Latest Property News on 'Banking and Finance'

Indian Central Banker’s Appreciated Globally

The financial crisis has tarred the reputation and ideology of free marketers and central bankers the world over, including Alan Greenspan, the former chairman of the Federal Reserve. But it has had the opposite effect on Yaga Venugopal Reddy, the former governor of the Reserve Bank of India. Yaga Venugopal Reddy, the former governor of the Reserve Bank of India, has received credit for generally strong banks and economic growth.

While other central bankers are defending and apologizing for how they managed the financial system during good times, here in India, big banks have not sought succor from the government, and the economy is still growing, albeit less rapidly. And Mr. Reddy, with the conservatism he represents, is taking a victory lap. He is widely sought after on the global speaking circuit and sits on the United Nations panel that has proposed fixes for the global financial order. Newspapers here celebrated the recent publication of a book of his speeches, “India and the Global Financial Crisis: Managing Money and Finance,” with fawning coverage. Read More »

Growth in Bank’s Credit to Realty Sector

BL Research Bureau Real estate developers may have just got out of a severe liquidity crunch; but data from the Reserve Bank of India suggest that bank credit to the realty sector has actually expanded. Scheduled commercial banks’ outstanding credit to real estate grew from 1.8 per cent of non-food credit at the end of March 2006 to 3.2 per cent by February 2009. Recently released annual reports of banks also suggest that loans outstanding to commercial real estate have seen strong growth. Fourteen banks, which have released their 2008-09 annual reports, disclosed that their commercial real estate exposure grew by an average 29.1 per cent, even as total credit grew 25 per cent. This growth was more significant for public sector banks; their real estate exposure grew 43 per cent over the year against their credit growth of 29 per cent.

Private banks such as ICICI Bank and Axis Bank, on the other hand, posted marginal growth in their real estate credit portfolio. IndusInd Bank, Oriental Bank of Commerce and Indian Bank hold higher exposure to real estate, with the sector accounting for over 8 per cent each of their total credit. The rapid growth in real estate sector until last year could be explained by the IT boom and increased requirement for quality office space and residential space. According to CARE’s report on Indian banking, credit to sensitive sectors (real estate accounts for 87.4 per cent of sensitive sector lending) has grown 46.1 per cent compounded annually during 2004-08, while total advances grew 29 per cent in the same period. However, following the global meltdown, slower demand for property and steep fall in their market prices led to risks of higher slippages in banks’ real estate portfolio. Banks in turn had to tighten credit risk standards and reduce lending to this sector. Read More »

SBI Associate merger in six months: Bhatt

Merger of State Bank of India’s six associates with itself could be completed within six months once the Union Government extends approval for the process, SBI Chairman O P Bhatt said. “Once we get the signal (from the government), the process will not take more than three to six months…we have taken initiative on our own for the merger,” Bhatt told reporters here today.

Discarding the allegations that associate merger will lead to retrenchments in State Bank, Bhatt said the process will not cause any lay offs. The merger will not result in any dip in the credit flow from State Bank to needy segments such as infrastructure, health, power, education and housing, Bhatt said. “The bank is taking steps to increase its advances to these sectors,” he said. Read More »

PNB likely to double the profit by 2013

The country’s second largest public sector lender Punjab National Bank aims to double its profit to Rs 7,500 crore in the next four years. “The bank has set a target to expand total business to Rs 10 lakh crore and earn net profit of Rs 7,500 crore by 2013,” said PNB Chairman and Managing Director K C Chakrabarty, who will take charge of Deputy Governor of RBI tomorrow.

The bank ended fiscal 2008-2009 with the net profit of Rs 3,091 crore, a surge of 51 per cent over the previous fiscal. The total business of the bank crossed over Rs 2,64,000 crore at the end of March 2009. During the current fiscal, the bank expects 27 per cent growth in the net profit. “We expect deposit growth of 18-19 per cent, advances to grow by 25 per cent and net profit (to increase by) 26-27 per cent,” he had said. Read More »

Hike expected in Income Tax Exemption on Home Loans

The government is considering a proposal to hike income-tax exemption available for interest payment on home loans to Rs 2.5 lakh a year, to boost demand and rebuild the slowdown-hit housing industry. The ministry of housing and urban development has urged finance minister Pranab Mukherjee to make an announcement to this effect as part of his Budget presentation in early July, a government official said on condition of anonymity.

At present, taxpayers taking housing loans are eligible for income-tax exemption on interest payment of up to Rs 1.5 lakh every year. Besides this, the repayment of principal amount is part of investments eligible for benefit under Section 80(C) of the Income-Tax Act, which has a ceiling of Rs 1 lakh. The government has already identified housing as one of its focus areas, a fact highlighted by President Pratibha Patil in her address to both the houses of Parliament. The existing tax exemption limit is considered inadequate at a time when a two-bedroom house in big cities costs at least Rs 25 lakh. Considering a person takes a loan of Rs 20 lakh at an interest rate of 9.5%, he would pay Rs 1,88,493 towards interest alone in the first year. His annual interest payment in the first five years would be more than Rs 1.5 lakh. Read More »

UBI awaits SEBI’s approval for AMC foray

Buoyed by the pick up in insurance venture with Daiichi, Union Bank of India will soon foray into mutual funds business by setting up an asset management company along with its Belgium partner-KBC Group. The joint venture, in which Union Bank owns 51 per cent stake, is awaiting Sebi’s nod to start operations sometime this fiscal and will mark the lender’s entry into the mutual funds space.

“The bank is currently implementing a massive business expansion programme that, over the next few years, will change UBI as a financial powerhouse,” Union Bank’s Chairman and Managing Director M V Nair told media. The bank launched the insurance JV with Japanese insurance firm, Daiichi and Bank of India last year and has 10 products in the market. The JV plans to launch more group- oriented products this year, Nair said. Read More »

Yes Bank to raise Rs 2,000 cr by equity, debt

Expecting exponential growth in the next five years, private lender Yes Bank on Sunday said it will raise 400 million dollars (about Rs 2,000 crore) by means of equity through a follow-on public offer, and debt. “From here we are looking for growth of up to 45 per cent on a year-to-year basis. We have been building the foundation of the bank for the last five years and now is the time to actualise high growth,” Rana Kapoor, Managing Director and CEO of Yes Bank, said. In the first tranche, the bank is likely to hit the bond market to raise 150 million dollars by the end of the current financial year or the early next fiscal, Kapoor said adding that the second capital raising event would be a follow-on public offer of up to 250 million dollar.

Asked about the total business by 2015, he said, “We are expecting our balance sheet of Rs 1,25,000 crore to Rs 1,50,000 crore of both advances and deposits.” The bank reported a net profit of Rs 303.8 crore for 2008-09, a growth rate of nearly 52 per cent over the previous year. “The key differentiator for Yes Bank has been the unique knowledge-driven approach to offering industry-specific financial solutions that go beyond the traditional realm of banking,” Kapoor said. Read More »

PSBs Welcome Home Loan Balance Transfers from Private Sector Banks

Home loan ‘balance transfers’ from private sector banks and housing finance companies are welcome, say public sector bankers. While they are dangling the carrot of soft interest rates to encourage customers from other banks and HFCs to make the switch, public sector banks (PSBs) are not letting their guard down in their quest to grow their retail loan book. While some PSBs are aggressively pursuing home loan takeovers, yet others are cautious due to concerns over the quality of assets.

According to public sector bankers, the switch happens when there is a wide interest rate differential on home loans between PSBs and private sector banks/HFCs. On a Rs 30-lakh home loan of 20 years, PSBs are currently charging a floating interest rate of about 9.25 per cent, while select private sector banks/HFCs are quoting an interest rate of 9.75-10.50 per cent. It is this interest rate differential that is prompting home loan customers to gravitate from private sector banks/HFCs to PSBs. A senior IDBI Bank official pointed out that customers would do well to do a through cost-benefit analysis before they go in for balance transfer of their outstanding home loans from one bank to another. The reduction in equated monthly instalments should far outweigh the pre-payment penalty charges (imposed by the old bank) plus the processing fee (imposed by the new bank). Read More »

Private Equity players likely to invest $5 to $8 bn

Venture capitalists and private equity players are now working overtime when it comes to new investments. Due diligence is taking more time than before.

Anywhere between $5 to $ 8 billion is waiting to be pumped into the Indian market in the form of private equity. Slowdown-free sectors like healthcare and education are hot picks, besides those catering to domestic consumption.

“Right now, we are evaluating proposals in diagnostics, logistics and energy saving,” says Srini Raju, co-founder of Peepul Capital. His fund has a war chest of $220 million of which $150 million has been invested in telecom and manufacturing companies. Read More »

Indian companies Line Up QIPs Worth 30K cr

With investors regaining their appetite for risk, Indian companies are hoping to make the most of it. Companies have lined up qualified institutional placements (QIPs) worth around Rs 30,000 crore and these issues should sail through without any trouble, provided the mood in the stock market remains positive, merchant bankers say.

Companies eyeing the QIP route include Adani Enterprises (Rs 1,500 crore), Essar Oil (Rs 10,000 crore), HCC (Rs 1,500 crore), HDIL (Rs 3,000 crore), JSW Steel (Rs 5,000 crore), Karnataka Bank (Rs 500 crore), Parsvnath (Rs 2,500 crore) and Sobha Developers (Rs 1,500 crore). Funds raised through this process would be used to finance capex requirements, retire expensive debt and clean up the balance sheet in general. Read More »