HDFC Bank cut rates on personal & commercial vehicles

HDFC country’s second largest private lender has announced a cut in interest rates on personal and commercial vehicles which has come as a big relief for the auto-loan seekers. Bank has slashed interest rates by up to 150 basis points.

Besides bank has also announced cut in interest rates on corporate loans and wholesale credit. With the slash in rates on these loans is going to benefit small and medium enterprises and large companies.

HDFC Bank Head (Retail assets and credit cards) Pralay Mondal pointed out that car loans will get cheaper by 125 basis points, whereas interest on two-wheeler loans has been slashed by 150 basis points.

Simultaneously, the bank will be reducing interest rate on personal loan by 75-100 basis points, from existing 17-17.5 per cent.

He added, "We have been able to pass on such a massive reduction to customer as cost of fund has eased and it is slated to come down further in the coming months".

He further added the bank is taking this measure as a precaution which in turn will stimulate the lull auto sales in particular and the SME and manufacturing sector in general.

For the past two months the auto sector has been facing slowdown in sales. In December, the overall domestic auto sales came down by 18.2 per cent as the sales of commercial vehicles and two-wheeler crashed heavily.

Transversely the announcement of massive rate cut by the bank has come in less than 20 days after the reduction in its prime lending rate by half a percentage point.

The bank, largest financier of retail loan, is at present offering car loan at 13.5-14 per cent, commercial vehicle loans at 14.5-15 per cent, while credit for two wheelers draw interest rate at 24-24.5 per cent.

Besides this, HDFC Bank is determining to slash rates on loan against properties and securities by as much as 200 basis points.

Mondal remarked that the interest rate on loans against properties will be reduced by 150-200 basis points, while for credit against securities the cut will be one per cent.

While the exiting rates for such credit differ between 13.75 per cent and 15.25 per cent.

On the other hand, the bank is providing retail loan to its existing account holders at a discount, which differs between 50 and 100 basis points on the card rate. The discount depends on credit profile of the customers.

In the previous week, the bank's promoter HDFC Ltd launched a special housing loan scheme under which it is offering 9.75 per cent for new loans up to Rs 30 lakh.

Before the special offer, HDFC was taking 10.25 per cent for loans up to Rs 20 lakh and 11.25 per cent for bigger loans. The bank sells home loan products of its promoter.

It may be taken into consideration that across various maturities HDFC Bank last month has reduced deposit rate in the range of 50 to 225 basis points.

Therefore fixed deposit rates have been cut down across four maturities and the highest point of deposit rate of the bank has come down to about 10 per cent.

The government and the RBI with an aim to increase demand have taken several measures to bring down interest rates.

As part of its strategy government has permitted public sector banks to offer line of credit to NBFCs on new purchases, with an aim to boost demand.

HDFC Bank plan to cut down auto loan in some States

Mr V.S. Ashok Khanna, HDFC bank’s Executive Vice-President and Business Head, Car and Two Wheeler Loans in an interview told Business Line that bank might lower its auto loan exposure in markets such as Delhi, Kerala and Uttar Pradesh following the State governments’ stand on repossession of vehicles in these regions.

“The Delhi police have issued directives asking customers having any complaints against recovery agents or collection agencies to call them on a toll free number. We are talking to the individual state governments; in case there is no change in policy, we will have to control our exposure in places like Delhi, Kerala and Uttar Pradesh,” Mr Khanna said.

The strict recovery norms and the strict clause on collection procedures have made the job of banks very difficult. He said there is fear among financiers which has made them cautious of lending.

In this year there has been a slowdown or even negative growth in the vehicle finance industry. He pointed out that these measures can lead to a further slowdown in the industry.

“There has been a slight increase in delinquency but it is not a cause of concern for banks. But what is more worrying is that such policies can turn customers paying their installments on time into willful defaulters. I anticipate further slowdown in the vehicle finance industry in 2009-2010,” he said.

As per the recent approximation by Crisil, the vehicle finance industry is approximately to register a negative growth of around 15 per cent in 2008-09, as against recorded Compounded Annual Growth Rate of 18 per cent between 2002-03 and 2007-08.

HDFC Bank plan to cut down auto loan in some States

Mr V.S. Ashok Khanna, HDFC bank’s Executive Vice-President and Business Head, Car and Two Wheeler Loans in an interview told Business Line that bank might lower its auto loan exposure in markets such as Delhi, Kerala and Uttar Pradesh following the State governments’ stand on repossession of vehicles in these regions.

“The Delhi police have issued directives asking customers having any complaints against recovery agents or collection agencies to call them on a toll free number. We are talking to the individual state governments; in case there is no change in policy, we will have to control our exposure in places like Delhi, Kerala and Uttar Pradesh,” Mr Khanna said.

The strict recovery norms and the strict clause on collection procedures have made the job of banks very difficult. He said there is fear among financiers which has made them cautious of lending.

In this year there has been a slowdown or even negative growth in the vehicle finance industry. He pointed out that these measures can lead to a further slowdown in the industry.

“There has been a slight increase in delinquency but it is not a cause of concern for banks. But what is more worrying is that such policies can turn customers paying their installments on time into willful defaulters. I anticipate further slowdown in the vehicle finance industry in 2009-2010,” he said.

As per the recent approximation by Crisil, the vehicle finance industry is approximately to register a negative growth of around 15 per cent in 2008-09, as against recorded Compounded Annual Growth Rate of 18 per cent between 2002-03 and 2007-08.

Bankers wait for January CRR cut

Bankers are expecting Reserve Bank of India governor Duvvuri Subbarao will cut the cash reserve ratio (CRR) by at least 50 basis points next month — and provide further force to the economic incentive package that the government and the central bank paved over the weekend.

Earlier on Saturday, Subbarao informed there is enough cash swilling about in the financial system in a clear justification for keeping hold on the CRR at 5.5 per cent. The CRR is that portion of deposits that banks must maintain with the RBI. A cut in this reserve ratio directly instill liquidity into the system.

According to the central bank sources it will be reviewing its credit and monetary policy in the middle of January.

Banking industry was hugely disappointed as the RBI hadn’t cut the cash reserve ratio, which would have given banks more cash to lend to firms.

“Ample liquidity was one of the key factors why the RBI did not reduce the CRR. However, it could cut it by 50 basis points next month to ensure that cheap funds are available to banks for lending,” said a senior official with a private sector bank.

Industry mavens had cried out in distress after the RBI failed to cut the CRR once again. Although between October and November this year, the central bank had reduced the reserve ratio by 350 basis points to 5.5 per cent. Some of the monetary measures were attached with it, this had injected close to Rs 300,000 crore into the financial system.

Pressure to cut the CRR has already started to mounting. Industry forum Ficci has advised the RBI to cut the reserve ratio to the 2004 level of 4.5 per cent. It also wanted the RBI to bring down the statutory liquidity ratio, which is now hanging at 24 per cent.

The SLR determines how much of the total deposits banks must invest in approved securities such as government bonds.

Last week, the central bank had cut down the short-term lending and borrowing rates — the repo and the reverse repo, respectively — by 100 basis points each and the government followed it by a pump-priming strategy intended to encourage industrial growth, which has shown signs of sputtering.

A section of the bankers are of view that the CRR cut is not required now as the financial system is having a surplus liquidity of over Rs 56,000 crore. On the other hand the RBI governor had informed the liquidity adjustment facility — through which the central bank manages the level of funds within the system — is in absorption mode.

Banks have not reacted with enthusiasm to the cut in the benchmark rates. Only Yes Bank, HDFC Bank and Union Bank have announced cuts in their prime lending rates that prop up their rate tables.

Bankers say that the cost of funds for banks remains high. Therefore banks have not cut down their deposit rates either; both rates will have to move in tandem.

Short term deposits growth increased by 40 to 50%

Indian people are investing more in the short-term bank fixed deposits (read: three-month & six-month which they were to invest in real estate and equity markets. Due to this on an average there has been a 40 to 50% growth in the fixed deposits for shorter tenures.

According to Bankers market instability and general lack of confidence is the reason behind the investors opting for short-tenor product. In the last few months Kotak Mahindra Bank has seen its inflows more than doubling on fixed deposits (FDs), while the Bangalore-based ING Vysya Bank has witnessed an over 50% increase in its short-term deposits.

On the other hand Axis Bank, has accounted a growth of 25-30% in the 20-20 version of FDs. HDFC Bank India’s second largest private bank, also reported a high growth in fixed deposit. In the last nine months bank’s deposits have increased by almost 80%. According to latest data given out by Reserve Bank of India (RBI) in October alone, Indian banks had seen a raise in terms deposits worth Rs 94, 811 crore.

But bankers are of view that the high growth numbers is dangerous for the capital markets. As most of the investors, have withdrawn their funds from mutual funds and cleared up their stock portfolio to deposit with banks. K V S Manian, group head retail liabilities & branch banking, Kotak Mahindra Bank reportedly said that the latest trend is indicative of investor outlook towards equity markets in the short-term.

“We have in general seen a higher customer inclination for FDs. While the lower retail segment was always inclined towards the product, the attractiveness of current rates has enhanced their interest. However, in case of the high net worth individual segment, there’s a definite shift in attitude around this product of late,” he said.

Uday Sareen, country head, retail banking, ING Vysya Bank think this phenomenon, is quite broad based across the entire range of customers. “Given the current mood, individuals are deferring their decision to invest in real estate, stock market, and other investments. Gradually as people realign their expectations to the new financial paradigm, they will be willing to reassess their financial risk profile, financial goals and re-balance their portfolios,” he said.

While Manju Srivatsa, president, retail banking, Axis Bank feels, 25-30% growth in short-term FDs is a huge number in such a short period of time. “It’s a massive turnaround. There’s an overall increase in the demand and interest in FDs,” she said.

On the other hand Anindya Mitra, senior vice-president, retail liabilities, HDFC Bank, is of view that such trend might continue, till the equity market stabilizes. “Capital protection is on top of the priority with investors right now. At least, in the short-term, equity is getting substituted by FDs in an investor’s portfolio,” he said.

Serial home loan fraudster ran out of luck, caught by the police

Powai police had a break through the housing loan fraud by arresting one Pankaj Jani on the complaints of a leading bank. Last week one of the leading banks filed a complaint with the police that the documents submitted by some applicants were forged.

The police told that Jani, who is a part of a wider racket, had allegedly taken housing loans of Rs 40 lakh and Rs 49 lakh loan from ICICI Bank in April this year. However Jani, luck could not favor him this time when he attempted to get loans of Rs 50 lakh and Rs 41 lakh from HDFC Bank and thus landed him in the police net.

The police on investigation found that Jani had applied for housing loan using different names, but the photographs he submitted were of his own. Whereas the applications submitted were in the name of Birendra Sadhu Shetty and Santosh Mhatre.

Intriguingly, the police found a photograph of another person having the similar name to the one of the names mentioned on the application, Birendra Sadhu Shetty. Moreover the documents submitted were also similar to those Jani had provided.

There were seven housing loan applications involved in the racket -five with ICICI Bank in Ghatkopar and two with HDFC Bank in Andheri. Jani started filing the applications six months ago. The police apprehended three applications of Rs 54 lakh, Rs 60 lakh and Rs 24 lakh, respectively, which were pending with ICICI Bank. They also confirmed that Jani had used fake names such as Birendra Sadhu Shetty and Santosh Mhatre in the applications. Another application was made in the name of one Anand Chandshieve.

Explaining the technique, senior inspector Rajdoot Rupwate said, "The money was being used to pay EMIs for the two loans that had already been sanctioned. If they hadn't done so, it could have raised the suspicion of the bank authorities, especially while clearing the other applications. Jani had sought the loans through direct sales agents."

The fraud came to light when a verifying officer with HDFC Bank, Kiran Karnik, found that the Jani had submitted fake documents. To cross check he then dialed the number given against Shetty's name, but the call was attended by a man named Shabbir Patel. Thereafter he lodged a complaint with the Powai police.

"The bank officials, along with the police, laid a trap for Jani and caught him while he had gone to collect the loan cheques," said Rupwate. "Jani revealed that he carried out the fraud after receiving instructions from the kingpin, Sahil alias Sohil alias Abhay Singh alias Rajesh alias Vijay Saksena alias Ajay Saksena. He has never met or seen Saksena ; the others involved in the racket, too, haven't met one another."

Further giving out details about the racket, sub-inspector Keshavkumar Kasar said, "Jani was assigned to get hold of people seeking loans. Their signatures were then taken on loan application forms. These people had no idea that the documents would be misused."

In this connection three other persons-Anil Shelar, Chandar Sharma and Sanjay alias Ajit have been arrested as well. Their documents were used to get the loans. The property for which the loans were sought was in Karve village, Navi Mumbai. "A member of the gang was stationed at the property site. Whenever bank officials visited the place, he used to put up nameplates with Shetty and Mhatre written on them," he said.

The police has booked all the accused for impersonation, cheating and forgery under the IPC and have been remanded in jail custody. The police also informed that Saksena has been operating from Delhi and is missing at present.

Pankaj Jani had applied for the loans in the names of other people but used his own pictures. Picture 1 is the photograph he used while applying in the name of Birendra Sadhu Shetty and Picture 3 while using the name of Santosh Mhatre. Picture 2 is the building in Navi Mumbai for which the loans were allegedly taken. Jani, who is part of a bigger racket, had taken two loans of (Rs 40 lakh and Rs 49 lakh) of the seven loans he had applied for. The others, which were pending, were for Rs 50 lakh, Rs 41 lakh, Rs 54 lakh, Rs 60 lakh and Rs 24 lakh

Banks to earn Rs 475 cr from DDA housing scheme charges

The Delhi Development Authority (DDA), advertised in newspaper about the sale of about 5,000 flats in the city. By inviting the applications for the flat DDA is going to make a big earning of about Rs 4.5 lakh per flat as interest on the money it collects as refundable registration fee.

The seven banks, who are mediating the scheme, are expected to collect in about Rs 250 crore by financing the applications.

The DDA is gathering an amount of over Rs 9,000 crore collected from more than 600,000 applicants who have submitted their forms along with the registration fee of Rs 1.5 lakh.

By the last date September 16 it is expected to puff up considerably. Approximately DDA will be taking three months to take out the computerized draw for the allotment of the flats, till that period money is going to remain with the authority on which it will be earning an interest of 10 per cent before refunding the money to the unsuccessful applicants, which means it would be richer by at least Rs 225 crore. This money will remain with the DDA for three months — the approximate time the authority will take for the allotment of the flats through a computerized draw.

This is going to add an extra earning of at least Rs 4.5 lakh per flat as interest on the registration amount, which is kept with the banks that are collecting the applications. If the rate of interest is 9 per cent, the DDA will be earning an extra profit of around Rs 4 lakh per flat.

The DDA has plans to use this money to buy land for low-income group housing schemes. “That’s the model we follow. The money from the registration fees will be used to buy land to build houses for low-income groups,” said DDA spokesperson Nimo Dhar.

The DDA has announced sale of freehold flats in various localities which are aimed to cater to the aam aadmi. The flats have been priced much below the market rates, creating a huge rush of applicants. The lower price tags of the flats clearly show that the DDA is a not-for-profit developer. “We are a no-profit-no-loss organization,” the spokesperson added.

Ramesh S Singh, additional general manager of Central Bank of India, one of the seven banks mediating for the housing scheme, said the response has been tremendous.

“Real estate prices are shooting up and many people find it beyond their means to buy residences built by private players. For this section, especially the middle class, DDA flats are the best option.” Singh says this time people are showing more interest in the scheme than in a similar scheme in 2004.

The scheme has come up at a time when housing loans have gone up as a result of the central bank raising the repo rate and the cash-reserve ratio to control inflation. The premium flats have become even dearer therefore more and more people are trying their luck in this category.

The huge demand for these DDA flats has turned into a risk-free business opportunity for the seven banks — State Bank of India, Central Bank of India, Union Bank of India, IDBI Bank, ICICI Bank, HDFC Bank and Axis Bank — who are mediating the DDA housing scheme.