HDFC rides small-town housing boom

Housing Development Finance Corporation (HDFC), India’s largest mortgage lender, posted a 12 per cent increase in its October-December net profit, helped by strong demand for home loans from non-metros.

HDFC posted a net profit of ?1,278 crore against ?1,140 crore in the year-ago period.

Total income increased 15 per cent to ?6,020 crore while the loan book grew 19 per cent to ?1,92,266 crore.

Mumbai-based HDFC caters mainly to the mid-income home buyer. Its average loan size is ?22 lakh. Apart from lending to the retail segment, HDFC also disburses credit to real estate developers.

But it was the retail segment that contributed 89 per cent of the additional loans in the first nine months of 2013-14. The retail loan book grew 24 per cent to ?1,30,916 crore during the December quarter.

Keki Mistry, Vice-Chairman and CEO of HDFC, said: “The company has seen good demand for loans from individuals across all major cities. In percentage terms, growth has come from tier-II and tier-III towns.” The outskirts of Delhi NCR, Chennai, Mumbai, Bangalore and Pune primarily contributed to HDFC’s loan growth during the quarter.

There has been no behavioural change in consumers buying homes across the country, Mistry said. The average age of customers buying homes is 38 years and the loan amount they borrow is generally 65 per cent of the value of the house.

While non-performing assets (NPAs) have been an issue for most finance companies, HDFC continued to maintain good asset quality with gross NPAs at 0.77 per cent of total loans at the end of December 2013. A focus on first-time home buyers, who seldom skip instalments, has helped HDFC keep delinquencies low.

Meanwhile, bank and finance stocks took a hard knock in Wednesday’s trade on fears that the RBI may not cut rates in its policy review on January 28 after the Urjit Patel Committee’s recommendations.

“I don’t think the RBI will cut rates in the January or March policy as the US Fed tapering will weigh on its calculations,” he added. This could mean that HDFC will not lower rates.


satyanarayan.iyer@thehindu.co.in

Source: Thehindubusinessline

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RBI unlikely to tinker with rates in Jan 28 policy review: BNP Paribas

BNP Paribas expects the Reserve Bank of India to keep policy rates unchanged in the January 28 policy review meeting.

The RBI is likely to pause for the second time in a row, thanks to inflation based on both the wholesale price index (WPI) and the consumer price index (CPI) softening in December.

But there is a strong chance of the central bank going in for 25 basis point hike in each of the subsequent two meetings, said Richard Iley, Chief Asia economist, BNP Paribas.

BNP Paribas expects interest rates to remain elevated for the next two quarters. The interest rates are expected to come down by the end of 2014.

“Inflation is worrisome. CPI is extremely high. Regaining control over inflation is going to be tough for RBI Governor Rajan,” Iley told Business Line.

Richard also felt that the RBI will have to factor in the aspect of a limbo situation on the fiscal policy front given the impending general elections.

India’s inflation remains uncomfortably sticky at about 8 per cent, despite the economy’s lacklustre growth.

Survey evidence suggests that inflation expectations — both of urban households and professional forecasters — remain on an upward arc, risking a continued ratcheting up of average inflation performance, noted a recent BNP Paribas report on Key Macro Themes for 2014 in Asia ex Japan.

GDP growth

BNP Paribas sees Indian economy growing at a dismal 4.3 per cent in 2013-14. But it has projected a stronger GDP growth of 5.1 per cent in 2014-15.

However, a return to 7-8 per cent GDP growth looks a “pipedream” for the foreseeable future.

“Achieving 7-8 per cent GDP growth is long way. We are sub 5 per cent in the latest quarter. It’s very hard to generate additional 2 percentage points growth. The concern is poor performance of the industrial sector,” Iley said.

There has been stagnation in industrial output in the best part of the last four years, he said, adding that the key is going to be recovery of the corporate sector. “It’s hard to see animal spirits returning. The role of dysfunctional politics has been unhelpful.”

The outcome of general elections in May 2014 would have a significant impact on sentiments. The positive outcome of a stable Government would pave the way for structural reforms and better economic growth, BNP Paribas said.

srivats.kr@thehindu.co.in

Source: Thehindubusinessline

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Kotak Bank Q3 net falls 6% as loan growth slows

Kotak Mahindra Bank saw its net profit drop 6 per cent to Rs 340 crore in the October-December quarter of this fiscal due to higher provisions and slower loan growth.

“We have cautiously slowed our commercial vehicle and commercial equipment (CVCE) segment due to stress in asset quality. Without considering CECV, our loan growth was at 12 per cent year-on-year,” said Dipak Gupta, Joint Managing Director of the bank.

CV segment hit

The mid-size private sector bank’s CV segment witnessed de-growth of 26 per cent. Gupta said the CV segment is seeing signs of stabilising, though there is no incremental business.

The retail and corporate books grew 6 per cent and 5 per cent, respectively. On the other hand, agriculture saw a healthy growth of 23 per cent.

‘Other income’ was marginally down at Rs 300 crore (Rs 305 crore).

Bad loans or gross non-performing assets (NPAs) worsened to 2.01 per cent of total loans as on December 31, 2013, from 1.46 per cent in December 31, 2012. The bank’s provisions (including towards bad loans) increased to Rs 70 crore as against Rs 42 crore in the corresponding quarter last year.

Also, it restructured assets worth Rs 42 crore (Rs 7 crore in Q3 FY13) during the quarter.


beena.parmar@thehindu.co.in

Source: Thehindubusinessline

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IDBI Bank joins the credit card bandwagon

Nearly nine years after becoming a full-fledged commercial bank, IDBI Bank has decided to issue credit cards to its customers.

The Mumbai-headquartered bank intends to issue around five lakh cards in three years — one lakh in the first year and two lakh cards each in the following two years.

The public sector bank, which currently has a base of more than 10 million customers, will be issuing EMV (Europay, MasterCard and Visa) chip cards with magnetic stripes.

EMV is a global security standard for microprocessor chip card technology. This ensures that the credit card is not only accepted anywhere in the world but is also better protected against fraudulent activities.

Since many merchant establishments in the country still have credit card payment infrastructure (terminals) that accept cards with magnetic stripe, the bank has decided to issue EMV cards with magnetic stripe.

The category of credit cards that the bank plans to issue are: Platinum, Signature and Corporate.

Service provider

For foraying into the credit cards space, IDBI Bank is planning to engage the services of a third party service (TPS) provider for providing end-to-end solutions for credit card issuance under the outsourced model. The TPS provider, among others, will undertake operational activities relating to account updation, demographic changes, payment instructions, recurrent payment instructions and balance transfer request received through physical change request form/phone banking/Net banking.

For now, IDBI Bank will be issuing credit cards on Visa and MasterCard platforms. The main business of Visa Inc and MasterCard Worldwide is to facilitate electronic funds transfer — they process payments between the banks of merchants and the card issuing banks of the purchasers.

Once Rupay (the home-grown rival of Visa and MasterCard) launches the credit card, the bank will issue the cards in association with Rupay too. Currently, IDBI Bank’s debit card portfolio comprises Rupay debit cards also.

As on November-end 2013, there were 18.77 million credit cards outstanding in the country. The total value of loans outstanding against these cards stood at Rs 12,789 crore.

ramkumar.k@thehindu.co.in

Source: Thehindubusinessline

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RBI’s Anand Sinha demits office

With Anand Sinha relinquishing his charge as Deputy Governor on Monday, the Reserve Bank of India has re-allocated his portfolios among the remaining three Deputy Governors — K.C. Chakrabarty, H.R. Khan and Urjit Patel. Sinha was in-charge of eight departments, including Departments of Banking Operations and Development, Risk Management, Information Technology and Expenditure and Budgetary Control.

Sinha was on an 11-month extension as he was dealing with the process of issue of new bank licences in the private sector. In the race for this top-level vacancy at the RBI are Executive Directors: B. Mahapatra, R. Gandhi, P. Vijaya Bhaskar, G. Gopalakrishna and Deepali Pant-Joshi.

Source: Thehindubusinessline

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Dewan Housing net up 52% in third quarter

Dewan Housing Finance Ltd (DHFL) reported a 52 per cent jump in net profit at Rs 138 crore due to healthy loan growth in the third quarter ending December 31, 2013.

The housing finance company’s net profit in the corresponding quarter last year was Rs 91 crore.

Housing loans sanctioned as on December 31, 2013, grew 51 per cent, while disbursements were up 35 per cent. The firm securitised housing and property loans aggregating Rs 502 crore.

This quarter also witnessed some improvement in consumer sentiment and home buying on account of the festival season, especially in India's tier III and IV towns, said Kapil Wadhwan, Chairman and Managing Director.

Loan book outstanding as on December 31 increased 55 per cent to Rs 37,849 crore from Rs 24,340 crore.


beena.parmar@thehindu.co.in

Source: Thehindubusinessline

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Banks can now lend up to 75% of value of pledged gold

The Reserve Bank of India on Monday allowed banks to lend more against pledged gold jewellery, thereby creating a level-playing field for them vis-à-vis gold loan companies.

This move follows the central bank’s January 8 announcement that gold loan companies or non-banking finance companies (NBFCs) can lend up to 75 per cent of the value of pledged gold jewellery against the earlier 60 per cent.

In a notification, the central bank said banks can lend up to 75 per cent of the value of pledged gold jewellery, including bullet repayment of loans. Bullet repayment refers to the loan being repaid at the end of the tenure instead of in instalments.

To standardise the valuation and make it more transparent to the borrower, the RBI said gold jewellery accepted as security/collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd (formerly known as Bombay Bullion Association).

If the purity of gold is less than 22 carats, the bank should translate the collateral into 22 carat and value the exact weight of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.

Unorganised sector

By allowing banks and NBFCs to lend more against the pledge of gold jewellery, the central bank may be trying to break the shackles of the unorganised sector in the business of lending against gold.

The RBI reiterated that banks should continue to observe necessary and usual safeguards and also have a suitable policy for lending against gold jewellery with the approval of their boards of directors.

In May 2013, the RBI had imposed restrictions, according to which while granting advance against the security of specially minted gold coins sold by banks, they would have to ensure that the weight of the coin(s) does not exceed 50 gm per customer and the amount of loan to any customer against gold ornaments, gold jewellery and gold coins (weighing up to 50 gm) should be within the board-approved limit.

The limit of 50 gm is also applicable to grant of advance against units of gold ETFs and gold mutual funds.

ramkumar.k@thehindu.co.in

Source: Thehindubusinessline

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Federal Bank gets nod for hiking foreign investment limit

The Cabinet Committee on Economic Affairs (CCEA) has approved the proposal of Federal Bank for increase in foreign investment up to 74 per cent.

This nod is, however, subject to the condition that aggregate Foreign Institutional Investors' shareholding will not exceed 49 per cent of the paid-up capital of the bank.

The approval will result in a foreign investment of Rs 1,400 crore into the country, an official release said.

Srivats.kr@thehindu.co.in

Source: Thehindubusinessline

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RBI committee to review governance of bank boards

The Reserve Bank of India has constituted an expert committee to review the governance of bank boards in India.

The committee will review the regulatory compliance requirements of the board of directors of banks, judge what can be rationalised and where requirements need enhancements, examine the working of the boards, including whether adequate time is being devoted to issues of strategy, growth, governance and risk management, the RBI said in a notification.

The committee will review central bank regulatory guidelines on bank ownership, ownership concentration and representation on the board, analyse the representation to see whether the boards have the appropriate mix of capabilities and necessary independence to govern the institution, and investigate possible conflicts of interest in board representation, including among owner representatives and regulators.

‘Fit and proper’ criteria

In this regard, it will also assess and review the ‘fit and proper’ criteria for all categories of directors of banks, including tenor of directorship, board compensation guidelines and any other issue relevant to the functioning of the boards and the governance they exercise.

The committee is expected to submit its report within three months after its first meeting.

Chaired by P.J. Nayak, former Chairman and CEO of Axis Bank, the committee members include S. Raman, whole-time member, SEBI; Shubhalakshmi Panse, Chairperson and Managing Director, Allahabad Bank; Pratip Kar, former Executive Director, SEBI, and Joydeep Sengupta, Director, McKinsey & Company.

beena.parmar@thehindu.co.in

Source: Thehindubusinessline

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ICICI Bank to extend credit to MSMEs

ICICI Bank, the country’s largest private sector bank, has signed a memorandum of understanding with the National Small Industries Corporation (NSIC) to provide extended credit to the micro, medium and small sector enterprises.

This MoU will promote availability of credit facilities for sustainable development of MSMEs.

Under this agreement, the NSIC will share the proposals of its associated MSMEs for credit support to ICICI Bank. The bank, in turn, will offer credit and other tailored business solutions to these MSMEs as per its norms, the bank said in a statement.

This joint initiative aims to support MSMEs with superior banking solutions to prepare them for meeting the emerging global challenges.

beena.parmar@thehindu.co.in

Source: Thehindubusinessline

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‘No ATM levy for own customers’

HDFC Bank is not in favour of charging customers for using its own ATMs, according to Paresh Sukthankar, Deputy Managing Director. “Most banks have asked for a hike in charges. However, if the issue is left to the banks then we will not charge our own customers for using HDFC Bank ATMs,” Sukthankar said .

The Indian Banks’ Association has approached the RBI to allow banks to levy charges on customers for ATM transactions. Currently, banks do not charge customers for using their own bank ATMs. Further, customers are allowed five free transactions per month at other bank ATMs. To make ATM operations viable, banks have asked the RBI to allow them to charge customers for transactions.

Source: Thehindubusinessline

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