Latest Property News on 'Banking and Finance'

Deepak Parekh to Relinquish his Position as HDFC CEO on December 31

After being at the helm of home loan major Housing Development Finance Corp (HDFC) for about 16 years, Deepak Parekh will relinquish his position as CEO on December 31. Keki Mistry, currently the V-C and MD of the mortgage lender, will step in as the CEO, designated as V-C & CEO. However, Parekh, who has been with the institution for 31 years, will continue with HDFC as its non-executive chairman, a release said. HDFC is the holding company for all HDFC group firms, including HDFC Bank.

Over the years, under Parekh’s leadership, HDFC has emerged as one of the most stable mortgage lenders in the country. Even in the face of intense competition from new entrants, who mainly structured their business models around predatory pricing, HDFC maintained a cost-based, customer-oriented approach. HDFC was founded by Parekh’s uncle Hasmukhbhai Parekh in 1977, at a time when the concept of housing finance was nearly non-existent in India. Read More »

Kotak Mahindra Bank Emerges as a Key Player in the Private Banking Segment

Kotak Mahindra Bank has emerged as one of the leading players in the private banking space in India. Disclosing its assets under management for the first time in an interview to ET NOW, C Jayaram, executive director of Kotak Mahindra Bank, said: “We have emerged as one of the leading players in the industry with assets under management in the range of Rs 13,000 crore.” “Assets under management of Rs 13,000 crore will surely put Kotak in the top two, if not the number one player in the space,” said a senior official with a foreign bank, on the condition of anonymity.

While private banking is a space where banks rarely release information on their assets under management, players like DSP Merrill Lynch, Deutsche Bank and Kotak Mahindra Bank have always been acknowledged as key players in the segment. Both DSP Merrill Lynch and Deutsche Bank, however, do not disclose their assets under management as a matter of policy. Kotak Mahindra Bank identifies its private banking clients, as individuals with an investible surplus of over Rs 5 crore (or $1 million). This is a trend followed by all other large banks as well. Read More »

UBI seeks Capital Infusion from govt to meet future credit growth

State-owned Union Bank of India today said it has sought financial assistance to the tune of Rs 1,800 crore from the government to meet credit growth in the coming years. “We have requested the government for the capital infusion,” Union Bank of India Chairman and Managing Director M V Nair told PTI on the sidelines of India Economic Summit here.

Asked about the quantum, Nair said that it was about Rs 1,800 crore as the bank intended to have a credit growth higher than the industry average. The bank has adequate capital to meet the credit growth for current fiscal, he said adding that the capital assistance was required for business expansion in the coming years. Read More »

RBI’s Stricter Norms for Non-Performing Loans and Loans to Commercial Real Estate Can Affect Bank’s Profit

Rating agency Moody’s today said the Reserve Bank of India’s (RBI) stricter norms for non-performing loans and for loans to commercial real estate would hurt banks’ profits. “The hike in RBI’s provisioning requirements is likely to have a significant impact on profits over the short term,” Moody’s said in a statement. Retaining key policy rates in its review last month, RBI had raised the amount of funds banks need to set aside as provision for possible losses in the two categories. The central bank increased provisioning requirement to 1 per cent from 0.4 per cent for loans to the commercial real estate sector, resulting rise in provision by 150 per cent.

It also asked banks to set aside a minimum of 70 per cent of their non-performing loans (the norm has to be met by September 2010) as cushion to absorb potential losses here. “Higher provisioning will increase rated Indian banks’ buffer to absorb loan losses … But the higher credit costs are likely to dent bottom lines,” Moody’s said. The higher provisioning requirements suggests that the Indian banking regulator “is clearly worried, as are we, about a potential increase in bad loans”, the rating agency said. The fear feeds particularly from the significant build-up of restructured loans and due to the large increase in credit to the commercial real estate sector over the last year. Moody’s said the unchanged key rates and a higher statutory liquidity ratio (SLR) would have no short-term credit implications as majority banks have SLR holdings well over 27 per cent on high liquidity. Read More »

RBI’s Strict Norms for Non-Performing Loans may Hit Banks’ Profits

Rating agency Moody’s today said the Reserve Bank of India’s (RBI) stricter norms for non-performing loans and for loans to commercial real estate would hurt banks’ profits. “The hike in RBI’s provisioning requirements is likely to have a significant impact on profits over the short term,” Moody’s said in a statement.

Retaining key policy rates in its review last month, RBI had raised the amount of funds banks need to set aside as provision for possible losses in the two categories. The central bank increased provisioning requirement to 1 per cent from 0.4 per cent for loans to the commercial real estate sector, resulting rise in provision by 150 per cent. Read More »

10% Rise in SBI’s Quarterly Earnings

State Bank of India, the nation’s largest, said quarterly earnings climbed 10% on gains from bonds and currency trading even as its profits from lending to companies and individuals fell. Bad loans rose. Net profit advanced to Rs 2490 crore in the September quarter matching estimates, from Rs 2260 crore a year earlier, the bank said in a statement. A survey of analysts forecast showed its net profit may rise to Rs 2460 cr. “The performance would have been much better had it not been for the huge liquidity overhang, additional provisions for pensions and wage settlement,” said O.P. Bhatt, the chairman of the bank. State Bank of India is fighting a deluge of deposits rush after the collapse of Lehman Brother Holdings led to a run on many banks which were seen weak.

The reduction of benchmark rates by the Reserve Bank of India to beat the credit crisis has brought down the lending rates for borrowers, but the banks, especially public sector ones, were not able to reduce deposit rates proportionately leading to pressure on their profitability. Also, the relaxation of bad loan norms to fight the credit crisis is coming home to roost. “State Bank of India is a barometer of the Indian economy, and if the economy does well, so should State Bank, especially given its wide presence,” said Sandesh Kirkire, chief executive officer of Kotak Mahindra Asset Management Co., which manages 380 billion rupees in Mumbai. “All indicators of the economy point to a revival and SBI should benefit directly from it,” press reported Kirkire as saying. Read More »

RBI’s Credit policy may not affect home loans

The credit policy announced by Reserve Bank of India (RBI) governor Subba Rao on Tuesday may have hints of a tighter credit regime, but it may not have an impact on the interest rate structure for home loans, say experts. Experts say that their opinion is based on two facts. First, the demand for homes and home loans, in turn has gone up in the wake of the soft rate regime put in place by the finance minister early this year as part of his anti-recession measures. Second, the Centre has already expressed concerns about the bankers’ unwillingness to pass on the benefits of the revival package announced by the finance minister.

Shobhit Agarwal, joint managing director for capital markets at real estate research and advisory firm Jones Lang LaSalle Meghraj, tells TOI that the banks will now be a little more cautious while lending to real estate players, however, interest rates are at their lowest in recent times, and even a marginal hike due to this tightening in provisioning, will not affect the overall sector seriously. “The current credit policy has made only two changes that could conceivably affect the real estate sector. For one, the statutory liquidity ratio (SLR) has been increased by one per cent. Secondly, the provisioning for real estate loans has been increased to one per cent from the earlier 0.4 per cent. The impact on the sector is not significant as we see it. Rather, it might help, as the Central Bank is trying to curb the formation of an asset bubble - in other words, trying to control the asset prices for end users,” Agarwal says. Read More »

Banks and Realty stocks Dragged Indian Shares Lower

Institutional selling in blue chips, mainly banks and real estate stocks, dragged Indian shares lower in a choppy session Monday even as most regional markets ended higher. The Bombay Stock Exchange’s 30-stock Sensitive Index fell 0.4% to finish at 16,740.50, after trading between 16,706.08 and 16,938.88.

Investors dumped banks and real estate on worries that the Reserve Bank of India may hike interest rates at its policy review Tuesday. DLF, the nation’s largest property developer by sales, slumped 5.4% to 430.10 rupees to be the biggest percentage loser, while State Bank of India–the largest lender by assets–slipped 2.1% at 2,305.60 rupees. ICICI Bank, the second-largest lender, lost 1.5% to 890.70 rupees, while HDFC Bank slid 0.1% to 1,687.95 rupees. Shares of Reliance Industries, India’s most valued company, stayed weak and contributed to the index’s fall, ending down 1.6% at 2,015.45 rupees. Read More »

RBI Asks Banks to Stop Relying on Bulk Deposits

The Reserve Bank of India (RBI) has asked banks to stop relying on bulk deposits, which it has described as ‘purchased liquidity’, and instead strengthen their liquidity management by shoring up core retail deposits.

The regulator has said banks’ asset liability mismatches have been exacerbated by such deposits on one end, which are essentially shorter in tenor, and lending in mortgages and core projects on the other. In its report - Trends and Progress in Banking - released on Thursday, RBI said minimising regulatory and tax arbitrage will be a challenge. The central bank also said it alone is best suited as a single regulator responsible for financial stability. Read More »

RBI to Come up With Capital Adequacy Norms for bank VCs

The Reserve Bank of India (RBI) is likely to come up with capital adequacy norms for bank-sponsored venture capital (VC) firms to prevent reputational risk to their promoters. In addition, RBI wants banks to rebrand their VC funds in a manner that they appear as subsidiaries and not a part of the bank. In its annual report, the central bank had said that it would lay down a risk management and capital adequacy framework for bank-sponsored private pools of capital.

“RBI is working on capital adequacy norms for VCs floated by banks. The central bank wants to emphasise on branding in way that the funds look like subsidiaries. At present, investors have a feeling that they are investing in the bank and not in the fund,” said Amitabh Chaturvedi, chief executive officer, Dhanalakshmi Bank. He said the move had taken some time but expected the regulator’s approval by November. After this, the bank will apply to the Securities Exchange Board of India. It plans to float the fund by the first quarter of the next financial year. Read More »