Banks and financial institutions are seeking more flexibility in dealing with commercial and industrial loan accounts, which are seeing pressure due to cash flows and repayment.
Cash-strapped real estate firms are resorting to short-term borrowings of funds to complete ongoing projects as the economic slowdown has virtually halted demand for properties, freezing cash flows.
Gone are the days when banks would treat payment delays as part of life. Instead, they are taking measures to minimise chances of any kind of payment default by doing rigorous background checks.
Asks lenders to make sure that end use of advances to commercial real estate.
The slowdown coincides with rising loan defaults by retail customers and small enterprises, which have been hit by a steep rise in lending rates. The resource scarcity has changed the priority of investors. They want to remain liquid and not commit their funds to the long term.
At this time of fear and apprehension over jobs, public sector banks are swimming against the tide to go on a hiring spree.
Kerala-based private sector lender Dhanalakshmi Bank plans to recruit close to 400 employees, almost one-third of its present strength, to build up the existing team to tap more business
Most banks are going slow on clearing such loan applications as the employment scenario has turned adverse due to the financial crisis faced by most companies.
It is mission damage control and ICICI Bank is pulling out all the stops. Weighed down by persistent rumours over its health, the bank's top management will meet senior employees on Monday to reassure them about their future.
Some banks decide not to roll over short-term loans; others will do it only at higher interest.
Bankers have suggested that the Reserve Bank of India lower the statutory liquidity ratio and the cash reserve ratio as the present liquidity crunch is affecting their business. During the mid-term resource management discussion with the RBI team led by Deputy Governor Rakesh Mohan, the country's top bankers said the tight liquidity condition was pushing up the cost of funds and putting further pressure on margins.
The regulator wants to know if banks deploy the money to meet lending needs. Sources close to the development said that the central bank was checking if banks used the liquidity adjustment facility (LAF) for raising resources to meet short-term lending needs or pay off high-cost bulk deposits. Bankers said the central bank might be worried that the steps taken by it so far had not eased the liquidity situation and that call rates remained high.
A senior SBI official said bank branches and controlling offices face a piquant situation where the top management expects prompt action, including filing of a first information report, while the local police is reluctant to register complaints often due to political pressure. Of late, investigative agencies have raised concerns over the large circulation of counterfeit notes.
State Bank of India, the country's largest lender, is on an outsourcing overdrive. After outsourcing the back-office work in foreign offices, the bank has now decided to rope in external agencies to set up automated teller machines to save on capital expenditure and reduce the rollout time. It plans to initially outsource 500 ATMs to vendors, including original equipment manufacturers.
A clampdown on fresh personal loans, credit cards and auto loans is taking a toll on direct selling agents hired by banks to push these products. According to estimates, banks have reduced the number of DSAs by 15-25 per cent, while marketing expenses are 35-40 per cent lower.
The yen may have depreciated to 110 against the dollar from a high of 96 earlier this year, but bankers are advising extreme caution in using the Japanese currency for raising resources and hedging risks.
Government banks have demanded that the amount eligible under the farm waiver scheme should continue to be considered lending to the farm sector till the government clears the dues to help banks meet the mandatory priority sector lending target.
Continuing the flow of home loans and accessing low-cost deposits are two key elements of the government's instructions to public sector banks.
Global crude oil prices have dropped 14 per cent in less than a fortnight, but the three public sector oil marketing companies could still end up borrowing more in the domestic market and put further pressure on liquidity. With the three OMCs still saddled with under-recoveries, estimated at Rs 820 crore (Rs 8.2 billion) a day, they have no option but to use bank credit lines in the coming days as they have run out of their stock of oil bonds.
Banks are reluctant about disbursing loans for aviation studies on fears that a slowdown will hamper the job prospects in the aviation sector. The move, say analysts, may affect the fortunes of aviation training institutes.
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