SBI to tap Bhopal circle

State Bank of India (SBI) is expanding its reach to the rising potential areas. Moving forward on this SBI is planning to tap the rising potential in the Bhopal circle.

SBI will get on with its expansion program in the Bhopal circle which covers subscribers in states of Madhya Pradesh and Chhattisgarh. The plan will be completed by next year and will require increase in headcount, branch expansion, more ATMs and creating alternative channels to offer banking services.

Dinesh Kumar Jain, chief general manager, Bhopal circle, told Business Standard reporter, “We will open 140 more branches to render our customer-friendly services in rural, semi-urban and city areas of both the states. There are newly developed townships, colonies and residential areas in towns like Bhopal, Raipur and Indore, where we do not have a presence but they have good potential in banking.”

The bank is employing the expansion program in a major way and will hire 20,000 personnel this year all over India. “Of those the Bhopal circle will accommodate 2,500-3,000 people in various cadres; clerks, recovery officers and officers”.

He added, “We have already recruited 900 clerks approximately this fiscal (March 2008) and we are in the process of recruiting more techno-savvy dynamic and energetic younger personnel in clerk, recovery and probationary officers grade. As many as 300 probationary officers and 1,100 recovery officers are likely to join the Bhopal circle.” Bank after viewing the record hits received at some of its ATMs, the bank has planned to set up more ATMs.

In addition, the bank is also planning to launch mobile ATMs in Bhopal and other big cities of the states. “We have plans to establish 350 more ATMs in Madhya Pradesh and Chhattisgarh,” Jain added, “the circle will soon start mobile ATMs in bigger cities. The facility is operational in Raipur of Chhattisgarh.”

Bank is having a deposit base of Rs 30,000 crore and advances have touched Rs 20,000 crore in Bhopal circle. Bank expects the deposit figure to go up to Rs 32000 crore (expected to touch Rs 30000 next week) advances to reach Rs 20000 crore vis-à-vis Rs 16000 crore as on March 2008.after the opening of the branch. “Our focus is to migrate people from bank and use an alternate channel to do banking. This will not only arrest the rise in our operational cost but we will be able to render more customer-friendly services,” he added.

The bank has already made signed agreements with few departments of the state government and is carrying out discussions to offer various services; payment of value added tax, power bills, excise and stamp duty payment and college fee payment.

Jain further added, “Some government department are already working with us and more are likely to sync with us through computer network to offer e-governance facilities.”

Standard Chartered Bank ‘1Money’ offer preferred mode of payment

Standard Chartered Bank, a largest foreign bank in India has launched ‘1Money’. Bank has designed a product to help the customers do away with multiple plastic. It is the first the first card which has combined benefits of a debit and a credit card. ‘1Money’, will give the customer the choice of using the same plastic as a credit card or a debit card.

According to the Reserve Bank of India in India there are about 26 million credit card and 70 million debit card users. Year-on-year this number is growing by 28% and 41% respectively and the value of transactions is growing in similar percentages by 20% and 37% respectively. Hence, it is time that the Indian consumers get the option to decide their preferred mode of payment through one plastic.

Speaking during the launch, Shyam Srinivasan, Country Head – Consumer Banking, Standard Chartered Bank, said, “Innovation has always been a key focus in our business strategy. As one of the premium issuer of cards in the country, we have always looked for customer feedback and translated it into the most beneficial products offered. We believe with this initiative Standard Chartered will be the harbinger of a new era in customer delight in the Indian banking industry."

Present on the occasion Sai Narain CDK, Head - Consumer Transaction Banking & Strategic Initiatives Standard Chartered Bank said, “To further enhance customer experience, we felt the need to launch 1Money. The card aims to give our customers the unique experience of using multiple cards while holding just one piece of plastic. It has been our utmost priority to provide unmatched services to our customers and with this new service, we also hope to reach out to new customers who have till date, avoided availing debit or credit cards due to hassles of maintaining multiple plastics.”

The key features of 1Money are:

• The customer will get Visa Platinum Platform related benefits
• Platinum events from Standard Chartered Bank
• Cardholder will get Free Priority Pass
• Free Dining Plus Card offering dining and lifestyle benefits across the country
• Cardholder can avail Petrol Surcharge waiver
• ATM / POS Debit usage of Rs. 200,000 per day
  

The annual fee of the card will be Rs. 6000. Initially the card will be launched in the key metros and later it would be rolled out across in other cities.

StanChart to go low on personal loan business

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.

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.

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.

FM to advice banks to be prudent on personal loans

The Reserve Bank of India (RBI) is taking anti-inflation steps to curb inflation. Recently in credit policy RBI has hiked the benchmark short-term rate by 50 basis points and also hiked the cash reserve ratio (CRR) for banks by 25 bps. Following this the finance ministry might advice public sector banks to moderate credit disbursal for personal loans so that productive sectors can get more money supply.

The ministry wants that banks should be more careful when distributing loans although country’s growth do not get affected directly.

It seems a message to this effect will be conveyed personally by finance minister P. Chidambaram to bankers when he will meet bankers for the review of credit policy.

Finance ministry on Tuesday issued a statement indicating towards the things to come. It said banks should take “prudent” decisions while distributing credit so that credit is made available to the productive sectors.

Expressing his views on the statement issued by the finance ministry a banker said, “This means that we would have to put a check on personal and retail loans”.

Commenting on the anti-inflation steps taken by RBI in credit policy the finance ministry said that theses steps will help in bringing inflation to a reasonable level which is now on the edge of 12%.

Further the finance ministry stated, “Government expects that the measures taken by RBI, in continuation with measures already taken over the last two months, will help in moderating and containing inflation”.

Currently inflation is ruling at 11.89%, which is much above the RBI’s comfort level of 5%. RBI is expecting that the monetary measures taken in the credit policy will bring inflation down to 7% by March next year.

Loan fair organized in North Dinajpur district for tribals in Islampur

A loan fair was organized for the tribals by the West Bengal SC; ST Corporation in North Dinajpur district with assistance of Islampur Municipality. In loan affair Rs 25,000 loans were allotted to 36 beneficiaries of the SC; ST categories. The loanee have received training on tailoring and handicraft from the West Bengal SC; ST Corporation.

In a speech the District Magistrate of North Dinajpur Mr Sukumar Bhattacharjee said: “It was an attempt to bring the SC, ST communities under income generating schemes. Soon a section of SC, ST population of Raiganj subdivision would be brought under the scheme.”