Aggressive banks caught up in festive spirit
The festive season brings with it all sorts of attractive offers for consumers. Banks, not ones to be left behind, have come out with their own offerings, much to the pleasure of the consumers. Almost all leading banks have slashed interest rates on home and auto loans, in a bid to capture the likely demand during the festive season. SBI started the price war in the car loan segment in late June when it slashed rates to 8% for the first year and 10% for the next two years. Axis Bank recently upped the ante by slashing loan rates by 150-200 basis points to 8.5% on loans taken between October1 and December31. Following this, Kotak Mahindra Bank and HDFC Bank also cut rates by around 50 basis points. IDBI Bank has also recently cut its new home and auto loan rates by 25 to 50 basis points. As part of its festive offer, it will charge 8.5% for loans taken between October1 and December31.
 
The competition is heating up in the home loan segment too. SBI took the lead in August when it announced that loans up to Rs5 lakh would be offered at a fixed rate of 8% for five years. It also offered to charge 8% for the first year on loans up to Rs 50 lakh and cap them at 8.5% in the second and third years. IDBI Bank has also slashed home loan floating rates by 25-50 basis points. Under the new scheme, rates for home loans up to Rs 30 lakh will be 8.75% as against the existing 9%. Bank of India, ICICI Bank and Union Bank have come out with their own versions of sweet deals.
 
While consumers are rubbing their hands in glee, banks may have to bear the burden of reduced margins. For, while interest rates on advances have been revised downwards, the cost of funds for banks is not letting up at the same pace. Adding to this are the overheads and loan delinquencies which further erode banks’ profitability. Already, several banks are reeling under squeezed margins. The reported NIMs for banks like SBI, Bank of Baroda and Union Bank in the June quarter were as low as 2.3%-2.4%. Chanda Kochhar, MD and CEO, ICICI Bank believes that such irrational pricing doesn’t make economic sense. Speaking to Moneylife, she said, “I hope that as the credit demand picks up, this irrational pricing should disappear. Today people are doing irrational pricing as there is excess liquidity. NBFCs too were contributing to irrational pricing. For them too the cost of funds would go up. We are clear at what point it makes economic sense to do business.”
 
This raises questions regarding the sustainability of low loan rates in the near future. While the downward revision may work well for banks in the short-term, they will eventually feel the pinch of high cost of funds.
Sanket Dhanorkar [email protected]
 

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Osian Art Fund disappoints investors with just 5% returns
Osian Art Fund, which was announced as the world’s first art fund in 2006 promising great returns, made a quiet exit in August 2009, disappointing its investors with returns as low as 5% per annum for the past three years.
 
Osian's-Connoisseurs of Art Private Ltd, a leading archive and auction house, had announced the art fund in July 2006. The art fund was a close-ended scheme for a period of thirty- six months. Though the Fund was expected to initiate more art funds all over the world, it exited with low returns in August 2009.
 
The 5% annual returns return translates into Rs115 on Rs100 invested in art through the Fund in 2006. In contrast, the BSE Sensex was above 10,000 when the art fund was launched and it’s flirting with 17,000 today, a rally of 70%.
 
“In retrospect the fund entered at the peak of the art market and is exiting at the bottom of the market. This was not good timing. However, it is easy to say this now on hindsight, no one expected poor performance in  2006,” said a company official from Osian.
 
The art fund matured in August 2009, and the company is in process of distributing the return to its investors. The purchase price per unit was Rs100 and the minimum investment was supposed to be Rs10 lakh. The project was started to create an asset class for Indian cultural artefacts over a period of thirty- six months
- Amritha Pillay [email protected]
 
 

 

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Softcell partners with Seclore for digital rights management
Software licensing, infrastructure solutions and application development provider Softcell Technologies Ltd has said that it has signed an agreement with Seclore Technology Pvt Ltd to provide digital rights management to its customers.
 
Selcore Technologies, which was incubated and promoted by IIT Bombay, said in a release that the alliance will help the company to strengthen its market presence with Softcell's sales and delivery force.
 
"We do feel that digital rights management of documents is a very critical security issue and most companies in India would like to have some kind of solution in this area. The challenge so far has been to implement a solution that is truly cross platform, and which can do the job without being unduly intrusive," said Peter Theobald, senior vice-president for enterprises sales, Softcell Technologies.
 
"We do feel that Seclore has struck the right balance between feature set requirements, security and usability, and we look forward to working closely with the Seclore team to help our customers secure their sensitive documents,” Theobald added.
 

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