Indian Bank revises rates on term deposits

Indian Bank has revised the interest rates on domestic term deposits with effect from September 1. Interest rate for the 7-14 days period for an investment of Rs 15 lakh is at 3.5%, while that for the same period for Rs 15 lakh to less than Rs 1 crore is at 4%. Interest rate for the 30-45 days period upto Rs 1 crore is at 4.5%. The bank has fixed interest rate on deposits for 46-90 days for Rs 15 lakh at 5.25% and for Rs 15 lakh to less than Rs 1 crore at 5.75%. Term deposits for 91-179 days for investment upto Rs 1 crore is at 6.5% and that for 180-364 days is at 7%. For a period of one year to less than three years, the interest rate is at 9%. For 3 years to less than 5 years, the interest rate is at 8.75% and for five years and above at 8.50%.

PSB Director resigns

Punjab and Sind Bank (PSB) Director, Mr Harcharan Singh Josh, has resigned from the board of the bank, which is fully state-owned. The Government order accepting his resignation was received by the bank a few days ago, sources in the Board said. Mr Josh, who was one of the five non-official directors in the bank’s board, had a face-off with the PSB Chairman, Mr R.P. Singh, over alleged favouritism in sanctioning Rs 150 crore loan without collateral and at lower interest rate to Orbit Resorts expansion project. The PSB Chairman had contended that politically affiliated directors were attempting to frustrate the debt recovery measures of the bank.

India's sub-prime market proves a prime opportunity

Like the US, India too has a subprime market and it is booming. The success of early entrants like Citi Financial and GE Money has encouraged several others to enter the consumer lending business, nearly half of which is a sub-prime market. These include players like HSBC (Pragati Finance), Stanchart (Prime Financial), Fullerton India, DBS Cholamandalam and Indiabulls. Industry sources say Barclays, Deutsche Bank and AIG are eyeing the segment, which includes private lenders like ICICI Bank and HDFC Bank, which entered in 2004. What’s attracting them is an estimated $10-11 billion market for unsecured credit, which is growing at 25-30 per cent, according to Citi Financial Managing Director Sandeep Soni. The smaller players are growing at 50 per cent or more. "It’s an untapped market. There’s an opportunity to expand the market like in telecom," said Rajeev Yadav, head of personal loans at GE Money. A typical sub-prime customer is the self-employed, neighbour-hood retailer or a trader who needs credit to buy goods and grow their business. He may be filing a tax return (most show an income of Rs 70,000-80,000), but it doesn’t truly reflect his cash flows. "Many of these people do huge business in cash; there’s no way it can be registered on paper. If he maintains an average bank balance of Rs 2,000-3,000 and that’s increasing or services an EMI of Rs 1,500 on credit card or another loan, it shows he has cash flows. Banking tells us about a guy’s character, about his cash flows."

Demand for home loans slowing down

The demand for home loans has slowed down over the past few months due to rising property prices and high interest rates. The number of applications for home loans and registrations of new flats have come down, say bank officials and analysts. The stricter prudential norms for the real estate sector have pushed up property prices across the country. According to Mr Sunil Rohokale, General Manager, Mortgage Finance and Real Estate, ICICI Bank. “Interest rates have increased by 250-350 basis points in the last 18 months. Also, the property prices have increased by as much as 40-50 per cent in the same period. Customers have been hit by a double whammy,” he said. Mr H.N. Sinor, Chief Executive, Indian Banks’ Association, said that there is need for some kind of relaxation of the prudential norms with regard to sectors such as housing, as the sector is seeing a slowdown.