Mumbai: Manappuram General Finance and Leasing Ltd (MAGFIL) has reported a quantum jump in its gold loan business to cross the Rs6,000 crore mark, reports PTI.
The company's total gold loan outstanding as on 5th December, stood at Rs6,003 crore, a press release issued here today stated.
It has increased by Rs3,447 crore as compared to the level of Rs2,556 crore that prevailed on 31 March, 2010, adding Rs3,447 crore from April 2010, the release said.
The company has also increased its nationwide branch network to 1,641, with the addition of 636 new branches during the current financial year.
Recently, CRISIL has enhanced the P1+ credit rating limit of the company to cover its short-term borrowings up to Rs2,000 crore. In July of this year, the rating agency had assigned its highest rating of P1+ for the company's short-term borrowings programme up to Rs1,000 crore.
With SBI announcing a whopping 100bps increase in deposit rates, will the banks engage in an all-out war for deposits? High margins and tight liquidity may soon be a thing of the past
The days of fat profit margins and dearth of liquidity may be a thing of the past for the Indian banking system, as there are strong indications that banks may be headed towards a full-blown deposit war to attract funds from the public.
The country's largest lender, the State Bank of India (SBI), seems to have laid the foundation for a further build-up in deposit rates with its 50-150 bps hike across various maturities. Already, ICICI Bank has also raised its rates by 25-30 bps.
The higher rates will likely put pressure on the margins; no wonder that bank stocks have been sold heavily over the past couple of days. The BSE Bankex is down nearly 10% over the past one month as stocks like SBI (down 14%), Axis Bank, Bank of Baroda (down 12% each) and ICICI Bank (down 7%) have suffered heavy losses.
According to Macquarie research, "In the coming days we are likely to see more banks offering rates that are going to be very competitive and soon we may see deposit rates of 8.5%+ for the one-to-three-year maturity bracket." Macquarie said in a report that as banks head into the last quarter of the fiscal, unwilling to bring down their credit growth targets and requiring to honour the disbursements pipeline, they could turn desperate for deposits and would likely enter into a deposit rate "war".
Another leading research firm confirmed this view. "Given the high spread between deposit rates (70bps is a lot), other banks will have no choice but to follow suit and raise their deposit rates as well, mirroring the trend witnessed in September-December 2008. Since these rates are being offered at the longer end of the yield curve, a higher proportion of deposits are likely to be mobilised in the longer-end buckets, implying high-cost funds locked in for longer periods of time," the research firm said in a report.
Although the Reserve Bank of India (RBI) has been driving up key rates over the past one year, the banking system has been slow to respond on deposit rates. So while banks' lending rates were jacked upwards, deposit interest rates remained where they were, providing a healthy net interest margin (NIM) for banks. Now that deposits are getting re-priced with a considerable lag, these hefty margins will likely be squeezed in the coming quarters.
Macquarie said, "The clear asymmetric rate increases that banks are witnessing are bound to exert pressure on margins, particularly for government banks. While lending rates (base rate/PLR) have moved up by 50-75bps, retail deposit rates have already moved up by 150-200bps since June 10 and wholesale deposit rates have moved up by 300bps. We don't think banks have sufficient pricing power as already evident by asymmetric rate increases. Since deposits re-price with a lag in India, we expect margin pressure to be more evident beginning from 3QFY11 onwards."
Banks have also been facing a liquidity crunch, given the shortage of deposit inflows relative to credit demand. To fund this gap, most banks were making use of the RBI's special borrowing window-the liquidity adjustment facility (LAF)-for some time now. The central bank had allowed a relaxation in the statutory liquidity reserve (SLR) requirements in government securities from 25% to 23%, in addition to offering a second LAF window, with both facilities open till 28 January 2011.
But with deposit rates inching upwards, banks may no longer have to depend on the overnight window to maintain liquidity. What had hurt banks in their ability to attract deposits from the public was the negative real rate of return on deposits. With inflation running at a high 10% until recently, bank deposits were not a viable option for depositors. Instead, these funds were being directed into other financial instruments like small savings schemes and even physical assets like gold. Now that deposit rates are on the upswing, public savings will surely find their way into this channel, giving banks sufficient room to breathe on the lending front.
The average Indian has much more serious problems to attend to, like making both ends meet, or how to procure high-priced essentials, or get decent health care, and the hugely expensive UID programme isn’t going to make any difference about this
Thanks to a pliant media (and through the Radia tapes we now know who controls the mainstream media) and the UIDAI's media campaign (tax payers' money spent to brainwash people) one almost begins to feel that lack of identity is a real problem in India. In urban India, however, one need only look at a few examples to bust the myth being propagated by the UID campaign. Here are some examples from lower middle-class Bangalore.
Joy is a car mechanic who has his own mechanic shop. He works deligently, gets a few customers, and does a very good job for a very reasonable price. He is not a dealer or an approved mechanic for any of the big car brands; he doesn't even have an air-conditioned showroom that might attract upmarket customers. He operates in a low-class locality in Bangalore called Viveknagar.
Joy basically lives a hand-to-mouth existence, and to his credit has created a few jobs too. Joy's mother, 75, was ill some time back. She was taken to the government-owned Bowring Hospital. She was diabetic and also suffered from a heart disease. The doctors told her that one of her kidneys was not functioning and that the heart was functioning only about 10%, and that was only a matter of time before she would leave for her heavenly abode. They asked that she be taken back home.
No tests like echocardiogram, or a treadmill test, let alone an angiogram. It puzzles me how the doctors came to the conclusion simply on the basis of an ECG. I won't be surprised if they looked at Joy's ability, or rather inability, to pay for the sophisticated tests and surgical procedures and concluded that Joy and his mother were not worth wasting time on. Joy had a resigned look on his face-he told me it is all a matter of fate. A few weeks after his mother was brought home, she passed away.
Harry is a painter who works for a big paints manufacturing company in Bangalore. He earns Rs10,000 a month. Harry is a Bangalorean, owns a small house in the HAL locality. He has rented out a part of his house, and that gets him an income of Rs2,000 a month.
Harry's problem is that two years ago, his son who was about 12 years old had an accident. His leg was damaged; the bones near his thighs were damaged. The hospital screwed up or some such thing happened, and his son will forever be on crutches. Harry spent Rs2 lakh on medical treatment. Not knowing the intricacies of the medical condition, or how the hospitals and doctors operate, Harry sees no solution for his son's health condition. All Harry does is plead with me, "Pray for my son".
I could describe a hundred stories like these, deaths that should not have happened, or of permanent disabilities due to a lack of knowledge of patients, about private health-care costs that are very high, and dismal health care in public hospitals.
Among the several people in the low-class localities of Bangalore that I know, the story is more or less the same. Many die by the time they are 50, bad food habits, drinking and ignorance of modern health care leading to heart attack in most cases. When the sole bread-earner dies, the cycle repeats. Children don't have the money to study and take up a higher professional degree, as a result of which their earning capacity is dismal. The loop will continue to the next generation. This to me is urban lower middle-class India's story.
Unless I am drastically wrong somewhere, I believe what urban India needs is cheap government subsidised education, affordable health care, and good education that can give people higher-paying jobs. For instance, today the IT sector has high-paying jobs but not enough talented and skilled people. There are too many low-skilled or unskilled people around, and most job vacancies require higher skills. Thus, there
is a mismatch.
I cannot understand how UID (unique identity number), or deploying a sophisticated biometric scanner is going to help these people. Sure, they will enroll in the UID programme; for that matter, show them any carrot and they will enroll in anything. They are too naive to see through the complex, sophisticated business models of the fat-cat corporates.
Portable identity is touted as a feature of this UID programme. Eliminating fake ration cards is touted as another feature. In a recent talk by the IT secretary of Karnataka on a panel discussion on UID, he mentioned how computerisation of traffic records and subsequent linking of records had helped increase revenues from traffic fines in the state. This may be true, but how high a priority should this be? Even with a few fake ration cards, a poor family could make say Rs5,000 a month more by pilfering grains and kerosene. Compare this with the hundreds of thousands of crores taken away by sophisticated scamsters in the Commonwealth Games, the Adarsh army building case and the 2G spectrum allocation matter. Who should the government be going after? Big crooks or petty thieves?
Coming to catching traffic violators, it is interesting that most traffic cops prefer to catch two-wheeler riders over those going around in say luxury cars. The concept of a hierarchical society is ingrained in our psyche so much, more so in the psyche of even our cops. That all citizens should be equal before the law is hardly practiced in our country.
Coming back to the UID programme, why spend Rs50,000 crore of tax payers' money to catch a petty thief? And to whom are we going to give the contracts for biometric scanners and such other contracts to? It would have helped if the contracts for biometric scanners were given to Indian companies who could have done research on biometrics, manufactured the scanners in India and as a result would have created good technology and good jobs in India. Indeed, India could have become leaders in biometric research and manufacturing, and these companies could have then tried to get into foreign markets. However, these contracts have been given to the likes of Microsoft and L-1 identity solutions. L-1 has had or continues to have a number of former US government intelligence personnel as its top executives or employees.
Indeed, it takes a few conversations with a man on the street, and not moving about the malls alone, to see the state of the nation and the aam aadmi's problems.
Even the so-called conveniences attributed to come from UID-instant mobile connection for instance-would be useful really for the upmarket crowd who are busy making money and cannot afford to make even two visits to a mobile providers' office, or do not have the time to arrange for address proof and identity proof documents. The aam aadmi on the other hand has time at his disposal; he wouldn't give much importance to this convenience. But he has much more serious problems to deal with-like how to make both ends meet; how to deal with the huge price rise of essential commodities; how to get health care; problems that are much more serious than helping you shop for the right item at the click of a mouse.
(The author has a BTech from IIT Mumbai, and a PhD from Columbia University, New York. He runs a start-up, Teknotrends Software Pvt Ltd, that does cutting-edge work in the area of network security.)