Fresh round of loan recasts to be riskier for banks, says Barclays

‘We are concerned about the high level of loan restructuring being undertaken by the domestic banks:’ Barclays report.

The banking system is likely to face a bigger challenge from the restructured accounts in the current environment than they had faced after the global credit crunch following the sub-prime crisis during 2008-10, says a Barclays report.

"We are concerned about the high level of loan restructuring being undertaken by the domestic banks because we expect their experience with loan restructuring in the current environment to be worse than in FY09 and FY10," the research report said. As per the report, the monetary easing played a major role in easing debt burdens in the past round of debt restructuring, which is not the case in the present situation.

"Monetary easing played a major role in easing debt burdens in the past. Furthermore, borrowers were also able to recapitalise and manage their debt burden by taking on unhedged forex liabilities. These factors are unlikely to be repeated in the current round," the report notes. The report, however, points out restructuring standards in the country are not stringent.

"Restructuring standards appear lax and (to) create perverse incentives...specifically, restructuring is allowed even if the promoter 'sacrifice' is only 15 percent of the bank's sacrifice. Hence, borrowers can restructure with very little sacrifice, which we believe reduces the discipline that the threat of default normally places on the borrower," it warns.

It also says the provisioning norms are relatively low in comparison with those of other Asian economies and don't confirm to the accounting principles of conservatism.

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Business gets worse for private life insurers; MetLife bucks trend

‘The life insurance industry registered a growth in their overall first year premium collection in January this year:’ IRDA

Indicating tough times ahead for the private life insurers, first-year premium, an indicator of new business growth in the sector, dipped by 15% last month, although MetLife bucked the trend.

As per the latest data released by sector regulator IRDA, the life insurance industry registered a growth in their overall first year premium collection in January this year.

However, the private sector players continued with a downward trend and their first year premium dipped by 15% from January 2011 levels to Rs2,451.22 crore. The decline in January 2012 was worse than the previous month December 2011, when the first year premium of private life insurers dipped by 8%.

Private player MetLife, however, saw its first year premium grow 232% in January 2012 to Rs203.6 crore. Helped by its better-than-peers performance, MetLife India became the fifth largest among 23 private sector life insurers in the country in January, up from its sixth position in the previous month. It was ranked 15th in April 2011.

As per IRDA data, MetLife's market share has also doubled to 3.8% in the first ten months of the current fiscal (April 2011 to January 2012), from 1.9% in the same period of the previous fiscal. For the month of January 2012, MetLife commanded a share of 8.3% in total new premium for private sector, up from 6.86% in the previous month. This is the highest market share in a month since its inception.

The total new premium for the sector, including that of state-run LIC, stood at Rs9,543 crore in January 2012, up 15% from Rs8,301 crore in the same month last year.

LIC's new business grew by 31% last month, while its market shares rose to 74% from 65% in January 2011. The business conditions have not been very encouraging in the insurance sector in the recent past and the IRDA chairman J Harinarayan said earlier this month that the sector would see a de-growth of 13%-14% this fiscal.

The first year premium of life insurers declined by 17% to Rs71,952 crore as on 31 December 2011 in the current fiscal, down from Rs86,697 crore in the year-ago period. The decline in the business of private insurers was higher at 20% compared to the state-owned insurer, Life Insurance Corporation of India, which suffered a 15% dip in the first-year premium.

Bank of America Merrill Lynch said in a recent report that the top-line growth of the Indian insurance industry has already taken a big hit after the new regulations.

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HDFC launches online property search portal in Kolkata

 HDFC Red has primary property listing with more than 9,000 types across 2,200 projects in 13 cities of the country.

Housing finance major HDFC has expanded its services to potential customers with online property portal HDFC Red.

"It is a free service to people to help them in property search. Earlier it was done by sales team, but with the growing demand we'll now offer in more structured manner," HDFC Developers CEO Sohel I S said.

At present, HDFC Red has primary property listing with more than 9,000 types across 2,200 projects in 13 cities of the country.

"HDFC Red aims to assist aspiring home buyers in identifying property and we are glad to launch it in the city today," HDFC DGM Rajiv Mittal said. "Though there is no direct link between HDFC and HDFC Red, but the service will help HDFC in attracting more customers for loan," he said.

Sohel said the company might add more services like resale of the property.

HDFC officials said Fixed First scheme, which offers fixed rate for three or five years launched in September last year, was no longer doing well as home loan seekers were expecting easing of rates.

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