Axis Bank the third largest private bank in India, will be increasing its retail loans and contribute about 25% of the total loan portfolio within next two years. To achieve this ambition, the bank will be rolling out 200-250 branches and around 1,000 ATMs every year.
“We want to grow our retail assets and we hope to tap the potential in smaller town and cities. We are expecting to increase the share of retail loans to 25% of our total advances in about two years,” said Axis Bank executive director (retail banking, SME & agri) SK Chakrabarti.
In 2009-10, the bank’s retail advances stood at Rs 20,823 crore from the year-ago amount of Rs 16,052 crore, a growth of 30% year-on-year. At present, bank total advances amount to Rs 1,04,343 crore which had grown by 28% y-o-y. Bank retail loans include 70% of mortgaged home loans the rest comes from credit cards, auto (in 4-wheeler segment) and personal loans.
To increase its retail baking, the bank is taking some measures to mobilize its business operations further. Chakrabarti informed, “We have now divided business responsibilities in 26 circles instead of four zones as it was earlier. Under one circle, there will be 35-40 branches, which will be easy to handle for a manager.”
He added, “We are looking at the customer as an individual having requirement in all the spaces. Our branch expansion will help us acquire more customers and thereby help multiply our retail banking business”.
Wednesday, May 19, 2010
Sunday, May 9, 2010
PSU Banks will focus on personal loans to increase margins and profitability
To increase interest rate margins and profitability public sector banks are offering personal loans to the people. Among the loans segment personal loans yield more returns.
Banks like Allahabad Bank, UCO Bank, Union Bank of India and United Bank of India have already worked out new strategies to sell their high-yielding personal loan products to their retail customers. Earlier during economic slowdown many of these banks have stopped offering personal loan products as number of defaults have increased at that time.
On an average, these banks have lower average of retail loan share in comparison to the industry. The retail loans outstanding loans average is around 12-14% in comparison to industry average of 20-22%.
Allahabad Bank chairman and managing director JP Dua said, “Personal loan gives a better spread as well as it helps in building relationship.” In the next three years bank will be improving its retail loan shares to 22%.
Allahabad bank’s retail loan average is at 13.92% whereas Union Bank ratio is at 11.5%. State Bank of India countries largest lender has the ratio around 21%.
Public sector banks earn maximum return of around 14-15% from off-shelf loan products in personal loan category whereas from car loans they earn a return of around 12%. On the other hand housing loans get a secured and a higher volume of business, but the returns are much less than the other loan categories.
Banks prefer salaried customers for off-the-shelf products as they link such products to the salary accounts of the customers to minimize probability of default.
According to United Bank of India chief Bhaskar Sen with the improvement in economic conditions the purchasing power of middle class families is also increasing therefore this can boost demand for car loan and housing loan products. Mr Sen said, “The housing segment will continue to give banks businesses many more years. In the car loan segment, demand is seen especially in the small car category.”
UCO Bank chairman and managing director SK Goel said: “We have identified 200 branches across the country to push retail loan products as our share of retail loan business is comparatively low.”
United Bank has 12% of retail share whereas UCO Bank retail share is around 14%. Among the public sector banks, Bank of Baroda has a better retail loan ratio at 20% followed by Indian Bank at 18%.
Bank of Baroda executive director RK Bakshi said, “A higher share of retail loan is important for credit diversification. It’s a stable business and it improves relationship with customers.”
Mr Dua of Allahabad Bank said that public sector banks have large number of branches therefore they can easily improve their retail loan base through their network. “We will try to leverage our vast branch network. We plan to expand our current and savings account deposit base to reduce the cost of deposit and a focus of retail loan will accompany this drive,” Mr Dua said.
Banks like Allahabad Bank, UCO Bank, Union Bank of India and United Bank of India have already worked out new strategies to sell their high-yielding personal loan products to their retail customers. Earlier during economic slowdown many of these banks have stopped offering personal loan products as number of defaults have increased at that time.
On an average, these banks have lower average of retail loan share in comparison to the industry. The retail loans outstanding loans average is around 12-14% in comparison to industry average of 20-22%.
Allahabad Bank chairman and managing director JP Dua said, “Personal loan gives a better spread as well as it helps in building relationship.” In the next three years bank will be improving its retail loan shares to 22%.
Allahabad bank’s retail loan average is at 13.92% whereas Union Bank ratio is at 11.5%. State Bank of India countries largest lender has the ratio around 21%.
Public sector banks earn maximum return of around 14-15% from off-shelf loan products in personal loan category whereas from car loans they earn a return of around 12%. On the other hand housing loans get a secured and a higher volume of business, but the returns are much less than the other loan categories.
Banks prefer salaried customers for off-the-shelf products as they link such products to the salary accounts of the customers to minimize probability of default.
According to United Bank of India chief Bhaskar Sen with the improvement in economic conditions the purchasing power of middle class families is also increasing therefore this can boost demand for car loan and housing loan products. Mr Sen said, “The housing segment will continue to give banks businesses many more years. In the car loan segment, demand is seen especially in the small car category.”
UCO Bank chairman and managing director SK Goel said: “We have identified 200 branches across the country to push retail loan products as our share of retail loan business is comparatively low.”
United Bank has 12% of retail share whereas UCO Bank retail share is around 14%. Among the public sector banks, Bank of Baroda has a better retail loan ratio at 20% followed by Indian Bank at 18%.
Bank of Baroda executive director RK Bakshi said, “A higher share of retail loan is important for credit diversification. It’s a stable business and it improves relationship with customers.”
Mr Dua of Allahabad Bank said that public sector banks have large number of branches therefore they can easily improve their retail loan base through their network. “We will try to leverage our vast branch network. We plan to expand our current and savings account deposit base to reduce the cost of deposit and a focus of retail loan will accompany this drive,” Mr Dua said.
Friday, February 26, 2010
ABN AMRO to withdraw personal loan, credit card services in India
Bank officials of Dutch lender ABN AMRO Bank NV, a part of Royal Bank of Scotland NV has informed that, bank is withdrawing its personal loan and credit card services in India and will be focusing only on retail deposits, wealth management, and corporate banking.
In view of this many employees working in credit card and personal loan segments have been asked to leave. Earlier in the beginning of the current fiscal, around 2,850 people were hired by the consumer banking team of the bank, which has 31 branched on India, but at present around 500 of them have left.
An anonymous executive at ABN AMRO Bank told, “The book size of the consumer finance division has almost been halved—from Rs2, 300 crore to Rs1, 200 crore. The plan is to shrink it to around Rs190 crore.”
In 2007 as part of a global acquisition the Indian operations were sold to Royal Bank of Scotland in the year ended 31 March, 2009 had posted a 93% decline in profit to Rs Rs19.39 crore, from Rs280.99 crore in the previous fiscal.
RBS in order to raise funds is selling off businesses chosen as non-core in select markets. Bank sources said it will continue to expand ABN AMRO corporate and wholesale banking activities.
RBS spokesperson in an email response to queries sent by Mint stated, “As part of our regular review of the products and services we provide, in line with many other banks in India, we made a decision earlier this year to discontinue the issuance of fresh credit card or unsecured loans.”
“We continue to maintain our service for existing card and loan customers and remain focused on the branch banking and wealth management businesses in the retail arm of the bank.”
However in February 2009, RBS had announced that it will be shifting to India retail and commercial banking operations, having 2,500 employees, into a for-sale, non-core division. RBS is getting advice from Morgan Stanley on the sale.
There have been rumors that sale to HSBC Holdings Plc, Europe’s largest lender might not get through. But Malini Thadani a spokesperson for HSBC India, refused to “comment on rumors”.
The RBS spokesperson said, “RBS is in ongoing discussions for the remaining retail and SME (small and medium enterprise) assets it has decided to sell in Asia and we will not be making any further comment at this stage.”
This is the third time the UK-based bank is trying to sell its consumer banking assets in Asia including India.
Recently RBS has been holding talks with Standard Chartered Plc and Australia and New Zealand Banking Group Ltd (ANZ) for the sale of its Asian consume banking assets.
But Standard Chartered Bank had walked out of the deal due to bad asset quality and high valuation. Also ANZ is not going to finalize the deal of the Asian consumer banking assets of RBS, including those in India, on the basis of commercial and regulatory uncertainties.
Although ANZ has acquired the retail and commercial banking operations of RBS in Taiwan, Singapore, Indonesia and Hong Kong for around $550 million (Rs2,558 crore). It has also attained the onshore global banking and markets (GBM) and global transaction services (GTS) operations in the Philippines, Vietnam and Taiwan (excluding securities).
Moreover last year bank’s consumer banking operation, which was put on sale reported an operating loss of Rs230.77 crore.
Before this it had made profit of Rs38.99 crore. In the previous year the provisions for non-performing loans, or the money set aside for sticky assets, had risen to Rs335.92 crore which was almost nine times the amount that the bank had provided for in the previous year.
The fiscal year 2009 was not a good year for foreign banks in India, as slowing economy had led to rise in non-performing loans. But no other foreign banks had seen a dip in profit.
Standard Chartered Bank’s India operations had registered 12% growth in net profit; HSBC’s net profit had risen to 8%; while the Indian arms of Citibank NA and Barclays Bank Plc had reported a growth of 20% and 485%, respectively.
In view of this many employees working in credit card and personal loan segments have been asked to leave. Earlier in the beginning of the current fiscal, around 2,850 people were hired by the consumer banking team of the bank, which has 31 branched on India, but at present around 500 of them have left.
An anonymous executive at ABN AMRO Bank told, “The book size of the consumer finance division has almost been halved—from Rs2, 300 crore to Rs1, 200 crore. The plan is to shrink it to around Rs190 crore.”
In 2007 as part of a global acquisition the Indian operations were sold to Royal Bank of Scotland in the year ended 31 March, 2009 had posted a 93% decline in profit to Rs Rs19.39 crore, from Rs280.99 crore in the previous fiscal.
RBS in order to raise funds is selling off businesses chosen as non-core in select markets. Bank sources said it will continue to expand ABN AMRO corporate and wholesale banking activities.
RBS spokesperson in an email response to queries sent by Mint stated, “As part of our regular review of the products and services we provide, in line with many other banks in India, we made a decision earlier this year to discontinue the issuance of fresh credit card or unsecured loans.”
“We continue to maintain our service for existing card and loan customers and remain focused on the branch banking and wealth management businesses in the retail arm of the bank.”
However in February 2009, RBS had announced that it will be shifting to India retail and commercial banking operations, having 2,500 employees, into a for-sale, non-core division. RBS is getting advice from Morgan Stanley on the sale.
There have been rumors that sale to HSBC Holdings Plc, Europe’s largest lender might not get through. But Malini Thadani a spokesperson for HSBC India, refused to “comment on rumors”.
The RBS spokesperson said, “RBS is in ongoing discussions for the remaining retail and SME (small and medium enterprise) assets it has decided to sell in Asia and we will not be making any further comment at this stage.”
This is the third time the UK-based bank is trying to sell its consumer banking assets in Asia including India.
Recently RBS has been holding talks with Standard Chartered Plc and Australia and New Zealand Banking Group Ltd (ANZ) for the sale of its Asian consume banking assets.
But Standard Chartered Bank had walked out of the deal due to bad asset quality and high valuation. Also ANZ is not going to finalize the deal of the Asian consumer banking assets of RBS, including those in India, on the basis of commercial and regulatory uncertainties.
Although ANZ has acquired the retail and commercial banking operations of RBS in Taiwan, Singapore, Indonesia and Hong Kong for around $550 million (Rs2,558 crore). It has also attained the onshore global banking and markets (GBM) and global transaction services (GTS) operations in the Philippines, Vietnam and Taiwan (excluding securities).
Moreover last year bank’s consumer banking operation, which was put on sale reported an operating loss of Rs230.77 crore.
Before this it had made profit of Rs38.99 crore. In the previous year the provisions for non-performing loans, or the money set aside for sticky assets, had risen to Rs335.92 crore which was almost nine times the amount that the bank had provided for in the previous year.
The fiscal year 2009 was not a good year for foreign banks in India, as slowing economy had led to rise in non-performing loans. But no other foreign banks had seen a dip in profit.
Standard Chartered Bank’s India operations had registered 12% growth in net profit; HSBC’s net profit had risen to 8%; while the Indian arms of Citibank NA and Barclays Bank Plc had reported a growth of 20% and 485%, respectively.
Thursday, February 4, 2010
Penalties for pre-paying loans might be banned if banks found guilty
According to report of the acting Director General of the Competition Commission of India, the competition watchdog in India banks – both public and private sectors are working as “cartel” by charging penalty from the customers for pre-paying loans.
In view of this, Commission has issued notices to around 20 banks including big players such as the State Bank of India, Punjab National Bank, ICICI Bank and HDFC among others. The final decision will be taken by the regulator after it receives replies from the banks. On the other hand banks are consulting law firms to get legal view on the issue.
According to the sources closely related to the investigation, banks are charging prepayment penalties to “limit competition or not to have extensive competition and also to discipline customers so that they don’t switch banks at a slight drop in interest rate”. On the other hand banks say pre-payment leads to asset-liability mismatches having a cost attached to it.
The sources added, “The banks have been acting in collusion and charging customers for pre-payment of loan. They decided to charge the interest after a meeting of the Indian Bank Association (IBA) in 2003 where it was decided that all banks would enhance fee-based income and charge customers for paying the loan earlier than the due date. They decided to charge the customers uniformly so that they don’t switch loyalties when interest rates drop”.
However banks charge interest on pre-payment of loan even before the IBA meeting, after meeting the system was formalized and became more organized. The sources said, “This is an anti-competitive behavior and in violation of Section 3 of the Competition Act, which deals with anti-competitive agreements.”
But after the IBA meeting the decision was circulated internally, which is also in violation of the Reserve Bank of India’s guideline.
The sources pointed out that RBI does not support such practices and it has given clear instructions that banks should not levy “usurious charges” and should not have “income without earning”. The RBI has clearly stated that banks must maintain transparency in case of charges and should not charge fee-based income, the source said. Buts the banks are not following guideline of both the RBI and the Competition Act.
Last year the Competition Commission of India (CCI) had received a complaint from the customers regarding the penalty charges imposed by the banks on pre-payment of loans. However the pre-payment penalties are being charged by the banks in order to discourage customers from retiring debt before the scheduled date and also to stop them from switching banks to take advantage of more competitive rates offered by rivals.
In case the Commission finds the banks guilty, the penalty on pre-payment of loans might be banned across the industry, the sources informed. This move of Commission will bring relief to many home loan borrowers who have little choice but to pay pre-payment penalty or stay on with their existing banks even though they have to pay a higher interest rate on their loans.
In view of this, Commission has issued notices to around 20 banks including big players such as the State Bank of India, Punjab National Bank, ICICI Bank and HDFC among others. The final decision will be taken by the regulator after it receives replies from the banks. On the other hand banks are consulting law firms to get legal view on the issue.
According to the sources closely related to the investigation, banks are charging prepayment penalties to “limit competition or not to have extensive competition and also to discipline customers so that they don’t switch banks at a slight drop in interest rate”. On the other hand banks say pre-payment leads to asset-liability mismatches having a cost attached to it.
The sources added, “The banks have been acting in collusion and charging customers for pre-payment of loan. They decided to charge the interest after a meeting of the Indian Bank Association (IBA) in 2003 where it was decided that all banks would enhance fee-based income and charge customers for paying the loan earlier than the due date. They decided to charge the customers uniformly so that they don’t switch loyalties when interest rates drop”.
However banks charge interest on pre-payment of loan even before the IBA meeting, after meeting the system was formalized and became more organized. The sources said, “This is an anti-competitive behavior and in violation of Section 3 of the Competition Act, which deals with anti-competitive agreements.”
But after the IBA meeting the decision was circulated internally, which is also in violation of the Reserve Bank of India’s guideline.
The sources pointed out that RBI does not support such practices and it has given clear instructions that banks should not levy “usurious charges” and should not have “income without earning”. The RBI has clearly stated that banks must maintain transparency in case of charges and should not charge fee-based income, the source said. Buts the banks are not following guideline of both the RBI and the Competition Act.
Last year the Competition Commission of India (CCI) had received a complaint from the customers regarding the penalty charges imposed by the banks on pre-payment of loans. However the pre-payment penalties are being charged by the banks in order to discourage customers from retiring debt before the scheduled date and also to stop them from switching banks to take advantage of more competitive rates offered by rivals.
In case the Commission finds the banks guilty, the penalty on pre-payment of loans might be banned across the industry, the sources informed. This move of Commission will bring relief to many home loan borrowers who have little choice but to pay pre-payment penalty or stay on with their existing banks even though they have to pay a higher interest rate on their loans.
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