PSU banks anticipate growth in vehicle loans in fiscal year

At present there is slowdown in economic but the major public sector banks are anticipating growth in Auto Loans by 20-25 per cent for the purchase of cars and other passenger’s vehicles in the current fiscal.

Though private sector rivals are restraining from lending to the auto sector and are expecting a much lower growth.

The major reason is that on car finance PSU banks are charging lower interest rates in comparison to the private sector banks. The lending rates of the public sector banks range from 11.75 to 13.75 per cent, private sector banks charge 15 per cent and above.

A State Bank of India official said: “We are growing our portfolio faster than the average market growth rate.”

SBI has recorded a powerful growth of 30 per cent year-on-year in its auto loan portfolio. The bank had an exceptional auto loan portfolio of Rs 8,029 crore as on September 30, 2008 as against Rs 6,153 crore as on September 30, 2007.

Another PSU bank, Union Bank of India, too has booked around 25 per cent year-on-year growth in its auto loan. “Unlike some banks, which resort to direct sales agents to garner business, we prefer dealing with customers directly through dealers. This way we have control over the customer profile,” said a senior bank official.

The bank has set around Rs 1,000 crore for auto loan.

On the other hand the largest private sector bank ICICI Bank does not hope for much growth in auto loans in the current year.

“Primary demand in the four-wheeler segment is coming down. The ratio of actual sales to purchase enquiries is coming down,” said Mr N.R. Narayanan, Head of Vehicles Business, ICICI Bank.

According to ICICI official in the next six months, the car loan market may witness de-growth. He said, “By March 2009, I see a flat to negative growth”.

Mr Mayank Pareek, Executive Officer, Marketing & Sales, Maruti Suzuki Ltd, said “private sector banks such as ICICI Bank and HDFC Bank, which were aggressive players in auto finance three-four years ago, have noticeably scaled down their lending from the beginning of this year”.

“ICICI Bank’s share of financing our vehicles dropped to five per cent now from 35-40 per cent earlier. We anticipated it and entered into agreements with PSU banks. Two years back, we tied up with SBI and associate banks, and now we are building on that and also the tie-ups with other PSU banks.”

Bankruptcy or Debt Consolidation: Which is better?

When you are overwhelmed by debts and desperately seeking a way out, the question might arise in your mind that which is better, bankruptcy or debt consolidation. Both options have their own benefits and drawbacks.

While you face embarrassing situations due to your increasing debt burden, you might go on to obtain new loans for the purpose of repaying the earlier loans. However, most of the times you would find it impossible because carrying on with a number of loans is often very much risky and this would progress towards bankruptcy. If you feel that you are not able to repay your loans, at that time you can file for bankruptcy. If you are declared as a bankrupt person, you would be freed from your debt obligations. Alternatively, bankruptcy remains in your credit report for seven to ten years. Due to this cause, you need to make an attempt to pay off your debts rather than filing for bankruptcy. You have got some ideas on Which is better bankruptcy or debt consolidation?

One method of avoiding bankruptcy is to receive a debt consolidation loan. For controlling your debts, debt consolidation can work as a useful tool. It combines your every debt carrying high rates of interest into a single loan bearing a low rate of interest. This reduced rate of interest allows you to pay reduced monthly payments. This loan is available in both secured and unsecured forms. You should try to obtain a secured debt consolidation loan since it bears a lesser rate of interest. An unsecured debt consolidation loan carries a higher rate of interest, thus it nullifies the benefits of consolidating debts with higher rates of interest into a debt consolidation loan with lower rate of interest. Nonetheless, debt consolidation may not be advantageous for you if you have a poor credit.

Whether bankruptcy is better than debt consolidation or vice versa is a matter of speculation. Therefore, it is recommended that you seek the advices of an expert financial consultant. He will tell you which of the two is right for you.

ICICI bank fined for sending musclemen for loan recovery

ICICI Bank has been directed by the court to pay Rs.20,000 as a compensation to a consumer. Court termed the act of sending recovery agents as “uncivilized” and instructed the bank to pay compensation to a consumer for sending musclemen to his home.

The complainant Rahul Sharma had filed the case before the Delhi State Consumer Disputes Redressal Commission that he got threatening calls and musclemen were sent to his home for the recovery of unpaid installments of a house loan he had taken. The court ordered bank to pay the compensation and Rs 2,000 as the cost of litigation to the complainant.

"In a democratic society governed by rule of law, any other method of recovery of dues from the person who had taken loan from the bank or financier is not permissible. Threatening calls on telephone to recover the amount due and using muscle power by sending musclemen to the house of the borrower is a highly uncivilized act," commission president Justice J D Kapoor ruled.

The case was filed in 2004 when Sharma took a home loan of Rs 450,000 from the bank. The loan amount was payable in 240 EMIs.

Till September 2005 there was no problem but on Sep 19, Rahul was asked to issue the cheques against the EMI as these could not be realized through the electronic clearing service (ECS), by the bank.

Therefore, he issued cheques of the required amount for consecutive months as directed by the bank.

Despite making the full payment, bank used to send musclemen to his house to threaten his family members in abusive language, Sharma stated in his complaint.

But the bank termed the complaint as frivolous and stated that as Sharma had failed to pay his installments on time, the bank is well within its rights to recover its dues. The commission rejected the bank's contention.

The commission in its judgment stated, "The legal process may be slow but it is no excuse for employing musclemen. Such type of 'instant justice' cannot be permitted in a civilized society where there is effective rule of law. Otherwise, it would result in anarchy, that too, when the borrower retorts and uses force".