RBI Strictures on Home Loans

The Reserve Bank of India (RBI), concerned over excessive flow of banking funds to the real estate sector, ruled that lenders will provide loans only up to 80 per cent of the cost of property. Following the RBI directive, a homebuyer will necessarily have to arrange at least 20 per cent of the property value on his own before seeking a loan from a bank. With a view to check speculation in the real estate sector, the apex bank has made it tougher for banks to provide high value loans for properties costing more than Rs 75 lakh, besides raising the provision requirement for loans provided at ‘teaser rates’. “In order to prevent excessive leveraging, the LTV (Loan to Value) ratio in respect of housing loan hereafter should not exceed 80 per cent,” the RBI said in a notification. However, in case of small value housing loans up to Rs 20 lakh, banks can provide loans up to 90 per cent of the property value, the RBI stated, adding that such loans are part of priority sector advances. In absence of any LTV norms, banks have been providing liberal loans for buying homes, going up to 90 per cent of the asset value. In order to curb the practice of attracting homebuyers by offering cheaper rates for limited period, RBI raised the provisioning requirement for banks for teaser rates from 0.4 per cent to 2 per cent with immediate effect. Under the revised norms, the banks will have to set aside more capital as provision against home loans given at teaser rates. Some banks including ICICI Bank, HDFC, etc. have already withdrawn their teaser rates scheme while SBI’s scheme would continue till this month. The announcement follows the concerns expressed by RBI Governor D Subbarao in his half-year review of the monetary policy in October. The decision, the RBI said, is aimed at “preventing excessive speculation in the high value housing segment”. The RBI measures would dissuade banks from providing advances that fuels speculative activity in the real estate sector. As regards the high value properties, the RBI stated, the risk weight for housing loans above Rs 75 lakh would be 125 per cent. Risk weight refers to the capital, which the banks have to set aside against outstanding loans to meet the capital adequacy norms. Currently, as per the Basel-II norms, banks have to maintain a capital adequacy of 9 per cent. For high value home loans the banks will now be required to set high aside more capital to meet the capital adequacy norms prescribed by the RBI. These measures by the RBI are bound to keep investments in the real estate sector safer and bring about some much needed stability in the financial market.

                                  Source:- Indiapropertis

Hans Rosling: Asia's rise -- how and when

Hans Rosling was a young guest student in India when he first realized that Asia had all the capacities to reclaim its place as the world's dominant economic force. At TEDIndia, he graphs global economic growth since 1858 and predicts the exact date that India and China will outstrip the US.

Watch it over here.....

Hans Rosling: Asia's rise -- how and when

"Hans Rosling: Asia's rise -- how and when"

Now draw cash from kirana store

MUMBAI: Withdrawing cash from the neighbourhood kirana store has finally become a reality. ICICI Bank and ICICI Merchant Services—a company majority owned by US First Data Corporation—have started enabling cash withdrawal facilities among merchants that have their credit card swipe machines. 

Banks would need to make some minor changes in their systems to enable their debit card holders withdraw cash. ICICI Bank has already made these changes and its debit cardholders can start withdrawing cash from merchants who have been enrolled for cash withdrawals. 

The withdrawals will be subject to a daily limit of Rs 1,000 and will attract a charge of Rs 10 for every transaction. A portion of the charge will be shared between the banks and the merchant who pays out the cash. At present, only a handful of merchants have been enrolled into the scheme but the number is expect to grow sharply in coming months. 

“All of our 1.5 lakh merchants can become part of this. In future this cash-at-POS model could be used to drive other services like government annuity payment or remittance services ,” said Amrish Rau, country manager, First Data. “It will really pick up in areas where ATMs have not proliferated . Also, Reserve Bank of India guidelines allow merchants to act as business correspondents of banks and this could be used to promote financial inclusion,” he added. 

The facility is not intended to replace ATMs but to make available new channels closer to the customer. As against 75,000 ATMs in India, there are over 5 lakh point-of-sale terminals. This number is expected to double in a few years because of new entrants in the business. 

Source:- The Economics Times

              19 JAN, 2011

Global project finance market up 54%

LONDON: The global project finance market , which finances energy and infrastructure projects, jumped 54% in 2010 to $228 billion according to research published today by Thomson Reuters and its Project Finance International (PFI) publication. 

The Indian market, financed mainly by local banks, leapt from $30 billion to $55 bilion. Activity by the multilateral agencies supporting projects in the emerging markets increased from $20.5 billion to $27 billion while the global bond market recovered from its 2009 low by doubling in volume to $20 billion. 

Such is the growth in the Indian market, the local banks will now need assistance in financing schemes going forward. The Reserve Bank of India (RBI) is looking at reforming guidelines on refinancing infrastructure schemes with international debt, according to a report in today's PFI. International banks and multilateral agencies are now starting to fund Indian projects. 

Loan volumes in the Americas rose $5 billion to $25.5 billion but both the US and Canada saw big jumps in bond issuance. Loan volumes in the Europe, Middle East & Africa (EMEA) region rose $20 billion to $84 billion and in Asia they rose to $100 billion - aided by India and a big one-off deal in Taiwan. 

The number of advisory mandates won, which show the pipelines of going forward fell to 411 from 488. There was a big drop EMEA where the problems associated with the private finance initiative (PFI) in the UK came home to roost. UK PFI volumes fell to 2 billion pounds from a peak of 8.2 billion pounds as the new government cut back the PFI. However European PFI volumes rose to 11.2 billion euros - although this market could be impacted by austerity programmes going forward. 

SBI Capital , Bank of Taiwan and IDBI topped the global loan arranging table while RBS topped the global bond tables. PWC topped the global advisory deals closed table closely followed by RBC and Macquarie. The leading multilateral agencies came from Germany, Japan, China and South Korea.

Source:Economic Times

Indian students offer micro-loans to rickshaw pullers

NEW DELHI, Jan When students at Delhi University's College of Commerce saw rickshaw pullers being beaten near campus, they didn't call a police officer. They called a bank.

Calling the police would have been pointless, said Ajay, a rickshaw puller from the eastern state of Bihar, India, who asked that his last name not be used. The abusers in question are contractors from whom pullers rent their vehicles each day.

“I have been beaten several times by my rickshaw owner behind closed doors as I was not able to pay him his daily rent of 40 rupees (88 cents),” Ajay said. But "we cannot protest against it ... as we depend on the rickshaws provided by them for our livelihood."

Instead, the students joined with a local bank and created a micro-loan program, Life on Wheels. The loans enable pullers to buy their own vehicles and escape the exploitative rental system, said Abhay Kumar, a faculty adviser of the student group, Students in Free Enterprise. The group is an international non-governmental organization that mobilizes university students in developing the community.

“We took it upon ourselves to rescue them from such torture," Kumar said.

The program helps pullers acquire loans to buy their own rickshaws, which would be challenging otherwise. Most rickshaw pullers leave rural regions to work in large Indian cities then send their hard-earned savings home.

“We have tied up with Punjab National Bank for providing loans to the pullers. SRCC stands as guarantor for them,” Kumar said.

Pullers are loaned about $230, which they must pay back at a rate of about $5.50 per week. With regular payments, they can call a rickshaw their own within 12 months, according to Mehak Nanner, the student group president. The loans also cover the cost of insurance, licenses, and two sets of uniforms.

The new rickshaws are an upgrade from those the pullers usually rent. They have amenities for passengers, such as dust bins, water bottles, newspaper stands and cushioned seats.

“At present there are 42 such rickshaws plying on the roads of Delhi University north campus,” Nanner said.

Students launched their first five rickshaws in December 2009 with the support of Delhi Chief Minister Shiela Dikshit, said Radhika Goel, the student group's 2009 president.

“It was a proud moment for us as Ms. Dikshit praised the efforts of the youth and encouraged us more,” Goel said.

The group had expected to launch 75 of the new rickshaws before the Commonwealth Games in October 2010 but a ban on rickshaws during the event hindered progress, Nanner said.

Now, the plan is back on track with another 60 rickshaws expected to hit the roads in the next few months, she said.

It’s an initiative that has given a new lease on life to the rickshaw pullers.

“I will finally own a rickshaw of my own,” said Sapan, a puller who also asked that his last name not be used, as he gazed at his new vehicle.

Santosh Sharma, who is at the top of the list to receive one of the new rickshaws, said he is ecstatic.

“This rickshaw will provide me with a particular status within the rickshaw community,” he said.

Kumar said that not all pullers qualify for the program.

“Some criteria have been set for the pullers who would like to own [the] rickshaws,” he said, such as having government-issued identity cards.

Puller Gautam Singh said that while he’s excited about the new opportunity, he regrets the 15 years that he spent pulling a rented rickshaw.

“I was a slave in the hands of my master,” he said. “The amount of rent that I have paid to my owner to date would have easily fetched me around 35 to 40 rickshaws."

Singh, however, is more focused on the present upside of the new rickshaw program than any possible negatives. Taking a firm grip on his new black rickshaw, he offers his passenger a newspaper to read for his short journey and moves smoothly out into traffic.

Source: UPI.COM

Big not necessarily safe in banking: RBI

MUMBAI: The Reserve Bank of India has changed its stance on bank consolidation arguing that advantages of scale have been diluted after the global financial crisis. The comment was made by RBI deputy governor Subir Gokarn in the context of increasing depth of banking services in the country. 

Speaking at a seminar on infrastructure finance organized by the Federation of Indian Chambers of Commerce and Industry (Ficci), Gokarn said, "There is some debate that has not been resolved as to what the right size of a bank should be. I am sure that it is a function of a lot of variables, but at the end of the day the unambiguous argument in favour of size has beendiluted somewhat by the experience of the crisis, rightly or wrongly so." 

The deputy governor said that RBI has been exploring the issue of new licences of late and clearly felt a need to build new capacity in the banking system. "You could argue that new capacity does not necessarily mean new institutions and new capacity could be created by existing players as well, and the point about banks being relatively small has been raised. I think there are two sides to this issue. Yes, there are benefits of economies of scale and the ability of banks to deliver services more efficiently as they grow in size. But as we have started to emphasize in the wake of the crisis that large banks are not necessarily safe banks and the larger they get the more of a risk they pose to the system." 

In his presentation, Gokaran highlighted the benefits of competition in other sectors and said that there was no reason why similar benefits should not accrue to the banking industry

Source: Times of India