After YES Bank it is ING Vysya Bank that has reacted to the hike in the policy rates of Reserve Bank of India. The Central Bank has raised both repo and reverse-repo rate by 50 basis points in order to bring soaring inflation rates under control.
After the revision the base rates of the lender now stands at 10.20% and it shall be applicable from 1st August. More banks are expected to raise their lending rates and join the league very soon.
In order to spread their risk amongst more borrowers, the public sector lender has started to reduce the proportion of the loan lent to their top borrowers. As an attempt the risk, during the last fiscal the lenders reduced the concentration of deposits by their top depositors.
Concentration of funds with a few customers increases the risk for lenders; however it is beneficial for a bank to cater to a few customers and to make maximum profits out of them.
Along with State Bank of India, the largest lender in the country few other public sector bank like Bank of Baroda, Punjab National Bank, Union Bank and Oriental Bank of Commerce have also brought down the proportion that they have lent to the their top customers.
According to the guidelines of the Reserve Bank of India, it is mandatory for all the banks that out of the total lent amount by a bank, 40% must be lent under priority sector lending and out of that 40 percent at least 18 percent must be lent to agricultural activities.
All the banks are required to maintain the lending accounts as prescribed by the Central Bank otherwise banks have to deposit the difference in the amount with NABARD that pays interest as low as 4 percent. Corporation Bank is way short of the target and so it has planned to lend to the farmers directly for the current financial year to meet the targets.
The Chairman and managing Director of Corporation Bank Mr. Ramnath Prdeep said “We had reached a compliance level of 14 per cent (against a target of 18 per cent). But because of disqualification it has come down to 8 per cent.”
About depositing with NABARD, he said “I am incurring a loss of Rs 500 crore on account of this. We are paying depositors an interest rate of 9.5 per cent while the amount deposited with Nabard will earn only 4 per cent.”
HSBC India is all set to re-enter the unsecured retail loan segment. For past two years the bank slowed down its operations in this section.
The CEO of HSBC India, Mr. Stuart Davis said, “We will offer unsecured personal loans selectively to our customers and not in the open market as we did earlier.”
He also said “Winding down of the unsecured loan book and recoveries in corporate loans helped improve the asset quality.”
The bank will acquire the retail and commercial businesses of Royal Bank of Scotland by the end of this year. “We are expecting a robust loan growth and will continue to build our wealth management platform for increasing our customers,'' Davis said.
Indian Overseas Bank is going to introduce the agri-jewel loan scheme to the urban areas. The scheme has received a very good response in the rural parts and this has prompted the bank to introduce the scheme in the urban areas also.
The bank is planning to open a separate desk for such loans in 25 branches across the country. The bank has also ensured that the interest rates will be considerably lower than those offered by the private banks.
The Chairman and Managing Director of the bank Mr. M Narendra said “Enthused by the agri-jewel loan in rural areas, we thought of capitalising [on] it in urban areas also. We are opening [a] separate desk for gold loans in 25 branches. With this, we will be able to provide very fast gold loan to urban customers also.”
The banks have again started to influence the customers by introducing new schemes in the personal loan sector after a break of one year.
As the income of the people is increasing the spending capacity of the individuals is also increasing. This fact has motivated the banks to re-enter the arena of personal loan.
According to the central bank second financial stability report released on Thursday, personal loans, which had a negative growth of 3.48 per cent in 2009-10, increased 14.49 per cent in September 2010 year-on-year.
The analysis of the data collected from 47 commercial banks shows an outstanding rise in the credit for personal loan Rs 1,16,353 crore in November from Rs 1,12,389 crore in March.
However personal loans are of very insecure from the bank point of view as they are not lent against any collateral , but since they fetch high income to the bank the banks are very interested in personal loan. The banks charges interest rates ranging between 16 to 19 percent for the individuals that are working for a reputed company . the banks even charges more interest rates if the individual is working for a small or lesser known company.
It remains to be seen if personal loans from the country’s largest private bank will increase over the next few months in line with the larger trend.
