Pvt Banks increased margin money on four wheeler

For many of us buying a first car is always has a great emotional value. The interest rates have hiked so much that it has become difficult to buy a car but this is just one side of the story. If we see the other side which is adding up to the high cost of the four wheeler is the margin money which needs to be brought in upfront. Private sector banks without announcing have hiked the margin requirement by 10 percentage points in the past few weeks.

According to few dealers hike in margin money has made it difficult to get a car loan through. For a compact car (B Segment), lenders are demanding 10% to 15% as margin money while earlier it was only 5% or so. For a mid sized sedan (C-Segment car), the margin money requirement has been hiked to 20% from 10% and for a utility vehicle 25% is being demanded from the earlier 15%.

However the commercial banks are lending up to 85% of on road price (dealer price plus road tax and insurance). "The problem here is paper work consumes a week to 10 days," dealers said.

Thus this means a car buyer has to shell out Rs 60,000 upfront for a compact car as against Rs 20,000 earlier and increases correspondingly for bigger cars. Up till now car financiers used to finance up to 100% of on road price of car.

"This is not all. In most cases, car financiers have brought in tighter disbursal norms, making a purchase a Herculean task. I know of a case in Coimbatore, where a buyer was asked to show property in his name to avail of a loan for a small car. And more so, after all paper work, the lender disbursed only 85% of the car value," sources said. But a section of market thinks that rising interest rates in fact don't hurt sales that much. They say that a 50 basis points or half per cent increase on a one lakh rupee car loan for a time of three years will translate into a monthly of a mere Rs 36.

"For a first time buyer, there is a lot of emotional accomplishment of owning a car, therefore he will try and stretch himself. But, where he is getting stumped now is on margin payments," an official with private bank said. "Car financiers are hiking interest rates and increasing margin payments which are affecting the already damp sentiment. We hope to see drop in domestic sales, because of this situation," Arvind Saxena, senior vice-president, marketing, Hyundai, said.

Dental Insurance – Some basic ideas

Dental insurance is one of the most popular forms of insurance nowadays. First of all, we should know the concept of dental insurance. Dental insurance is a form of insurance where an individual purchases a dental insurance plan through payment of a yearly or monthly premium to a dental insurance provider. Subsequently, the dental insurance provider offers dental insurance coverage for dental expenses. In simple words, if the insured person bears any dental expenses within the insurance term, those expenses would be reimbursed by the dental insurance provider.

The majority of health insurance programs offered at the present time are inclusive of dental insurance. Therefore, there is normally no requirement to purchase a dental insurance policy separately. When your health insurance or medical insurance does not offer dental insurance, you may receive dental insurance as a component of your medical insurance by means of raising your premium by a nominal value. In this kind of a dental insurance program, you can also avail tax benefits. In the U.S., the health insurance premium paid by you is immediately deducted from your taxable earnings. In this manner, you finish up paying lower taxes.

Family dental insurance offers dental insurance to the whole family. This is a more beneficial form of dental insurance than individual dental insurance because family dental insurance is relatively low-priced in comparison to individual dental insurance. In a family dental insurance program, if the number of heads goes up, then the premium per individual goes down since the risk becomes distributed.

When your company is offering dental insurance, in that case there is nothing better than that. You must opt for this form of insurance when your company is offering it because your employer pays the greater portion of the premium and you pay the rest.

Researches have also demonstrated that people carrying dental insurance plans have the trend of having improved dental health since they prefer precautionary dental checkup. This is advantageous because poor dental health might spoil your appearance and add to your expenses.

PSU banks to cut PLR by 75 basis points, interest rate to soften by 25-50%

After having a meeting with Finance Minister P Chidambaram all the PSU banks have decided to cut their prime lending rates by 75 basis points. Therefore interests rates are likely to get soften as the cut can be between 25-50%. Moreover credit guarantee on loans would be extended to Rs one lakh crore and deposit rates will be reduced by 50 basis points.

Earlier, Finance Minister P Chidambaram had held a meeting with top executives of PSU banks to review the liquidity situation and performance of lenders. The meeting was organized after the leaders of the Indian industry had met Prime Minister Dr. Manmohan Singh and demanded for steps to improve liquidity and move to create environment favorable for lowering of interest rates.

The meeting was attended by the SBI Chairman O P Bhatt, PNB chief K C Chakrabarty, Bank of Baroda Chairman M D Mallya, Canara Bank head A C Mahajan, UCO Bank CMD S K Goel and top officials of the Finance Ministry and Reserve Bank of India (RBI).

Earlier on Sunday, Chidambaram said that he would ask the public sector banks to think about lowering lending rates to ease the liquidity crunch in the country.

While expressing RBI's latest policy package as right step to instill more liquidity in the system, Chidambaram said, "I am happy with the policy package announced by the RBI. When it announced its (peak season) policy on October 24, the RBI had promised swift action in case it is necessary to infuse more liquidity."

Previously on Saturday, the RBI had announced a slew of measures to instill liquidity in the system.

The apex bank had slashed the repo rate by 50 basis points to 7.5 per cent and the cash reserve ratio (CRR) by 100 basis points to 5.5 per cent and the statutory liquidity ratio (SLR) by 100 basis points to instill an additional Rs 85,000 crore into the system.

Before in October, the RBI had infused an additional liquidity of Rs.1, 85,000 crore in the view of global financial crisis.

Banks change fixed rate by invoking reset clause

Banks due to liquidity crunch are under pressure to protect their margins and are required to review the pricing and structure of loans. Earlier loans which had a fixed rate of interest were considered to be insulated from interest rate vagaries.

Banks are under pressure to protect their margins and need to review the pricing and structure of loans. Previously, loans carrying a fixed rate of interest were considered to be insulated from interest rate vagaries. Therefore they are supposed to remain neutral to the changes in the market rates of interest. Hence increase in the interest rates, have entailed a loss of banks.

Banks have introduced the reset clause in their fixed home loan documents to result in change in the interest rate at a future date. A reset clause permits banks to review rates at the end of certain number of years. In the housing loan agreements the reset clause is either explicitly or implicitly. The clauses come into effect at the time of increase in the interest rates. Effectively, this makes the fixed rate loans equivalent to floating rate ones.

The reset clause also enables banks to revise their interest rates on the loans in case of certain circumstances. Under this clause the banks have the discretion to increase the interest rates in case the market rates increase. This gives the banks a escape against interest rate increases at a future point in time. But it is a disadvantage for the borrower.

The interest rate on fixed is higher than the floating rate because there is an additional element of risk, which the bank has to bear in the future. Generally, people opt for fixed rate loans when the interest rates are low therefore they prefer to lock-in the interest rates for the long term. Originally, banks were offering these loans without any apprehensions of any radical increases in interest rates in the future. But, as the interest rates started going up, banks are introducing the reset clause.

However the interest rate reviews and hikes can be linked to various factors - the prime lending rate (PLR) of the bank, money market conditions and so on. Furthermore, the increases might apply to select borrowers - loans above a certain amount or loans for certain tenure. The tenor of review and increase in the interest rates may be mentioned - once in a quarter or once in six months.

Recently the interests rates have gone up subsequently therefore banks are increasingly introducing the reset clauses to increase the interest rates on the fixed rate loans as well.

Banks not offering loans for gold purchase

In India it is a festival time and the celebrations are on full swing new clothes to buy, new appliances, even buying a new car. At this time banks also promote gold coin purchases at bank branches. But most of the banks have not included loan offer for purchasing of gold or gold jewellery in their portfolios.

However Indian Overseas Bank and Corporation Bank are offering loans to purchase gold and platinum jewellery, some banks like Canara Bank are offering discounted loan offer for purchases.

According to industry experts these products are not consumer friendly. "Banks currently offer loan for gold purchases to only government employees or those who have a salary account with them. The loan is available only for buying gold bars, not jewellery," says Keyur Shah, associate director of the World Gold Council.

Though the World Gold Council is having talks with several banks and national gold jewellers for making available gold purchases via equated monthly installments (EMIs).

"In times of volatility and global crises, gold jewellery purchases on EMI would be beneficial. We have been talking with banks and national players to offer gold on EMI," says Shah.

He raised a question, "Affordability is a factor in gold purchases. When loans are available to purchase consumer durables, home, etc, why not for gold?"

Bankers stated that high risk is involved in the yellow metal. An anonym’s bank official stated, "The prices are volatile and, in case the person defaults, it is not as easy to recover a gold asset as it is to recover a home or vehicle."

But Shah is not convinced about this. He added, "If security and risk can be taken care of in the white goods industry, it can be taken care of in the gold industry as well".

Jewellers pointed out that they haven't seen too many purchases by takers of gold loans as the loans are not consumer friendly.

"Banks have restrictions for offering gold loans. Unlike a personal loan or a consumer durables loan, a loan for buying gold jewellery is not sustainable. Unlike a television, which sees a significant drop in value once it is purchased, in the case of gold, the value may even increase after it's bought. Gold is a liquid asset and can be moved and so structuring a product may not be possible," says V Govindraj, VP, integrated retail services at Tanishq.

To get a gold loan, for amounts beyond Rs 50,000, a security such as LIC policy, Kisan Vikas Patra, National Savings Certificate has to be kept with the bank. Therefore if you are looking for taking a loan of Rs 1 lakh, up to Rs 50,000 it will come without security and a security has to be submitted for the balance Rs 50,000.

However jewellers themselves have found an easier way, which operates like the loan facility. Rajiv Popley, director of Popley Group, says, "We have been offering the EMI facility for gold purchases for the past five years through credit cards. We have a tie-up with Citibank and ICICI Bank, under which the EMI facility can be utilized. Most people take this facility."

"There is no down payment required and the interest charged is 0% for three months," explains Popley. "Buying gold is a spontaneous decision and the EMI on credit card facility can be utilized in seconds, while the bank loan is a tedious process. No one would undergo a tedious process when the shopping is spontaneous," he elaborates.

Nevertheless, the EMI on credit card facility that many people are using for gold purchases might not be as low-cost as it appears. Banks are usually charging an interest rate of around 1.5-3% per month, as well as the processing charge for the EMI on credit card facility. Therefore, for a six month EMI option, you will end up paying around 8-9% more than the purchase price. In this world everything has price.

Banking operations paralyzed due to two day strike

Public sector bank employees went on two day strike which paralyzed the banking operations across the country. Over one million employees stayed off from work.

A two-day nationwide strike was called by the United Forum of Bank Unions. The employees are protesting against bank mergers and are demanding a wage revision. Due to two-day strike customers faced difficulty as they were unable to carry out their normal banking transactions. Several bank branches remain closed in Mumbai and other cities.

Due to strike an automated teller machines (ATMs) of most lenders, including State Bank of India, Punjab National Bank, Canara Bank, Bank of India and Corporation Bank, ran out of cash at certain locations and customers were unable to withdraw cash. The other banking transactions like clearing operations, real time gross settlement (RTGS) and forex transactions were also hit by the strike.

According to Lalit Nagda, the general secretary of the Maharshtra State Federation of Bank Unions in Mumbai alone, transactions worth more than Rs 35,000 crore were hit because of the strike. The union also participated in the strike along with the eight associations that had called the strike.

“Everyday 300,000 to 350,000 instruments are traded in Mumbai,’’ he added.

United Forum of Bank Unions Convenor C H Venkatachalam said if the Indian Banks’ Association (IBA), the apex body of banks, did not attended to their demands in due time the agitation would be intensified further. He informed that banks can go for more than a two-day strike next time.

A bank union controlled by the Bal Thackeray-run Shiv Sena did not participated in the strike as it was not invited to participate in the initial round of discussions for the protest.

However the treasury operations of banks were not affected by the strike as officers were not a part of the stir.

A senior executive at Union Bank of India said but, volume of transactions in the money market was down due to an overall liquidity crunch.

There was around 23 per cent of attendance of total 39,000 employees of Central Bank of India. The All India Bank Officers Confederation told that no transactions took place on the second day.

A few branches, like the Nariman Point branch, of Union Bank of India employees had not participated in the strike so the banking operations were carried out partially.

South Indian Bank Launched Convenience Banking Product for salaried employees

South Indian Bank (SIB) launched a latest product for convenience banking, “Group Salary Savings Account” (GSSA). The product is a premium savings account designed to meet the needs of salaried employees and their employers.

Bank sources informed that the corporates, firms and such others who have opened accounts with any of the 511 CBS branches, the salaries of their employees will be distributed by the bank, hassle-free and free of any bank charges. The employer will be benefited in as the distribution of salary of would be easy to any employees/any single employees who are/is working even in far-off places where SIB has no presence,

The product was jointly launched by Dr V.A. Joseph Chairman & CEO of the Bank and Mr. M. P. Gopala Krishnan, President, CMS Trust. In his inaugural speech Dr. Joseph said, ''This convenience banking product, which is designed for the convenience of both employers and employees, leverages the bank's strong technology platform, which connects all the 511 branches and 26 extension counters of the Bank under Core Banking Solutions network offering anytime banking to its customers. GSSA can be opened with zero balance”.

The Chairman and CEO of the Bank also stated, “South Indian Bank, being a customer – oriented Bank is striving hard to render personalized customer service using the latest technological capabilities. The technological capability of the Bank was recognized when the Bank could bag the banking technology excellence award from IDRBT which is the technical arm of RBI. The service quality of the Bank has also been recognized when the Bank was selected in the ‘Outlook Money – C Fore’ survey as the best private sector Bank in India in the service quality segment.”

Dr. Joseph also informed about the facility recently started for online booking of offerings, free of bank charges, through South Indian Bank payment gateway. It is the first bank to start online booking by the customers of the bank who are devotees of Guruvayur Sreekrishna Temple which is described as the Dwaraka of South India. NRIs are also using this facility to affect offerings, hassle –free with greater transparency and security at the click of a button, either for themselves or their aged parents resident in India.

The Chairman while concluding his inaugural speech said, “South Indian Bank had completed on 26.03.07 the project ‘SIBertech’ by introducing a centralized Core Banking Solution in technology partnership with Infosys Technologies when many banks had not even started implementation of CBS. SIB had started this project in 2001 to render personalized customer service. The new product now launched would confirm this belief”.

Bank has launched convenience banking product after doing deep research so that banking for employers and their employees, could be made extremely easy and comfortable. The features include: -

Free International ATM-cum-Debit Card for which annual maintenance charges are not collected

Free of charges online booking of offerings for Lord Sri Guruvayurappan, free of bank charges

No charges on withdrawal of cash from the ATMs of other Banks (As charges would be borne by SIB)

Free utility payment and e-commerce services

No stipulation on minimum balance

The depositor enjoying many freebies can earn the usual SB interest

The depositor can operate his SB account –during his travel/temporary transfer /transfer- hassle-free

The account can be closed /transferred to another branch with out any charge

Free of cost cheque leaves (subject to limits in each category)

Free fund transfer facility through RTGS/NEFT/Fast Money /DD

Customers of this feature-rich Savings Bank account will also get the facility to open Depository account and also enjoy mobile banking facility.

Mr.George Davis Thottan,General Manager and Mr.P.J.Jacob,Deputy General Manager & Regional Head also gave speech on the occasion .