matter of policy.
Kotak Mahindra Bank categorizes its private banking clients, as individuals having capacity to invest surplus of over Rs 5 crore (or $1 million). The same trend is followed by other banks also.
Mr Jayaram said in the past year also, Kotak’s client base in the private banking business was quite big and the at present bank is having a clientele base of 1,500 from net worth families. He added, “There is a large base of HNIs in the country. This has been rising and will be on the rise. There are more people being added to the universe every year, and it’s a function of the way India is progressing”.
In the next few years bank will be looking for expansion of their business in the private banking sector.
On the other hand wealth managers believe Indian HNIs are searching for alternate asset classes.
Mr Jayaram said, “Initially, this was a space where there were very few asset classes. But the new generation of HNIs is moving away from just equity and fixed income into other asset classes like real estate, commodities, private equity and structured products”.
He also believes that newer and younger HNIs are ready for aggressive expansion into new asset classes, to get higher returns. According to geographical location these banks get largest clientele base of HNIs from Mumbai, Delhi and Bangalore.
Thursday, December 3, 2009
UCO Bank gets approval to open 82 new branches
The Reserve Bank of India (RBI) has given approval to state owned lender UCO Bank to open 82 new branches across the country by the end of this financial year. At a customer’s meet Chairman and Managing Director SK Goel said, “These branches will be in addition to the 2,078 branches which UCO Bank has at present”. The bank has also drafted a plan for the renovation of its 400 branches.
Goel stated, “We are going for a makeover of our branches in rural areas. The bank aims to offer an ambience which will make our rural customers feel at home”.
He also resolved financial inclusion in Himachal Pradesh and Orissa, in these states bank has the lead responsibility. Goel told bank has achieved 100 per cent financial inclusion in Himachal Pradesh.
He said the RBI had set up an independent agency to check the genuineness of the claims made by UCO regarding financial inclusion in Himachal Pradesh.
While in Orissa, Goel informed in 13 districts of the state bank has achieved 100 per cent financial inclusion.
He added, “We are aiming to make Orissa the second state in the country to achieve 100 per cent financial inclusion and we want this to happen as soon as possible.”
As per agency’s reports, in Himachal Pradesh has achieved 99.4% financial inclusion and the people left out in the state are the migrants who had come to the state for a short duration, he said.
Tuesday, November 24, 2009
Kotak Mahindra Bank open first representative office in Dubai
Kotak Mahindra Bank, a private sector lender has opened its first international representative office in West Asia in Dubai.
Kotak Mahindra Bank Executive Vice-Chairman and Managing Director Uday Kotak told, "Investors based in the Middle East can now access information on various investment opportunities available in India through our representative office."
Currently Kotak Group has made its presence in New York, London, San Francisco, Mauritius, Bahrain and Singapore. It is offering service to around 65-lakh customers.
According to release Kotak Mahindra Financial Services is a wholly owned unit of Kotak Securities, has received approval papers for setting up an office in the Dubai International Financial Centre.
Kotak Mahindra Bank Executive Vice-Chairman and Managing Director Uday Kotak told, "Investors based in the Middle East can now access information on various investment opportunities available in India through our representative office."
Currently Kotak Group has made its presence in New York, London, San Francisco, Mauritius, Bahrain and Singapore. It is offering service to around 65-lakh customers.
According to release Kotak Mahindra Financial Services is a wholly owned unit of Kotak Securities, has received approval papers for setting up an office in the Dubai International Financial Centre.
Monday, November 23, 2009
Banks to bet on home loan disbursal to improve credit offtake
Although economy is recovering and also the recession is over still the credit growth is sluggish and also the corporate credit has not yet taken off, therefore banks are making final effort to widen their loan portfolio through home loans.
However after a break in 2008 and early 2009 the employment prospects are improving and income becoming steady, a gradual increase in demand for houses can be seen. The banks festive home loan schemes have helped in stimulating the recovery.
Albert Tauro, chairman and managing director, Vijaya Bank pointed out, "There has been some pick-up in retail demand following the introduction of festival home and car loans at attractive interest rates which is improving the credit offtake scenario".
The big lenders such as State Bank of India and ICICI Bank are betting on this opportunity to grow their retail loans, especially home loans, to support their overall credit expansion. Home loans cover at least 6-10% of the total credit portfolio of most of the banks.
As per the latest RBI data the year-on-year growth of bank’s total loans has declined to single digit and as on October 30 it was just 9.5% as against 28.4% a year ago.
According to RBI's macroeconomic report as on August 28, the total outstanding housing loans of banks amounted to Rs 2.85 lakh crore, or 10.8% of total loans.
For the fiscal 2009-10, in the first eight months home loans had increased by 4.5%. While in July-September most of the banks had reported at least 20-25% growth in their home loan, and are hoping to see a similar trend in the coming quarters.
Bank of Baroda chairman M D Mallya, last week had informed that the bank’s home loans has grown by 25%. According to S L Bansal, general manager -- retail banking, Union Bank of India’s home loan book has registered a growth of 24-25%.
On the other hand Housing Development Finance Corporation, the country's largest home loan lender is already flooded with loan applications, a joint manager director Renu Karnad informed.
Karnad said, "The segment where we are seeing good demand is in the price range of Rs 30-50 lakh in metros and bigger towns and around Rs 20-25 lakh in smaller towns."
The banks are getting large number of loan applications and bankers are likely to disburse the loans to the applicants in the coming months, thus giving boost to the overall disbursals of banks. Also there has been increase in the demand for home loans as banks have extended their special home loan schemes under which they are offering lower fixed rates, therefore banks are trying to cash in the increasing demand.
Recently State Bank of India has extended its special 8% home loan scheme up to March 31. Every month SBI is disbursing loans of around Rs 2,000 crore, chairman O P Bhatt had said on October 31.
After SBI, Corporation Bank has also extended its scheme to March 31 whereas Axis Bank has recently announced a special scheme under which it will offer loans at 8%. The Union Bank of India has launched a scheme under which the borrowers will have to pay 8.5% fixed rate for the first three years.
But sharp increase in property prices can cause risk to the rising demand in home loans. While HDFC's managing director Keki Mistry think property prices have to reasonable then only the rising demand can become a concrete boom. . "People do not buy houses just based on interest rates," Mistry said on Monday.
In major metropolitan cities the property prices have already started moving up, in Mumbai and New Delhi property prices have raised sharply. "We are seeing some pick-up in demand for home loans. But for this demand to sustain, builders will have to maintain prices at current levels, else demand will get diluted," Punjab National Bank's chairman and managing director K R Kamath said.
On the other hand some bankers say in most of the areas the rise in property prices is not sharp, and might not affect the demand. The another risk to the rising demand is the expected turn in interest rate cycle as the Reserve Bank of India is preparing strategy to withdraw the accommodative policy. But some of the bankers say the impact on banks' lending rates of the monetary policy withdrawal will be visible only by March-end.
According to Bansal of Union Bank of India, "I don't think it (rates) will go up much. If rates go up, it will be mostly in February or March. And I don't think property prices will go up in a big way. The government is investing in affordable housing also". Although rising home prices might pinch buyers' pockets but affordable home loans appear to stay for long period.
However there are fears that rapid expansion of home loan at the time of potential rise in housing prices might also increase banks’ non-performing assets (NPAs). For instance, in July-September State Bank of India has seen a sharp rise in its net NPAs , mainly due to its retail portfolio. The banks’ net NPAs have increased to 1.73% by September from 1.55% as of June 30.
Well in the coming quarters demand for home loans is expected to remain strong. But bankers have to maintain asset quality as they give home loan to stimulate credit off take.
However after a break in 2008 and early 2009 the employment prospects are improving and income becoming steady, a gradual increase in demand for houses can be seen. The banks festive home loan schemes have helped in stimulating the recovery.
Albert Tauro, chairman and managing director, Vijaya Bank pointed out, "There has been some pick-up in retail demand following the introduction of festival home and car loans at attractive interest rates which is improving the credit offtake scenario".
The big lenders such as State Bank of India and ICICI Bank are betting on this opportunity to grow their retail loans, especially home loans, to support their overall credit expansion. Home loans cover at least 6-10% of the total credit portfolio of most of the banks.
As per the latest RBI data the year-on-year growth of bank’s total loans has declined to single digit and as on October 30 it was just 9.5% as against 28.4% a year ago.
According to RBI's macroeconomic report as on August 28, the total outstanding housing loans of banks amounted to Rs 2.85 lakh crore, or 10.8% of total loans.
For the fiscal 2009-10, in the first eight months home loans had increased by 4.5%. While in July-September most of the banks had reported at least 20-25% growth in their home loan, and are hoping to see a similar trend in the coming quarters.
Bank of Baroda chairman M D Mallya, last week had informed that the bank’s home loans has grown by 25%. According to S L Bansal, general manager -- retail banking, Union Bank of India’s home loan book has registered a growth of 24-25%.
On the other hand Housing Development Finance Corporation, the country's largest home loan lender is already flooded with loan applications, a joint manager director Renu Karnad informed.
Karnad said, "The segment where we are seeing good demand is in the price range of Rs 30-50 lakh in metros and bigger towns and around Rs 20-25 lakh in smaller towns."
The banks are getting large number of loan applications and bankers are likely to disburse the loans to the applicants in the coming months, thus giving boost to the overall disbursals of banks. Also there has been increase in the demand for home loans as banks have extended their special home loan schemes under which they are offering lower fixed rates, therefore banks are trying to cash in the increasing demand.
Recently State Bank of India has extended its special 8% home loan scheme up to March 31. Every month SBI is disbursing loans of around Rs 2,000 crore, chairman O P Bhatt had said on October 31.
After SBI, Corporation Bank has also extended its scheme to March 31 whereas Axis Bank has recently announced a special scheme under which it will offer loans at 8%. The Union Bank of India has launched a scheme under which the borrowers will have to pay 8.5% fixed rate for the first three years.
But sharp increase in property prices can cause risk to the rising demand in home loans. While HDFC's managing director Keki Mistry think property prices have to reasonable then only the rising demand can become a concrete boom. . "People do not buy houses just based on interest rates," Mistry said on Monday.
In major metropolitan cities the property prices have already started moving up, in Mumbai and New Delhi property prices have raised sharply. "We are seeing some pick-up in demand for home loans. But for this demand to sustain, builders will have to maintain prices at current levels, else demand will get diluted," Punjab National Bank's chairman and managing director K R Kamath said.
On the other hand some bankers say in most of the areas the rise in property prices is not sharp, and might not affect the demand. The another risk to the rising demand is the expected turn in interest rate cycle as the Reserve Bank of India is preparing strategy to withdraw the accommodative policy. But some of the bankers say the impact on banks' lending rates of the monetary policy withdrawal will be visible only by March-end.
According to Bansal of Union Bank of India, "I don't think it (rates) will go up much. If rates go up, it will be mostly in February or March. And I don't think property prices will go up in a big way. The government is investing in affordable housing also". Although rising home prices might pinch buyers' pockets but affordable home loans appear to stay for long period.
However there are fears that rapid expansion of home loan at the time of potential rise in housing prices might also increase banks’ non-performing assets (NPAs). For instance, in July-September State Bank of India has seen a sharp rise in its net NPAs , mainly due to its retail portfolio. The banks’ net NPAs have increased to 1.73% by September from 1.55% as of June 30.
Well in the coming quarters demand for home loans is expected to remain strong. But bankers have to maintain asset quality as they give home loan to stimulate credit off take.
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