ICICI bank home loan rate offers you with a flexible payment option

 
It is quite a difficult task to take in a decision to go for the home loans but you need to do a lot of study before you go with the right one. The article here briefly describes about ICICI bank home loan rate. With the minimum of 10% on the loan availed, this is the interest rate than the bank will be charging and you do get the options of paying back with variable amount and a fixed amount of EMI. You just need to fill an online form and the agent will be right there at your doorstep. They have a very simplified documentation and sanction approval is also not an issue nowadays.

They also help you to guide you through the process and recommend you with the best option available with them.

Summary: ICICI bank home loan rate is in no comparison higher than other banks and offers you with a flexible payment options

ICICI, Corporation Bank fined for faulty customer service

Faulty service towards customers from the part of banks has proved to be a cause of penalty for them. A Delhi consumer forum has put a penalty on public sector lender Corporation Bank as well as the largest private sector lender of the country, ICICI Bank.

Corporation Bank has been penalized on grounds of misplacing an account payee cheque of value Rs 45,220 of ICICI Bank. The cheque, despite being changed multiple times was cleared to a wrong person as a bearer cheque.

Corporation Bank was penalised by as much as Rs 15000. At the same time, ICICI Bank has also been asked to return the cheque amount of Rs 45,220 to the right person.

“In our opinion, ICICI Bank was also grossly negligent in clearing the cheque of the complainant (Mr Dinesh Kumar). We direct ICICI Bank to reimburse the amount of Rs 45,220 to the complainant,” the Bench presided over by Mr Bimla Makin said.

“We impose a cost of Rs 15,000 against Corporation Bank for misplacing the cheque from its custody,” the forum said.

“It was the duty of ICICI Bank to take proper safeguards, like asking for identity proof of the person getting the cheque encashed, when there were so many visible cutting and marks on the cheque and the account payee cheque was converted into open bearer cheque,” it said.

ICICI Bank announces expansion plans

Officials from ICICI Bank announced that the bank is going to add around 400-500 branches annually. It also aims at increasing the total spending percentage on the road and power projects in the years to come.

The Managing Director and CEO of ICICI Bank, Chanda Kocchar said, "I feel that we have to grow beyond the number of existing) branches... Over the next 2-3 years, we would continue to add branches at the rate of 400-500 per year"

Presently the bank consists of about 2,500 branches and 5,800 ATMs . Officials said that earlier the main focus of the bank was on Personal Loans but now it is more concerned about financing the corporate sector.

She said "I do feel ICICI Bank will play a major role in infrastructure project finance... As investment takes place in phases like in road and power projects, we move as investment takes place... this is an area of big focus,"

Regarding the expansion plans the officials said that it has not opened any new branch in the current financial year but the acquisition of Bank of Rajasthan by ICICI Bank automatically increased the branch network by 500.

"Well, bank grows where GDP grows. So, all the states where GDP growth takes place, banks will grow," Kocchar said.

ICICI Bank offers another option to dispense cash

ICICI Bank has launched an innovative scheme that suits the Indian market a lot. ICICI Bank and ICICI merchant services has launched a scheme that would enable the customers of the bank that have debit card to withdraw money from the merchant that have credit card swipe machine.

For the purpose the bank has to make minor modifications in the present system of the bank and in a few days the customers will be able to enjoy the service.

The Managing Director and Chief Executive of the bank Chanda Kochhar said "ICICI Bank continues to be at the forefront of offering new functionalities and convenience to customers by leveraging technology. The launch of cash withdrawals at PoS terminals will create a new mode of access to financial services, which not only enhances customer service but can also be leveraged for financial inclusion."

This service initially will be available with a merchant outlets by the scheme is expected to attract more merchants to provide this service as it will reduce the headache of managing cash for the merchants plus the service will load the customers with an alternative choice to withdraw cash.

According to the guidelines from the banks that customers will be able to get a maximum of Rs 1000 per day from the service and for this the customer will be charged with Rs 10 per transaction. This service charge will then be shared between the bank and the merchant.

ICICI Bank launches I-Express cross-border money transfer service

The largest private sector lender of the country, ICICI Bank has launched an instant cross-border money transfer option called I-Express, for Non-Resident Indians (NRIs).

According to bank press release NRIs can avail this service at ICICI bank’s select partners in Gulf Cooperation Council-political and economic union involving the six Arab states of the Persian Gulf.

Under I-Express facility the remitter can visit any partner outlet and get instant credit into the beneficiary account maintained with ICICI Bank in India that too at no extra. The funds will be remitted instantly and the beneficiary will be able to withdraw money immediately, under this service.

An ICICI Bank spokesperson said, "ICICI Bank not only offers funds transfer facility into the accounts of beneficiaries held in its own branches in India, but also helps in crediting funds into accounts of beneficiaries held in over 65,000 branches of other Indian banks."

The bank release added, the beneficiaries will be able to withdraw funds through the network of over 2,500 branches and 5,600 ATMs, apart from the over 55,000 Visa-enabled ATMs, thus, this facility will significantly increase the value-proposition of ICICI Bank’s cross-border remittance offerings to both the partners and NRIs in the GCC.

However, in the Indian remittance market, ICICI Bank has stood as a strong remittance player which had enabled remittances from across 40 countries worldwide.

Moreover, bank is having relationships with over 80 correspondent banks and 23 exchange houses across GCC.

ICICI Bank ends special home loan scheme

ICICI Bank, the country’s largest private sector bank has revised its home loan rates. The bank has hiked its home loan rates by 50 basis points also it has discontinued its special home loan (fixed and floating) scheme. The new rates are effective from 1October, 2010.

ICICI Bank senior bank official has confirmed about discontinuation of their special home loan scheme in which bank offered fixed rate of interest for the first two years.

Under the scheme bank was offering 8.25percent for the first year and 9.25% for the second year, thereafter the rate was reverted to the floating rate of the bank.

Other banks that have hiked their home loan rates by a similar 50 basis points include IDBI Bank and Allahabad Bank. IDBI Bank and Allahabad Bank hiked their base rate from 8 per cent to 8.5 per cent.

An IDBI Bank official said the cost of funds has gone up, in line with RBI's rate hike. "We have also hiked our deposit rates," the official said.

The banks are hiking their deposit rates in the range of 25-75 basis points for varying maturities. After the Reserve Bank of India (RBI) had raised the rate at which it lends to banks, the cost of funds of banks increased which has resulted in the revision of interest rates.

HDFC Bank, a mortgage lender had raised its interest rate by 0.5% to 9.25% floating in September, 2010. Bank under special home loan is offering loans at a fixed rate of 8.50 percent, will be available up to the end of this financial year, 9.50 per cent for financial year 2011-12 and the applicable floating rate for the balance term.
Meanwhile, SBI the largest public sector bank has extended its special home loan scheme to December 31, 2010. But it has not hiked its base rate, which is at 7.5%. Under its special home loan scheme bank is offering loans at 8 per cent for the first year, and then 9 per cent for the next two years thereafter it will revert back to the floating rate of interest that would be decided by the bank.

ICICI Bank's first retail outlet in Singapore

ICICI Bank has opened its first retail outlet in Singapore.

MD and CEO of the bank, Ms Chanda Kochhar said, the retail outlet has been opened in the banking hub of Singapore’s central business district the branch office is the first step towards starting of ICICI’s retail operations in the country under a 25-branch qualified full banking (QEB) license given by the Monetary Authority of Singapore in April.

She said, "We look at Singapore not just as doing business with Singapore, but the region," while emphasizing on the bank’s growth plans without setting forward targets.

In reply to questions on acquisitions, and further expansion in the region, she said ICICI will basically focus on organic growth.

ICICI Bank annual balance sheet is $90 billion out of which Singapore accounts for $5.8 billion and a significant 25 per cent portion of its international business.

Kochhar added, "In that sense, Singapore is one of the largest hubs of international businesses." She added, "Our focus will be to develop the regional banking business through Singapore operations," and also underlined the importance of Southeast Asian markets.

She said, "I expect a lot of business coming from the regional facilitated by the QFB license in Singapore."

The ICICI Bank Managing Director stated bank will be adding new products in order to expand its Singapore and regional businesses.

Kochhar also pointed out the importance of non-resident Indian (NRI) remittances, and said, bank has a 28 per cent share of the total remittances coming into India thus Singapore is an important part of that business.

Speaking about ICICI’s growth strategy for the coming years, she said, "Our expectation is that we will grow around 18 per cent for the current year ending March, 2011, and 20 per cent to 22 per cent the following year."

Kochhar also referred to strong growth of banks in India, based on the projected 9 percent to 10 per cent annual Indian economic growth.

According to her Indian banking sector annual growth would be over 20 per cent, with some big banks achieving growth "more than that".

Kochhar said, "In five years' time, the Indian banking sector should be about 2-1/2 times the size of what it is currently," and admitted there is a massive financial requirement for developing the country's multi-billion dollar infrastructure sector.

She added, "I think there are huge opportunities for all of us in India. The pie is large and there will opportunities for all banks to grow."

Banking Ombudsman charged ICICI, HDFC for violating norms on recovery agents

Government informed the Lok Sabha that HDFC and ICICI Bank have been violating RBI guidelines on engagement of recovery agents for loans the banking ombudsman has received several complaints against both the banks.

Finance Minister Pranab Mukherjee said in Lok Sabha, "RBI has reported that 120 complaints had been received by 15 Banking Ombudsman Offices in year 2009-10 regarding non-observance of RBI guidelines on engagement of recovery agents by private sector banks."

He said, "Further, it has also been reported that HDFC Bank Ltd and ICICI Bank Ltd have reportedly violated the said guidelines."

Regarding the remedial measures, he said, RBI had issued detailed guidelines to banks on engagement and training of recovery agents. Banks were instructed to ensure that the recovery agents were provided proper training to handle with care and sensitivity particularly in aspects like hours of calling, privacy of customer information etc.

He added banks have also been advised to make sure that the contracts with the recovery agents do not encourage adoption of uncivilized, unlawful and questionable behavior of recovery process.


Finance Minister further said that the banks, being responsible for actions of their agents have been advised to ensure that the agents hired for recovery of dues should strictly follow the guidelines and instructions issued by RBI, including the Banking Codes and Standards Board of India.

He added, banks engaging recovery agents have been instructed to do a periodical review of the mechanism to learn from the experience to bring improvement in the mechanism.

As per the Banking Ombudsman Scheme, 2006 as amended in 2009, the Ombudsman has the power to award compensation up to Rs 1 lakh to those harassed by the agents.

In a reply of another question, Mukherjee said the Khandelwal Committee in its report has said that if public sector banks have to truly make its position strong in a competitive environment, wages have to be set in co-relation with the performance of staff and profitability of banks.
The committee (headed by former chairman of Bank of Baroda A K Khandelwal) had recommended that PSBs (public sector banks) might be given freedom to negotiate wages and service conditions to create a better fit between compensation and performance.

ICICI Bank, Harley Davidson sign agreement to provide finance for bikes

An agreement has been signed between ICICI Bank and iconic US cult bike maker Harley-Davidson to provide finance facilities to its prospective customers.

The bike making company has opened outlets at Hyderabad and Chandigarh and will be opening three more outlets this fiscal. The company sources said next year it will be opening its outlets at four more places, including Chennai and Kolkata.

Harley-Davidson MD Anoop Prakash told reporters here today on the sidelines of opening its outlet in Chandigarh, "We have made an arrangement with ICICI Bank for making available finance to buyers for our bikes."

In India Harley-Davidson has launched 12 models priced between Rs 6.90 lakh and Rs 35 lakh per bike.

Regarding expansion of branches in India, he told next year company will be opening its outlets in Chennai, Kolkata, Gujarat and Kerala next year. Currently company has opened outlets in Hyderabad and Chandigarh. "Three more outlets will be opened in Delhi, Mumbai and Bangalore in this fiscal."

Up till now the company has not set any target about how many bikes it will be selling in the country. He added, "We have not set any target in terms of sales in the country because this segment exceeding 800 CC and above is very new to the country and we will have to see how the volumes grow."

Regarding the size of market for these high-powered bikes, he said last year, the company sold 700 units in the country and it is growing in double digits.

ICICI bank to get control RRBs branches sponsored by BoR

ICICI Bank, India's largest private sector bank will gain more from merger of the Bank of Rajasthan. Apart from getting hold of 468 branches, it will also get control of 58 branches of a regional rural bank sponsored by BoR.

The regional rural bank (RRB) sponsored by BoR is Mewar Aanchalik Gramin Bank (MAGB). The RRB was set up in 1983 and has branches spread across three districts — Udaipur, Rajsamand and Pratapgarh in Rajasthan.

ICICI Bank as the new sponsor of MAGB will be able to step into BoR’s shoes as all other things get equal.

But ICICI Bank's ‘foreign-owned, Indian-controlled' tag might create problem in carrying out a change in sponsorship of MAGB. The bank might have to face the legislative hurdles as RRBs were established under the provision of an Ordinance promulgated on September 26, 1975, and the RRB Act, 1976.

Except MAGB, J&K Gramin Bank (sponsor: J&K Bank Ltd) and Kshetriya Kisan Gramin Bank (sponsor: UP State Co-op Bank), all other RRBs are sponsored by public sector banks/ associate banks of State Bank of India. In India there are 83 RRBs.

In RRBs there is a joint owner ship of Government of India, the State Government concerned and the sponsor bank with the issued capital being shared in the proportion of 50 per cent, 15 per cent and 30 per cent, respectively. The RRBs were set up to ensure sufficient institutional credit for agriculture and other rural sectors.

After merger with BoR, ICICI bank will be the new sponsor of MAGB. According to Mr Pramod Kumar Sharma, General Secretary, All-India BoR Officers Association, but the doubtful point is whether the Government and the Reserve Bank of India will allow a ‘foreign-owned, Indian-controlled' bank to become the sponsor of a RRB. However there is no robust between the working culture of ICICI Bank with either BoR or MAGB, said Mr Sharma.

On the other hand the United Forum of BoR Unions has written a letter to the Reserve Bank of India and has asked it to intervene to stop the merger of BoR with ICICI Bank on grounds of violation of established norms of corporate governance.

The forum pointed out that the dominant shareholder group (the Tayal Group) and allied entities proposed the merger of BoR with ICICI Bank in a secret manner on May 18 through a swap (25 equity shares of ICICI Bank for 118 equity shares of BoR) while they have been disqualified by SEBI through an interim ex-parte order (issued on March 8) from dealing in the market with immediate effect.

Meanwhile Mr Vishwas Utagi, General Secretary, All-India Bank Employees Association has demanded for an investigation into insider trading in BoR shares by SEBI. He has maintained that the merger deal between two banks was finalized in the early hours (0430 hrs) of May 18, but the same was not disclosed until 5 p.m. to the three stock exchanges — Jaipur Stock Exchange, Bombay Stock Exchange and National Stock Exchange — on which BoR is listed.

Also, according to RBI guidelines, private sector banks have to make sure that the decision on merger must get the approval by two-thirds majority of the total board members and not those present alone.

An association representative said, on May 18, out of the total 15 directors on the BoR board, 12 members attended the board meeting. From those 12, seven directors voted in favor of the merger, five abstained from voting.

ICICI Bank to increase its presence in rural and semi-urban areas

ICICI Bank, country’s largest private sector lender will be increasing its presence in rural and semi-urban areas.

Managing director and CEO Chanda Kochhar said in the bank’s annual report, “As we focus on enhancing our capabilities to serve our corporate and retail customers across India’s towns and cities, it is also our endeavor to proactively reach out to rural India and to the vast numbers of our people who do not have access to formal financial services.”

Bank is using its branch network for the distribution of most of its loans, rather than direct sales agents. By the end of March 2010 bank’s direct agriculture advances accounted to Rs 17,329 crore. The gross non-performing assets of agriculture and allied services accounted to 5.62 per cent of advances of this sector.

Last year bank expanded its branch network by adding more than 500 branches and now it has around 2000 branches.

It is expected that bank’s proposed merger with Bank of Rajasthan (BoR) is going to boost its plans to increase focus on rural and semi-urban areas. BoR has a total of 463 branches out of which 46 per cent are located in rural and semi-urban areas.

Earlier in 2005-06, ICICI Bank had increased its focus on rural areas. Although, it suffered heavy losses on this front and due to this it had to stop its rural ventures for sometime. In 2006, the bank was cheated of Rs 200 crore at the central and state government warehouses in Kolhaput district in these warehouses it had not engaged third-party collateral managers. In 2006-07, ICICI Bank had kept a provision of Rs 93 crore to cover losses from frauds related to the warehouse receipt-based financing for agricultural products.

Due to this bank shrink its rural loan book by 50 per cent to Rs 10,000 crore at the end of September 2007. By the end of March 2007 its rural loan book amounted to Rs 20,000 crore.

To fulfill its rural market requirement bank commenced several initiatives which included offering credit through micro-finance institutions, micro-insurance and micro-investment products. It is giving financial support in the rural market, including farmers, traders, commission agents, small processors and other medium- and large agri-corporates. As of March 31, 2010 bank had around four million micro-finance borrowers with an outstanding portfolio of Rs. 3,179 crore.

ICICI –BoR merger will have to get approval from govt

ICICI Bank Ltd and Bank of Rajasthan Ltd (BoR) merger will have to pass through a new regulatory hurdle, said a senior official in the industry ministry.

Generally, mergers in the banking industry can proceed once they are appoved by the RBI. But in this case, approval from the Government is also required as the controversy ove the foreign nature of ICICI Bank is still persistant.

“The merger needs the approval of the FIPB (Foreign Investment Promotion Board) under Press Note 3,” an anonymous official of the department of industrial policy and promotion, told Mint, which is responsible for formulating foreign investment policy.

As per the Press Note 3 of 2009 series, in case the ownership of an existing Indian company is transferred to a non-resident entity, as a consequence of transfer of shares to non-resident entities through amalgamation, merger or acquisition will have to take approval from FIPB.

According the new rules private sector lenders ICICI Bank and HDFC Bank Ltd have been defined as foreign-owned as more than half their equity is owned by foreign entities, including foreign institutional investors, who have no board presence or say in company policy.

According to the press note, this regulation is applicable in sectors which have foreign direct investment (FDI) caps, such as defence production, private sector banking, broadcasting, commodity exchanges, insurance, print media, telecommunications and satellites, according to the press note

Thus any foreign company trying to takeover a local company requires taking the prior approval of FIPB.

This week the two banks had signed a deal that has got a cold reception from investors and analysts.

According to an anonymous analyst working with a consulting firm, said either of the banks need to approach FIPB for approval. “It does not matter which bank approaches FIPB. One entity can also approach FIPB on behalf of the other,” he said.

As per the new regulations, ICICI Bank, with another six banks, has become a foreign-owned lender as overseas entities hold more than 50% of the company’s stake. As on March 31 the shareholding of foreign institutional investors in ICICI Bank stood at 65.30%.

RBI said the new norms will create a new set of banks that are “owned by foreigners, but controlled by Indians”, thus creating a regulatory challenge for the central bank.

On the other hand, commerce and industry minister Anand Sharma had recently said that no change in the new FDI regulation was needed as it was working just fine.

Banks offering lucrative schemes to card holder to recover dues

Banks are facing problem in recovering credit card dues. Last year due to economic crisis and regression in jobs there has been sharp increase in bad assets linked to them due to this many banks will be flushing out credit cards from the market, instead increase debit card count.

Thus most of the major banks including ICICI Bank and Citibank are cutting down their credit card exposure and are offering lucrative schemes to card holders. But banks are not publicizing these schemes as it might increase the risk of defaults from other card users who are regular with the payments and opt for these easier settlement options.

So, if you have large outstanding on credit cards and paying the usual high interest on the same, you can avail this opportunity to convert credit card loan to a lower interest bank loan on a long tenure.

An anonymous senior ICICI Bank official told, “There are various structured payment plans that we’ve been offering. These limited schemes are worked out in consultation with the customer as an alternative repayment plan.” The reporter of ET emailed a query with this regard but did not get any reply from the bank. However banks are offering different-different schemes.

In case you have an outstanding loan of around Rs 2 lakh on credit card and have been paying high interest of 18%, now is the chance to convert it into a regular loan, which you can pay over a period of three years, and the interest rate will be as low as 12%. Citibank, Sandeep Bhalla, a business manager cards, said, “We have a retention-oriented, assistance-based collections process, and if there is a genuine inability to pay, we work closely with customers to offer repayment solutions based on his or her cash-flows.”

There are around 2.5 million Citibank card holders. A CIBIL spokesperson told that when a bank sends a report of restructured loan it is displayed in CIBIL records as it is and also reflects in the same manner in the credit report.

Banks refused to disclose their bad loans, but they are moving very cautiously.

By the end of October 2009 there has been sharp decline of 21% to 21.1 million in a credit card base from 26.7 million a year ago. The decline was also seen in the credit card outstanding, by 12.13% to Rs 5,660 crore at the end of October 2009, from 6,442 crore a year ago.

According to Venture Infotek study all banks are reducing their credit card business. ICICI bank the largest credit card issuer has cut down the number of card holders from 9 million in 2008 to 7 million in 2009.

ICICI Bank to do aggressive lending in the car, truck loans segment

ICICI Bank, India’s second-largest lender two years ago had stopped giving auto loans due to rise in defaults but now it is planning to do aggressive lending in the car and truck loans segment. This time bank will not give loans through sales agent in favor of auto dealers. Bank is targeting car and truck dealers with an aim to revive auto loans, although it is going cautioned on financing two-wheelers. Recently a pan-India meet of over 180 car dealers was organized by the bank to discuss this issue.

A senior auto industry executive of ICICI bank said, “ICICI Bank will lend much more now that will bring incremental growth to the passenger-car industry.” Previously, three years ago ICICI Bank used to be the biggest lender of auto loans. But increase in the defaults from borrowers and liquidity crisis in the economy compelled the bank to stop the auto loan. Thus in late 2007 and early 2008 car sales dropped significantly as the private banks scaled down their auto finance segments and also the rate of interest was very high on these loans.

But from past few months ICICI Bank has started showing interest in auto loans segment. The change in bank standpoint has come after the increase in the demand in the car market, in the past one year the passenger car sales has grown at 16.2% to 10.52 lakh units between April and October, 2009 over the year-ago period. ICICI Bank spokesperson refused to share any information on the new strategy or reveal any details of loans dispersal when ET reported contacted. An executive related to auto finance industry told in the current fiscal, ICICI Bank has doubled the amount allotted for the auto loan disbursement; it has been increased over Rs 1,500 crore, as against the year ended March 2009.

The auto finance market anticipated to be Rs 40,000 crore a year, in the past few months has gone through major changes. The main reason for decline in market share of private banks is the virtual exit of ICICI Bank from key market and on the other hand government-owned banks adopted aggressive lending strategy, they offered cheaper loans at interest rates less than 10%. According to sources in the banking industry ICICI Bank will remain the largest player in auto finance because of its huge disbursements in the past even though other banks such as SBI, PNB, Canara Bank and Bank of Baroda, in the recent years have overtaken it in terms of new auto loans.

Banks September quarter net profits stand up to 20.2%, look for more margins

In the September quarter most of the banks did not have any substantial gain from core business but have made good amount of treasury and other income.

According to September quarter results declared by 37 banks – in line with analyst guess, the aggregate net profit stood up to 20.2%.

The net profit grew mainly because of other income plunged 44% year on year, with government bonds prices moving up.

While calculating the net profit banks are allowed to include notional gains on investments such as income earned on bonds to 'other income', this process is known as marking to market. The line is reversed when bonds prices fall.

On the other hand the net interest income (NII), or the difference between interest earned and interest paid, the core business income for banks increased to 7.9% year on year basis in comparison to last year 38% jump during the same period.

However that is over the June quarter, NII rose to 8.4%, mainly because of improvement in loan disbursements.

Amongst the banks the State Bank of India, India's largest by market capitalization, has reported a 10.2% jump in net profit, while its NII grew by just 2.81% on year-on-year basis.

ICICI Bank, the second largest bank net profit was insignificant up to 2.56% due to lower non-interest income. While its NII declined by 5.2%, as bank disbursed 14% less loans in the quarter.

Fewer loans were disbursed as ICICI had adopted the strategy to reduce exposure to the so-called "unsecured" retail loans and instead focused on corporate lending.

"Bank earnings have been a mixed bag. Several banks have shown an increase in treasury profits leading to improved bottom lines," said Vaibhav Agrawal, senior analyst-banking at Angel Broking.

Banks which benefited the most from a rise in other income include Central Bank of India (other income up 332.4%), Allahabad Bank (208.5%) and Canara Bank (163.6%).

Suresh Ganapathy, analyst with Deutsche Bank said the net profit results of some public sector banks haven't been up to mark.

"Higher treasury profits and lower provisioning has helped them to achieve higher net profit," he said.

Few of the banks which made profit as their core business did well include IDBI Bank (core income up 106.2%), IndusInd Bank (98.2%), Vijaya Bank (35.53%), South Indian Bank (31.27%) and Axis Bank (25.86%).

But one area which remains of concern is asset quality.

"A lot of the loan growth can be attributed to liquidity, which is not a healthy trend," according to an analyst with the domestic brokerage, not wishing to be named.

Thus net non-performing assets or bad loans of 37 banks are up by 25% on a year on year basis.

On a chronological basis, or over the June quarter, bad loans have increased by 1.12%.
"Asset quality declined at some public sector entities such as Bank of India," said Aggrawal.

The banks faced loss due to default in repayments on some retail loans and on loans to real estate and export-oriented sectors.

But the companies were able to moderate the debt burden through equity-based fund-raised by corporates in the quarter.

Praveen Sood, CFO of Hindustan Construction Company stated many realtors paid their debts through QIP proceeds. "A lot of liquidity was also made available through various other measures so that also helped," Sood said. HCC's current debt estimates to Rs 2,200 crore. Furthermore, analysts are expecting improvement in interest income and margins if credit offtake picks up. But it will all depend on the Reserve Bank of India's (RBI) new directive, which can impact profitability.

The central bank told banks must achieve at least 70% provision coverage by September next year for their bad loans.

According to analysts this will strike net profit by 3% to 4% on a back-of-the-envelope basis as all banks combined will have to provide for around of Rs 1,2000 crore to meet coverage ratio.

The central bank will be issuing more detailed guidelines on this. "It would be premature to take this into consideration right now, therefore," said Ganapathy.

According to Aggarwal the earnings growth in the third quarter, is not going to be much strong.

He observes credit growth in the 15-17% range. Ganapathy concurs. "Margins will improve going forward on account of re-pricing of bulk deposits in the coming two quarters, which will reduce cost of funds," Ganapathy said. He is expecting Bank of Baroda, PNB and HDFC to perform much better over the next one year.

ICICI Bank decides to slash auto loans by 50 basis points ahead the festival season

ICICI Bank the largest private sector bank has decided to slash its auto loan rates by 50 basis points to 10.5-11 per cent, before the festival season. The bank is taking this measure in line with its target of growing its retail book.

A senior ICICI Bank official pointed out, “The reduction in rate would be announced in a day or two; the team is still working out the finer details”.

Currently the bank has set auto loans at 11-11.5 per cent. Previously at its peak, the auto loans were available at 12-13 per cent.

In June bank’s total auto loan portfolio accounted to Rs 25,920 crore, out of which Rs 10,000 crore is retail auto loan.

The bank has decided to focus on four-wheeler loans which will be disbursed by its branches. It will not be selling through the direct selling agent.

Over the past two years bank completely stopped giving two-wheeler loans and on four-wheeler loans it has been going slow.

Chanda Kochhar, managing director and CEO of ICICI Bank, has been claiming that now it is the right time that the bank can revert its well rounded growth in portfolios as there has been increase in the domestic demand and retail customers have also started spending.

In her speech at the MSME (micro and small and medium enterprises) conclave, Kochhar said until January the demand for retail products had dropped especially home loans, the decline was of 50 per cent. She added, “But from January, I clearly see a 50 per cent rise in demand. So we are focusing on all segments in line with the revival in demand. MSME will continue to be a focus area for the bank as the segment contributes 40 per cent of the country’s industrial production and forms 35 per cent of the total exports”.

ICICI is open for domestic takeover than going for overseas buy: Kochhar

After missing a chance of global acquisition in 2008, on Sunday ICICI Bank said it is ready for domestic takeover as it is better to go for takeover in India in the current environment rather than going for overseas buy.

ICICI Bank CEO and managing director Chanda Kochhar speaking about acquisition prospects this year and the elusive search for a property last year said, “I am always open... but the question will always be in terms of what is available and at what value, and then you weigh the option”.

Emphasizing that the bank with over 17 per cent capital adequacy ratio is the best capitalized unit in the world, thus she said, “So, clearly, what I would say, we are definitely growing in India, when one talks of aggression. Again, in a way to put that in context, we are definitely a growth organization and the growth DNA continues.”

Urging further on the bank’s willingness for acquisition at the right value offer, she clarified, “But that doesn’t mean that anything is on the cards. If you write it that way, investors will think I am acquiring something. I am always open.”

She gave a positive reply to a question whether acquisition within India made more sense than one overseas.

Ms Kochhar informed in March bank had formed a “strategic committee” in March 2008 for exploring an acquisition. “When the committee was formed, what we were planning frankly at that time (was) on the international side.” In response to whether bank is still opened to acquire global property, Ms Kochhar said, “(We are) clearly not looking for any international acquisition because in the current scenario the risk on the international portfolio are still unknown.”

She informed, “As of now, we are neither growing out presence in the international market from where we are because we are already present in 18 countries. We have substantial number of branches so we don’t see requirement to grow (in overseas markets)”.

Earlier the strategy committee which was formed for acquisitions last year was dispersed, as the planned purchase did not took place. Moreover, Ms Kochhar said, “Our focus is to grow as the Indian corporate grows here, and even international focus was always to grow with international requirements of the Indian corporate.”

Now the concern is, she said, “Is whether you grow organically or inorganically. Well, we have capacity to set up 580 branches in one year. So, obviously one then weighs what is the cost of acquiring a bank of similar size or is it more economical to do it internally.”

Small banks witness increase in transactions after open ATM rule

Since the launch of free cash withdrawal facility from automated teller machines (ATMs) the small banks are getting large number of customers of larger banks. Previously the banks were charging customers for cash withdrawals and balance enquiry at third-party ATM but from April 1 as per RBI norms the charges cannot be passed on to the customers.

Now the customers are using small banks ATM located near to their place due to which the big banks such as ICICI bank and SBI paying more interchange fee to other banks for using their ATMs.

Therefore big banks such as ICICI Bank country’s largest private sector player is paying a monthly outgo of Rs 4-5 crore as the payment of interchange fee to other banks. Even the State Bank of India (SBI) country’s largest public sector bank is getting equal number of other banks’ customers using its ATMs as the number of its customers using other banks’ machines. R P Sinha the deputy managing director for information technology said, “The total number of transactions at our ATMs have gone up by more than 100 per cent since April 1. However, our customers are also using other ATMs, depending on convenience”.

The banks have to pay interchange fee of Rs 18-20 per transaction when a banks’ customer uses the ATM of another bank.

On the other hand the number of customers has increased in case of smaller players. Dhanalakshmi Bank sources have informed there has been increase in transactions by 50%, is largely of the customers from other banks.

According to bank’s Managing Director and CEO Amitabh Chaturvedi, “Often, ATMs of large banks have long queues outside them and if our ATM is just next door, there is a spillover into our ATMs”.

YES Bank a new generation bank is having 216 ATMs, has not witnessed much increase but its country-head for cash management and direct banking pointed out there has been a major increase in the number of transactions and positive inflows from interchange fees. T S Jagadeesan, General Manager, Planning informed, “We had apprehensions about the (free ATM use) rule, since we have a significant number of no-frills account-holders, who have no minimum balance requirement. However, so far we have seen positive interchange flows”.

While the big banks having large networks of ATM such as Axis Bank are getting positive cash flow from the ATM. Aspy Engineer, Senior Vice-President of Alternate Channels pointed out, “Since April, both the number of interchange transactions we have acquired and cases where our customers have gone to other ATMs have gone up by 100 per cent. However, we were a net acquirer even before the rule came into force and so are interchange revenue flows are positive”.

Big companies try to revive zero interest consumer loan market

The big banks like CitiFinancial, ICICI Bank and GE Money have complete stopped giving loans for consumer goods since then zero interest loans have become a thing of the past. But now the major consumer durable companies are trying to revive back the concept of zero interest consumer loans in order to attract more customers. According to the report printed in Financial Chronicle companies like Samsung, Videocon and LG on their own trying to bring it back. For this these companies have signed agreements with non-banking finance companies to offer easy loans to consumers.

Amit Gupta Vice President-Sales, Videocon, said, "About 10 percent of the company's sales depended on easy consumer loans with tenures ranging from 11-18 months." By and large, the companies will bear the interest amount, which will pay the financiers at a rate of nearly five percent.

The industry sources say, Bajaj Finance and Shriram Finance have just now entered the easy loans market and trying to take hold of the opportunity. Previously the major financial institutions have suffered losses therefore decided to focus less on the segment of consumer loans.

Private bank might not be included in purview of the new FDI guidelines

Government directing towards RBI’s concern on the change of their status from 'resident' to 'foreign' if the norms are implemented there is possibility that private sector banks like ICICI bank, HDFC bank and Vysya Bank might not be included in the purview of the new FDI guidelines.

An official stated "There is a probability that we will exempt these banks from the guidelines on the lines of the exemptions in the insurance sector".

In February the of Industrial Policy and Promotion, through a string of 'Press notes' made changes in the FDI guidelines after which many private sector banks found that their status will get changed from ‘resident’ to ‘non-resident’.

There will be change in status because the total FDI will take into consideration the stakes held by Non-Resident Indians, American and global depository receipts, foreign currency convertible bonds and convertible preference shares.

Thus RBI raised the issue with the Finance Ministry and DIPP, in which it pointed out that as per the revised policy, foreign investment in all these banks will go beyond 50% in the new policy regime therefore they will be treated as non-resident entities.