As the D-day nears, all eyes are set on Finance Minister P Chidambaram. The common man awaits with bated breath as the FM gears up to table the annual Budget in Parliament.
What is there for the Banking sector in Chidambaram's 7th Budget? Will the interest change? What lies ahead for banks this years Budget?
To find out all the answers, IBNLive.com organised an online chat with K V S Manian, Head, Retail Liabilities and Branch Banking, Kotak Mahindra Bank.
Here is an excerpt from the chat conversation.
Sarva: When will we get best bargain for interest rates-Now or post march? I see most of the banks give better discounts on PLR for home loans now.
K V S Manian: My advise will be to wait and borrow post March
Bala: Misuse of Surfaesi Act by Banks even when the NPA becomes standard assets should be avoided-Banks thretning under Surfaesi Act should comes to end in case of Regular EMI Payers in Housing Loans. There must be some norms to be fixed i.e minimum period for taking action under Surfaesi act-Just if the assets becomes NPA on 90 days-and the loan period was over 50%-because of the circumstance the it becomes NPA and afterwards if it is standard asset the action should not be initiated for interior motive of the bankers-borrowers must be protected in the genuine cases. Law must be in such a way that Regulars EMI payers after crossing 50% of the loan period the bankers should not call back the entire loan-in case if it becomes NPA just for short span of time.
K V S Manian: On the NPA issue the genuine borrowers need to be dealt with , with understanding and a solution based approach , at the same time the resolution and recovery process needs to be faster from the lenders perspective . I would generally feel that there are enough laws in our country and we dont need more of them, I think the issue is of speed in resolution/implementation.
Simran: Good evening sir... i wanted to know, what do you think about the opening up of the banking sector in 2009. will it be a boon or threat to our economy.
K V S Manian: Competition in general is good for that sector, players and its consumers, so I dont see a threat as long as there is a level playing field and Indian banks are allowed to also expand in foreign countries.
Priyanko Pal:1) Is the interest rate is going to higher side after budget? 2) what would be the effect on CRR after budget? 3) what would be the effect on FII? 4) Can we expect a good movement in the market due to banking sector, as lots of merger and acquisition is going to take place?
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K V S Manian: I don’t think the budget will have anything specific which will adversely affect Interest Rates. CRR is usually a matter of Monetary policy of RBI and not of the budget, though RBI has in the past synchronised its announcements just after the budget. I do not expect a CRR change just now. Depending on the contents of the budget if market perceives them to be positive , FIIs will behave like any other investor would. I dont see lot of mergers and aquisitions taking place. Banking sector is a surrogate for general economic growth and should generally speaking do well if the economy continues to grow at 8-9 %.
Desraj: Hello sir, I want to know that what will be the impact on the lending rate of the bank
K V S Manian: Already you are seeing declining lending rates from some of the banks , I think you will see more of this Post March.
Pooja Patel: There’s a common turf between growth and inflation while considering formation of any economic policy especially to a developing nation like ours, where emotions are hit widely. Considering this fact and the mere inactiveness of the latest monetary policy where the interest rates with key rates remained unchanged; banks are in a lull. With more so herculene act of HDFC cutting its interest rates other private banks have been left with little space of choice o survive this competitive market.
SBI too following HDFC's rate cut, cut its interest rate by 25 bps. Other PSU also need to buck up in this regards. With such a heated environment if the Union budget rides the horses for no actions but combating inflation it would be like sheding the load on the alreaded loaded balance with growth needs poorling hanging in ambiguity. Some of the expections spelled out eye folded by the banking sector could be as follows: 1. HIking the FII/FDI limit for PSU banks from 20% to 26% 2. Sops to boost Infratructure finance companies to raise fnance at cheaper rates (Tax exempt funds) 3. Subventio to banks for lending to agriculture 4. Interest Subsidy on Farm loans And so on. Well if not all atleast some matters mentione above considered by the PM would atleast cushion the way out for banks from the steam till the next and most awaited monetary policy review happens.
K V S Manian: Let us wait and see, some of the measures suggested by you are good and should be looked in to by FM.
V A Varghese: Hi Manian, Do you expect the interest rates on Term Deposits to drop after the Budget, which will enable Banks to lend aggressively Regards Varghese.
K V S Manian: I expect march to remain tight , and rates will probably remain there or inch up , but post March I see interest rates easing
Varada Anand: Good Afternoon Sir!, As an ex-kotak employee i always admire and relish opinions of the organization’s big minds, in that context i would like to hear from you on the MoF's thrust in agriculture and rural financing sector commitments for private sector banks, i find more and more the pvt sector banks not showing any great commitment on this sector, i feel its not only a social responsibility but also a huge opportunity in these markets. This would form the platform for a much more comfortable and enviable CASA portfolio and access to low-cost funds.
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This would also trigger and cultivate the financial habits and create awareness among the rural population who would then have access to banking facilities moving forward. I guess we are sleeping over a tremendous rural revolution opportunity. Can I have your views on this and what the budget can really do to emphasize this and bring about this change in our country?
K V S Manian: I entirely agree with you on the opportunity, but do not agree that players in the sector are not seeing it. They are, and many private sector banks have focus in this area. I would not think that this is a matter the budget will touch though. The Central bank does have policies, which mandate banks to fulfill these obligations
Aditya Badami: Good Evening Mr K V S Manian Sir with the recent credit crunch affecting the global economies, do you think India is next in line for a credit squeeze, Will the lowering of interest rates on home loans and other personal loans affect the liquidity of the economy adversely. Thank you very much Aditya Badami.
K V S Manian: I don’t see Indian economy impacted the same way as say US economy, and do not foresee any credit crunch, liquidity will continue to be good , and my assessment is that Post march interest rates will ease and demand will pick up for the products mentioned by you.
Harsha: What’s the impact of budget on share market?
K V S Manian: We will need to know the contents of the budget to evaluate its impact on the market , so let us wait and see
Japesh Thakur:Good evening Mr Manian - I wanted to understand whether the budget would make some policy announcement on the NPA situation in the banking sector? Do you also foresee a rally in the banking scrips post-budget?
K V S Manian: The NPA situation in the banking sector is not a major concern area for the govt today , so i do not expect any major announcements specifically in this regard. Banking stocks in general are a surrogate for economy and they would move in tandem with that . as things stand now no body is questioning the ability of the economy to grow at 8 % if not higher.However Markets can be affected by many other technical factors which will also impact banking stocks
Sush: Sir, every year the prices of things increase by around 5% (inflation) so why shdnt the bank savings/FD interest rate go up in same ratio?
K V S Manian: On a lighter vein , then is that fine if loan rates also go up the same way as you suggest !!!! As long as interest rates are higher than inflation, which is the case, (real interest rates) the value of the money you have in hand is protected .Interest rates do go up if inflation goes up.
Amit Kesarwani:The Banking sector of USA is badly effetced by Sub-prime crisis and written off around $150 bn and stock market is under global cue, what do you see for Indian Banking sector will do post budget in terms of ALM and PLR ?
K V S Manian: The problems in India are not as significant as in the US , because of the moderation that we have had on consumtion expenditure , regulations on exposures and the domestic economy still being robust , so I dont see us having problems of the same nature. I do see softening of interest rates post March. Budget should not have much impact on ALM of banks
Subash: Hi Manian, Good Afternoon.. I have a small Question on the Telecom Sector...how do you think the Budget wil affect the Telecom sector..I mean will it have a positive affect on the Telecom sector if we look on the Basis of Equities?
K V S Manian: I am not a Telecom expert , so would not know the details of what the budget expectations would be , but I would generally believe that the Telecom wave is still in its rising phase and the sector should continue to do well
Ganesh: Hi Will FM bring down the housing loan interests?
K V S Manian: As you might know FM does not directly prescribe Home Loan rates , home loan rates are market governed . However the current expectation is that post march the interest rates are headed downwards and that should reflect in the Home Loan rates as well.
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