Standard Chartered Bank has decided to reduce its personal loans business and from now will be focusing on cross selling to its existing customers. The bank will also be tightening its processes of other unsecured lending products. By this move of bank a couple of hundred bank’s sales force is likely to get affected. Most of other banks are using direct sales agent (DSA) network while StanChart will be using its own sales force rather than the direct sales agent (DSA) network.
StanChart’s decision has come following the ICICI bank decision of focusing on selling its two-wheeler loans only to its existing customer-base. The banks decision has come in line with the increased delinquencies in this space for most players. The default in personal loan segment for most banks stands at 5-6%, as against 2% of the entire loan portfolio sometime ago. In the beginning, the rise in default for most banks was mainly in small-ticket personal loans. With the rising interest rates and the collection problems has affected the personal loan portfolio of most banks.
When enquired from Standard Chartered Bank head (consumer banking) Shyam Srinivasan said: “Stanchart continues to be focused on credit cards while focusing on the established existing customer base and new bank customers in targeted segments. On personal loans, given the market cycle at this point, we will offer the product only to existing customers of the bank.”
Most of the foreign and private sector banks have reduced the disbursements in the personal loan business and have also tightened distribution norms on the credit card side. StanChart will be selling personal loans only to its pre-qualified existing customer base, which have clear track records. The bank is having an internal customer-base of 2.2 million, including credit card, SME, saving and current account customers among others.
In the past couple of years the bank has cut down its credit card portfolio as well. In recent times, default on credit cards has gone up around 12% on an average for most players. According to sources this number is much lesser for StanChart.
According to bank officials the reason for the change in business mix is not related to the performance of its own portfolio. In the last few months leveraging among customers has increased. Currently StanChart is having around 60% of personal loan customers who are external customers.
In the credit card segment the bank has 1.38-1.4 million customers. Bank officials told, banks most important business is credit card segment, at present there are no plans to exit from it.
In the past few years, the bank for its credit card customers has increased income criteria. Now it is only focusing on the upper-middle and mass-affluent customer base; mainly with base annual incomes of over Rs 5 lakh. One-and-a-half years ago, this amount stood at around Rs 1 lakh and the bank is sourcing only around 10-15% of the customers in this segment. Sourcing is also done from StanChart’s internal customer base.
Another product on which the bank is focusing more on its internal customer base is the Smart Credit facility, using this facility customers can take overdrafts on their accounts.
In the past couple of years, StanChart has used its own sales force of around 1,800 people, rather than the direct sales force. A couple of hundred people are believed to have been affected by this decision, although this number could not be confirmed. Bank officials also added that all high-performers have been shifted to the mortgages, transaction banking and SME segments. At present, on the secured portfolio, the bank main focus is on mortgages, which is still seen to be growing strong.
It is believed that soon most players will be following the similar steps as defaults continue to grow.
Thursday, August 28, 2008
Tuesday, August 19, 2008
Syndicate Bank re-launched gold loan scheme to widen its personal loan portfolio
Syndicate Bank, is the 7th largest public sector lender bank has head quarter in Manipal has re-launched its gold loan scheme, SyndSwarna Express. Bank has re-launched the scheme with an aim to widen its personal loan portfolio.
The bank, aims to distribute Rs 1,000 crore under the new scheme, during the present financial year. Under this scheme, one can pledge gold and can take the required loan for a maximum period of two years.
Bank is charging interest of 13.5 per cent on this loan as compared to the earlier 15.5 per cent during last fiscal. It will be lending up to Rs 850 per gram of gold. The bank will be disbursing loan through single windows opened at 300 designated branches across the country for the quick appraisal of gold jewellery and disbursal of loan amount.
Bank said by the end of the present fiscal the scheme will be extended to around 700 branches. Bank sources explained that there is no ceiling on the loan amount and no penalty will be charged for pre-closure of the loan account and the interest will be calculated on the reducing balance.
George Joseph, has taken over as the new chairman and managing director of the bank told Business Standard: “As part of our efforts to adopt a ‘Blue Ocean Strategy’ (creating uncontested market space), we have been introducing new products and gold loan scheme is one such scheme, which is not openly encouraged by public sector banks. For the first time, we are taking the gold loan product to the mass market in cities. Earlier, it was restricted only to rural areas where farmers were pledging gold to raise loans for meeting their agriculture requirements. But, now we have extended it to urban customers at competitive rates.”
Joseph added, “With this scheme, we want to help customers avoid private money lenders who charge between 18 per cent and 24 per cent depending on the tenor of the loan. Our single window will disburse the loan in five minutes”. But, bank will be charging a processing fee of Rs 1.50 for a loan amount of Rs 1,000.
During the financial year 2008-09, Syndicate Bank have plans to disburse Rs 1,000 crore, the growth is close to 17 times over last fiscal’s growth for this product.
The bank, aims to distribute Rs 1,000 crore under the new scheme, during the present financial year. Under this scheme, one can pledge gold and can take the required loan for a maximum period of two years.
Bank is charging interest of 13.5 per cent on this loan as compared to the earlier 15.5 per cent during last fiscal. It will be lending up to Rs 850 per gram of gold. The bank will be disbursing loan through single windows opened at 300 designated branches across the country for the quick appraisal of gold jewellery and disbursal of loan amount.
Bank said by the end of the present fiscal the scheme will be extended to around 700 branches. Bank sources explained that there is no ceiling on the loan amount and no penalty will be charged for pre-closure of the loan account and the interest will be calculated on the reducing balance.
George Joseph, has taken over as the new chairman and managing director of the bank told Business Standard: “As part of our efforts to adopt a ‘Blue Ocean Strategy’ (creating uncontested market space), we have been introducing new products and gold loan scheme is one such scheme, which is not openly encouraged by public sector banks. For the first time, we are taking the gold loan product to the mass market in cities. Earlier, it was restricted only to rural areas where farmers were pledging gold to raise loans for meeting their agriculture requirements. But, now we have extended it to urban customers at competitive rates.”
Joseph added, “With this scheme, we want to help customers avoid private money lenders who charge between 18 per cent and 24 per cent depending on the tenor of the loan. Our single window will disburse the loan in five minutes”. But, bank will be charging a processing fee of Rs 1.50 for a loan amount of Rs 1,000.
During the financial year 2008-09, Syndicate Bank have plans to disburse Rs 1,000 crore, the growth is close to 17 times over last fiscal’s growth for this product.
Thursday, August 14, 2008
Banks have started waiving penalties for loan prepayments
The domestic private sector and foreign banks charge prepayment penalties ranging between one and three per cent of the outstanding loan principal amount. As certificates of deposit (CD) have headed to breach the 11-per cent mark on the back of tight liquidity, banks are in progress of waiving penalties for loan prepayments.
Public sector banks have already started waiving the prepayment charges. But private sector banks are still to follow the suit. Get the updated interest rates for Personal Loan India here also read the articles about how to avail the best personal loan for you.
ING -Vysya Bank sources said, “We have already done away with penalties on partial prepayments.”
Earlier banks typically opposed prepayments when interest rates were low and liquidity was in surplus. Bankers said their decision has been influenced by tight liquidity conditions and soaring costs of working funds.
Bankers stated that three- month CDs were raised at 10.5 per cent. Inclusive of costs for maintaining mandated reserve ratios (cash reserve ratio of 9 per cent and statutory liquidity ratio of 25 per cent), the effective costs were closer to about 11.5 cent on the funds raised through CDs.
CDs are considered as part of banks net demand and time liabilities and consequently eligible for both CRR and SLR. Bulk deposits through CDs comprised at least 30-35 of private sector bank lend able resources. While of foreign banks, the ratios are closer to about 40 per cent. Also, retail deposits are close to 10 per cent.
Bankers informed that till the middle of last year, many banks did a thorough research of some of their home and auto loan portfolios. The securitized papers were positioned them with other financial institutions that included mutual funds and insurance funds. Such resources were free from reserve ratios.
Prepayments of outstanding loans are free from reserve ratios and this allows banks to add to lend able resources.
On the other hand some of the foreign banks have raised cross -border resources for meeting their lending requirements. But part of the cross-border resources is short term in nature which consequently has the inherent risk of mismatches. But cross- border funds are no longer cheap, unlike in the past.
Moreover, switching over to Basel II has also pushed banks to reduce the risk-weighted assets on their books. This year, complete banking sector will be becoming compliant to BASEL II. A shrunk asset book reduced banks’ capital requirements. This is particularly in a situation, when the capital funds in the domestic and international markets are becoming increasingly difficult. Domestic banks have been facing pricing pressures for making tier two bond issues. Tier two capital bonds for public sector banks are currently priced at well over 11 per cent, including placement and reserve ratio costs.
Bankers also said that in the current scenario of hardening interest rates, delinquency risks have risen. Delinquency has forced far higher costs on the balance sheets than prepayments. This is because the process involves large provisioning or preparing for a write-offs that could translate into losses.
Public sector banks have already started waiving the prepayment charges. But private sector banks are still to follow the suit. Get the updated interest rates for Personal Loan India here also read the articles about how to avail the best personal loan for you.
ING -Vysya Bank sources said, “We have already done away with penalties on partial prepayments.”
Earlier banks typically opposed prepayments when interest rates were low and liquidity was in surplus. Bankers said their decision has been influenced by tight liquidity conditions and soaring costs of working funds.
Bankers stated that three- month CDs were raised at 10.5 per cent. Inclusive of costs for maintaining mandated reserve ratios (cash reserve ratio of 9 per cent and statutory liquidity ratio of 25 per cent), the effective costs were closer to about 11.5 cent on the funds raised through CDs.
CDs are considered as part of banks net demand and time liabilities and consequently eligible for both CRR and SLR. Bulk deposits through CDs comprised at least 30-35 of private sector bank lend able resources. While of foreign banks, the ratios are closer to about 40 per cent. Also, retail deposits are close to 10 per cent.
Bankers informed that till the middle of last year, many banks did a thorough research of some of their home and auto loan portfolios. The securitized papers were positioned them with other financial institutions that included mutual funds and insurance funds. Such resources were free from reserve ratios.
Prepayments of outstanding loans are free from reserve ratios and this allows banks to add to lend able resources.
On the other hand some of the foreign banks have raised cross -border resources for meeting their lending requirements. But part of the cross-border resources is short term in nature which consequently has the inherent risk of mismatches. But cross- border funds are no longer cheap, unlike in the past.
Moreover, switching over to Basel II has also pushed banks to reduce the risk-weighted assets on their books. This year, complete banking sector will be becoming compliant to BASEL II. A shrunk asset book reduced banks’ capital requirements. This is particularly in a situation, when the capital funds in the domestic and international markets are becoming increasingly difficult. Domestic banks have been facing pricing pressures for making tier two bond issues. Tier two capital bonds for public sector banks are currently priced at well over 11 per cent, including placement and reserve ratio costs.
Bankers also said that in the current scenario of hardening interest rates, delinquency risks have risen. Delinquency has forced far higher costs on the balance sheets than prepayments. This is because the process involves large provisioning or preparing for a write-offs that could translate into losses.
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