Companies & Sectors
Banking: Credit & asset quality key growth drivers in FY12, says recent survey

Growth from credit growth is expected to moderate, due to the lower GDP growth projection; Net Interest Income expected to come down, but profitability is expected to remain at a healthy 18.5% on a year-on-year basis

According to a report released today by ICICI Securities, the banking industry as a whole will be able to shake off the (one-off) provision for retirement benefits and burden of the transition to system-based NPAs (Non-performing Assets) in FY11. The study also states that credit growth is expected to slow down to approximately 18%-19%, on a year-on-year (y-o-y) basis. NII (Net Interest Income) for the sample covered in the study is expected to decline from approximately 39% (y-o-y) to an estimated 16% in FY12.
However, according to the study, the profitability of the universe selected is expected to remain healthy, at 23% (y-o-y). This is despite the constant hikes in monetary rates by the Reserve Bank of India. But ICICI Securities says that the tight monetary regime has laid stress on the cost of banking funds, NIMs (Net Interest Margins) and asset quality.

The study also maintains that private banks have performed better than their public-sector counterparts, and these government-owned lenders may face pressure due to high NPAs due to their exposure to various power and infrastructure projects.

The report says that on the cost front, there was a divergence between public-sector banks (PSBs) and their older government-owned counterparts. These banks (both PSBs and older government entities) had to bear the brunt of higher NPA provisioning; provision for the second pension option and gratuity enhancement with on-off provision for retired employees.

The official monetary policy has lowered GDP (Gross Domestic Product) projection from 8.5% (previous estimates) to the 7.8%-8.5% range. This revision, says the study, "makes us (ICICI Securities) believe that our earlier estimate of 20% credit growth has to be revised from 18%-19% with the RBI also setting a target of 19% for FY12."

The report adds: "In India, the credit to nominal GDP (market prices) is 50% as against over 100% for China and many other neighbouring economies." This factor, says the study, "depicts that the opportunity for growth in credit is enormous if economic growth stays high."

Personal loans (almost 50% of them are housing advances) have remained stable, at 18% of total non-food credit. The study also notes that commercial real estate and NBFC (non-banking financial companies) loans remain an "area of concern," under the services segment.


Sahara moves SC against SEBI order for refund to investors

Sahara India Real Estate Corp wants SEBI to expunge the parts of the order directing it to return money with interest to the investors as it has created a panic among the investors

New Delhi: The Supreme Court will hear on 4th July a Sahara group firm’s plea challenging a Securities and Exchange Board of India (SEBI) order directing the company to return money collected from investors through a scheme along with 15% interest, reports PTI.

A vacation bench of the apex court, comprising justices P Sathasivam and AK Patnaik, decided to hear the matter on 4th July, the first day after the vacation, after Sahara India Real Estate Corp today apprised the bench of its plea filed with the apex court registry.

The Sahara group firm sought directions to SEBI to remove the 23rd June order from its website and restrain the market regulator and its officials from publicising the order which it has challenged.

The counsel appearing for Sahara group firm said his client wants SEBI to expunge the parts of the order directing it to return money with interest to the investors as it has created a panic among the investors.

“The 99-page order (by SEBI) has created panic among the investors. They (SEBI) are holding press conferences and giving out press releases about the order,” he said.

The case will now be heard by a three-judge bench headed by Chief Justice SH Kapadia which has been hearing the case.


IDBI Federal Senior Termsurance – Guaranteed acceptance at a price

It’s an innovative, transparent product that allows entry till the age of 85 years without medical tests and covers for whole life. But be careful as the higher age groups may end up paying more premium than the sum assured within a few years 

IDBI Federal Senior Termsurance plan is a whole-life plan, which has a minimum entry age of 50 years and a maximum entry age of 85 years for a minimum sum assured of Rs2,338 and maximum sum of Rs5 lakh. The minimum yearly premium is Rs1,000 and the maximum premium is Rs2,13,890 (for individuals of 85 years for a sum assured of Rs5 lakh). The premium is obviously expensive if anyone wants to enter at old age.

The plan offers guaranteed acceptance with no medical tests. In the unforeseen event of the demise of the person insured within the first two years of the policy, 125% of the total premium paid shall be returned. After two years, the policyholder is insured for the sum assured for life. The amount of premium and cover remain the same throughout the life of the policy, except after the age of 90. At the age of 90, premiums will stop, but the life insurance cover will continue.

The premium rate for a person aged 50 years subscribing to the Senior Termsurance plan will be Rs18,195. In comparison, the premium rate for a person aged 50 for Aegon Religare Level Term Plan is Rs6,050, while that for ING Vysya Life - Term Plan is Rs7,555. So, the IDBI Federal new offering may seem steep when compared to other insurers, but it has to be remembered that this is a whole life product, whereas the maximum maturity is 75 years for existing term plans. Moreover, the premium rates for this product are fixed for specific age entry level irrespective of the medical condition, while the term plan premiums can be loaded at the time of underwriting, based on the medical condition of the person.


  •  'No questions asked' on the whole-life plan and no medical test is required for entry to the plan till 85 years of age. It will benefit to enter the plan at 50 years rather than 85 years to avail a lower premium. It is an innovative, transparent plan.
  •  At the age of 90 the premiums will stop, but the life insurance cover will continue.
  •  Strange segments that will benefit from the product are those with terminal illness, or anyone in a poor health condition who may not expect to survive beyond a couple of years. The insurer will pay 125% of the total premium to the family. This is like making 25% returns on investment for the family, any time between the start of the policy up to two years.


  •  The premium at higher ages is hefty. The premium for an 85-year-old person entering the plan will be Rs2,13,890 for a sum assured of Rs5 lakh. If the person dies after two years, the family will received Rs5 lakh, which is less than the premium paid!
  •  If the death happens within two years of taking the policy, 125% of the total premiums paid shall be returned. The sum assured will be paid only if the death is after two years of the policy. This is unlike term life insurance which pays the sum assured in the event of death, at any time, subject to verification.
  •  The maximum sum assured is only Rs5 lakh. The minimum sum assured of Rs2,338 is more about marketing on a premium of less than Rs100 per month.

 The true benefit of term life insurance is risk protection during working life. It is expected that the person would have saved enough by the time of retirement that can see him through even if the term life insurance expires. Currently, the maximum entry age is 65 years and maximum maturity is 75 years for term life insurance plans.

An innovative plan that allows entry up to the age of 85 years without medical tests and offering coverage for the whole life will come at a price. If the person has not saved enough during his working years, he may not have enough money to pay the steep premium during his old age and hence the plan is self-defeating. Nevertheless, IDBI Federal has something new to offer to customers. The new product is also transparent, as was the Retiresurance guaranteed traditional pension plan. (Read, "IDBI Federal Retiresurance - Aims to revive dwindling pension market".)



Nagesh KiniFCA

6 years ago

Sanjay - Now that you want my say-
I also don't stand telemarketing. So far no body has approached me via web site. Websites are great as they provide the info. right away.
Whether you like it or not the IDBI-Fed. is the only co that covers your mother-in- law too.Provided you pay for her cover! Take it or leave it

nagesh kini

6 years ago

Sanjay - Just because you don't like the tele-marketeers,neither do I like them; you can't run down the web sites which anyone can access with ease sitting at home. You are seeking to chop off the head to get rid of a headache!
Simply don't skip this plan - it is the only plan with which you can cover your mother-in-law too! You sought my response which you get now.


6 years ago

What I hate abt some online Insurnce websites is that they want your details so they will call u & inform you of premium etc. I just move on rather than being chased by telemarketers...
I will skip a Sr Ctizen Term plan rather than be disturbed non-stop by their telephone calls...What do you say??

Nagesh KiniFCA

6 years ago

IDBI Fortis unique senior citizen friendly initiative needs to be replicated in the general insurance health cover for a basic standard frill less product.
This ought to be supplemented in the Insurance Portability Paper as soon as possible.

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