White goods majors line up price hikes, new launches

Consumer durable companies will embark upon a dual strategy of hiking prices of white goods and simultaneously launching hi-tech models in refrigerators, washing machines and microwave ovens.

Reports say that consumer durables majors like Videocon, LG, Samsung and Haier are all planning price hikes by 2-7 per cent.

Videocon Industries is planning to launch refrigerators with built-in colour television and Internet, which can be operated by remote controls and priced between Rs 20,000 and Rs 1 lakh.

Videocon will increase prices of its white goods range by 5-7 per cent. Korean major, LG Electronics India is planning to hike prices of its washing machines (WM), refrigerators and microwave ovens by about 2- 4 per cent in September 2007.

Samsung India is soon launching new models of high-end side-by-side refrigerators with the improved prices.

Haier is also coming up with new innovative appliances to suit customer's needs, which will be followed with minimal hike in prices.

Fedders Lloyd Corporation is planning to launch new models of Llyods microwave ovens and washing machines with different prices toplug various price gaps.

In March-May 2007, durable companies hiked product prices by 4-8 per cent.

Reports also say that the prices are expected to stabilise by Diwali. Plans are on the anvil to launch premium range of refrigerators in 400 and 500 liters by changing the outdoor aesthetics and four new models of solo and grill convection microwave ovens.

RBI Annual Report for review of payment system

The Reserve Bank of India (RBI) will conduct an annual review of the payment and settlement systems to ensure that customers receive timely, cheap and dependable service.

The first review is proposed for the year-ended March 31, 2007. Business Standard reports that the review will be based on parameters like timeliness of customer service, cost of operation, service charges and the overall impact on the financial system.

RBI’s Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) will give directions and set standards for payment and settlement systems.

The board is to study payment systems in select countries, prepare a road map for moving from paper-based products to electronic payment systems and promote card-based payments as one of the strategies for increasing the use of electronic payments.

The board has recommended exploring the option of setting up a low cost cross-border remittance system with neighbouring countries, especially Nepal, and also proposed an assessment of the real time gross settlement (RTGS) system and bringing all RTGS-enabled branches under the national electronic funds transfer (NEFT) system.

The suggestions include looking at the feasibility of a couple of large banks providing associate memberships to smaller banks to participate in the cheque truncation system.

While, the RBI had rejected the panel’s suggestion to levy a charge on cheques, the other recommendations for incentivising electronic payment systems are being considered by the RBI.

The annual turnover, in value terms, in the various payment and settlement systems rose 37.5 per cent to Rs 4,23,74,063 crore in 2006-07 from Rs 3,08,15,285 crore in 2006.

Indusland Bank looking for a new name, image to attract customers

Indusland Bank wants to consolidate its presence in the private sector banking in India and has started hunting for a new name.

Financial Express reports that the names short-listed so far are Indus Bank, the Plus Bank, the Right Bank and so on. Sources say that the bank is in the midst of appointment of an international consultant to carry out the make over. The consultant will also help the bank for the upcoming media blitzkrieg.

The bank management wants to complete the change of name exercise by November 2007 and launch a nationwide media campaign thereafter.The campaign is scheduled to g on till March 2008 with an initial budget of Rs 10 crore.

The bank recently had a successful GDR issue and its net worth touched Rs 1,056 crore as on March 31, 2007. The bank posted a total business turnover of Rs 28,700 crore and is poised for greater growth in the years ahead.

Personal Loan business is growing aggressively

Market for personal loan in India is growing and has become competitive with the coming of foreign banks and non banking finance companies entering this space. Banks such as ICICI Bank, HDFC Bank, Citibank, Standard Chartered Bank, Centurion Bank of Punjab and non banking finance companies such as GE, DBS Cholamandalam, and Fullerton India among others are aggressively marketing personal loans.

With the growth the level of delinquency has gone up by 10-20 per cent. This rise in the delinquency has led the banks to tighten their due diligence of marketing agents and also reviewing recovery strategies.

The RBI data shows the growth of 23 percent in the personal loans year-on-year to Rs 87,944 crore as on May 25, 2007.

Banks and NBFCs are working on unsecured loans products as the yield in this business is high which covers for any defaults. There is a variation in the interest rate on personal loans from 14 percent to 30 per cent.

Neeraj Swaroop, CEO, Standard Chartered India said, “We see growth in the personal loans business. In the unsecured space, we have better ability and hence, we are aggressively pursuing the personal loans business.”

But there are some banks like IndusInd Bank, a private sector bank who are opting out of the personal loan business. Bhaskar Ghose, managing director, InduInd Bank said, “The yield in unsecured loans is higher. However, whenever there is an economic downturn or the customer faces an economic crisis, individuals tend to default on these loans. Hence, on a standalone basis we have stopped giving personal loans.”

IndusInd Bank will give personal loans only to customers with corporate salary accounts as the number of defaulters is rising. Ghose said, “This is the safest way to do the business as the bank deducts the installment from the salary account and if the employee decides to quit the organization, then the amount is deducted from the final settlement.”

According to bank’s loan data, 58 per cent accounts for vehicle finance loans, 13 per cent account for other retail loans and balance is wholesale (corporate) loans.

ICICI making zoom in private banking

ICICI bank has a strong foothold amongst the Indian private banks. It has a base of over a lakh customer, and is looking further to embark on a wider branding exercise for its flourishing private banking business.

Anup Bagchi ICICI SGM Global Private Banking said, “We now have a base of over one lakh private banking customers and in a couple of months we start branding the division to help the new generation develop relatedness with the bank."

There has been growth in the financial sector with top executives working with MNC taking home fatter pay packets, with employee stock options and small and medium enterprises on the accent.

Private banking involves specialized financial and investment advisory services for high net worth individuals through relationship managers.

Bagchi said the bank plans to double the number of relationship managers which explains the inherent demand from the sector.

Apart from the four metros cities, the cities like Pune, Nasik, Banaglore and Chandigarh, having large industrial activities too are providing the opportunities for private banking.

Bagchi further added, in the months to come, ICICI will develop special lounges for its private banking customers in 20-25 metopolitian and bigger cities. "The lounges are a way to provide the aspirational value to the customers, who have had a long association with the bank."

Apart from the four metros cities, the cities like Pune, Nasik, Banaglore and Chandigarh, having large industrial activities too are providing the opportunities for private banking.

Bagchi further added, in the months to come, ICICI will develop special lounges for its private banking customers in 20-25 metopolitian and bigger cities. "The lounges are a way to provide the aspirational value to the customers, who have had a long association with the bank."

Banks discourage customers from taking personal loans

In January this year the central bank imposed higher provisioning norms on personal loans due to this state-owned banks are discouraging retail customers from taking personal loans in spite of slowdown in loan growth and abundant liquidity.

There has been a growth in personal loans over the past few years, along with a rise in earnings of the organized workforce in a buoyant economy. But, once the Reserve Bank of India’s norms on provisioning kicked in, banks had to set aside 2% as standard provision on personal loans. According to this norm for each personal loan of Rs 100 which is treated as a standard loan, banks have to set aside Rs 2 as a provision. This is deducted from operating profit.

To discourage customers from seeking personal loans, banks have started to insert fresh clauses in loan documents which make it difficult for customers to avail of such loans. Some banks like Corporation Bank and Canara Bank have started asking customers to provide for an undertaking from their employers. “This is like seeking a guarantee from the employer which is not very easy to get,” pointed out a senior banker.

According to senior Canara Bank official, the bank is also insisting that the borrower should have a salary account with them in order to obtain personal loans without any collateral. “This is because we have noticed rising instances of loans without any security going bad. Thus, if the borrower has a salary account with us, the EMI is directly deducted from it which reduces the scope of default.”

Further to discourage personal loans, some banks are insisting on third-party guarantees in case the loan value is very high, besides seeking a guarantee from the borrower. For instance, Bank of India has decided not to increase its target on its personal loan portfolio. This means that fresh loans will be given only to the extent of repayment of the existing loans.

According to bankers, a substantial chunk of salary accounts, especially of private corporate, has been cornered by private banks. However, when it comes to locking in to loans, many employees prefer to access personal loans from PSU banks, mainly due to lower rates charged by them. While most PSU banks have pegged personal loans to the prime lending rate (12-14%) or a 100-200-basis point premium on big ticket loans, private and foreign banks charge as high as 16-21%.

With the upswing in property prices, banks are adopting a cautious approach to approving home loans. More and more banks are reluctant to approve home loans at a fixed rate. Banks like Canara Bank and Bank of India have stopped disbursing fixed rate loans while others such as State Bank of India, Punjab National Bank and Allahabad Bank have inserted a reset clause in their fixed rate loan documents.

Recently, the Bank of Baroda board also passed a resolution to insert a reset clause at the end of five years for their fixed rate home loans. Sources said Central Bank of India, too, is considering inserting a similar clause in its fixed rate home loans. The decision will be taken after the bank completes its IPO by the end of this month. The reset clause protects the lender from fluctuations in interest rates.

HDFC and Citigroup plan of cross-selling products canceled

The agreement signed between Housing Development Finance Corporation (HDFC) and Citigroup has been cancelsd. According to this agreement the two were to sell the mortgage lender’s loan products under the American bank’s India network.

In this working agreement the two has agreed for cross-selling each other’s products recently, which followed the increase of Citigroup venture in HDFC to 12.3 percent and also nominated its representatives in HDFC board. Citigroup officially describes its venture in HDFC as a financial investment.

According to banking sources Citigroup and HDFC are not going ahead with their plan as it would have created a conflict of interest between HDFC Bank and its promoter, HDFC. HDFC Bank has not launched its own home loan products and instead sells HDFC loans for a fee. HDFC holds around 23.32 per cent in the bank.
Citigroup, in response to an email query, said, “We will have to decline comment.”

HDFC did not reply to an email sent a week back.

In May, managing director of HDFC, Keki Mistry, said that the agreement between HDFC’s and Citigroup will be worked out in such a way that there would be no conflict of interest with HDFC bank.

HDFC recently while filing with the Securities and Exchange Commission with regard to its $700 million American depository receipts issue, recently released a statement that, “the bank may face potential conflicts of interest relating to our principal shareholder, HDFC Limited."

HDFC and Citigroup had plans to expand their cross-sell relationship beyond home loans, which were to be sold based on the mortgage lender’s risk criteria.

When HDFC decided to make a preferential allotment to private equity investor Carlyle Group, Citigroup sought a preferential allotment to itself to ensure the US financial services provider’s venture in HDFC remains at 12.3 per cent.