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<div type="image" title="The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books." agency="ANI" msid="114778648" hostid="261" caption="&amp;lt;p&amp;gt;The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books.&amp;lt;/p&amp;gt;"></div> Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, IndusInd Bank set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e. an NPA, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, RBI, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and <keyword id="20117932" type="General" weightage="20" keywordseo="navi-finserv" source="keywords">Navi Finserv</keyword> from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending instalments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honour any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its gross NPA for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. IDFC Bank’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in <keyword id="6051027" type="General" weightage="20" keywordseo="Unsecured-loan" source="Orion">unsecured loan</keyword>s, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. <keyword id="6376194" type="General" weightage="20" keywordseo="kotak-mahindra" source="Orion">Kotak Mahindra</keyword> Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical <keyword id="19897820" type="General" weightage="20" keywordseo="bollywood" source="keywords">Bollywood</keyword> headmaster who runs his dominion with an iron fist. However, that's a story for another day. Do you have a topic in mind you'd want a simpler explanation for, or insights or personal experience to share on personal finance and more? Contact us at businessinsider@timesinternet.in.

Simply Put: Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

Top 8 banks offering low interest rates on home loans; check full list here

Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, <keyword id="46717" type="General" weightage="20" keywordseo="IndusInd-bank" source="Orion">IndusInd Bank</keyword> set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e., an <keyword id="79363" type="General" weightage="20" keywordseo="npa" source="Orion">NPA</keyword>, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals, i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv, from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending installments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honor any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its <keyword id="763994" type="General" weightage="20" keywordseo="Gross-NPA" source="Orion">gross NPA</keyword> for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. <keyword id="62152" type="General" weightage="20" keywordseo="IDFC-bank" source="Orion">IDFC Bank</keyword>’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in unsecured loans, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. Kotak Mahindra Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical Bollywood headmaster who runs his dominion with an iron fist and takes things (and ceiling rates) into their own hands. However, that's a story for another day.

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

The Indian <keyword id="22196321" type="General" weightage="20" keywordseo="credit-card-industry" source="keywords">credit card industry</keyword> is struggling to grow, as new issues slow down on a year-on-year (YoY) basis. Not only has the growth i.e. issuance of new credit cards slowed down, but lenders are also becoming increasingly cautious of the asset qualities, a recent report by Nomura showed. From 19% in July 2024, the growth in the <keyword id="6368202" type="General" weightage="20" keywordseo="credit-card" source="Orion">credit card</keyword> spendings came down to 13% in August 2024. The year-to-date (YTD) growth has also significantly declined in FY25, currently standing at 17%, markedly down from 28% in FY24. For the fifth consecutive month, the number of new credit cards added to the system remained well below the 1-million, or 10 lakh mark. Around 9.2 lakh credit cards were added during the month, a slight uptick from the 7.55 lakh cards that came into the system In July 2024. However, there is growth in this space nevertheless, with about 10.55 crore active credit cards at present, marking a 15.6% YoY increase. Even the annualised spend per card, or the average amount spent via an annual card during an year grew 1% YoY to Rs 1.87 lakh. But this was far less than the 7% growth annual spends via one credit card saw in FY24. Meanwhile, what continues to burgeon consistently is the outstanding amount on these credit cards, which ballooned to Rs 2.7 lakh crore in June 2024, up from Rs 2.6 lakh crore in March 2024, and around Rs 2 lakh crore in the year ago period. To put this in perspective, pre-pandemic, the total outstanding amount stood at Rs 87,686 crore, which marks a 24% CAGR in this amount, in just a span of 5 years. <h2>Large drops, slowdown to sustain</h2>Even the monthly expenditure per card dropped 2% YoY to Rs 16,000 in August, 2024. Subsequently, the transaction volume via credit cards also dipped to 1.6% in August, along with the total amount of <keyword id="21084888" type="General" weightage="100" keywordseo="credit-card-spending" source="keywords">credit card spending</keyword>, which fell to Rs 1.69 lakh crore in August, from Rs 1.73 lakh crore in July. Also, there has been a hefty cutdown in provisions made for credit card reward points, which reflects in the quantum of credit card benefits that have been mowed out by companies of late, making credit cards far less lucrative than before. <h2>HDFC takes lead </h2>During August 2024, <keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC bank</keyword> added a total of 2.41 lakh credit cards, taking its total tally of active credit cards to 2.19 crore. <keyword id="19900482" type="General" weightage="20" keywordseo="ICICI-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="ICICI Bank" meta.hostid="261" meta.entityid="ICICI Bank">ICICI Bank</keyword> came a second distant, adding 1.45 lakh credit cards during the month, which means that the second-largest credit card issuer now holds over 1.75 crore active credit cards. Axis Bank and SBI Cards also added 1.27 lakh and 1.1 lakh cards, respectively to their repertoire during the month, while the growth numbers at Kotak Mahindra Bank remained largely flat, stagnating the bank's total card tally at 54.13 lakh. This was due to the ongoing ban on the bank due to its weak IT infrastructural issues imposed by RBI in April 2024. If anything, the bank's number of credit cards declined by 61,191 during the month. Even as the festive season approaches, experts think that it is unlikely to make a major dent in credit card spendings, which are expected to see a further slowdown in the quarters to come.

Credit card growth experiencing a slowdown, as borrowers struggle to pay back loans

<ul><li>Analysts believe that a potential acquisition will improve lending capability and expand branch footprint <keyword id="46013" type="General" weightage="80" keywordseo="kotak-mahindra-bank" source="Orion">Kotak Mahindra Bank</keyword>.</li><li>Market unclear on such a large acquisition would play out if it leads to a merger eventually.</li><li>The end game should be full acquisition and amalgamation of <keyword id="6357560" type="General" weightage="80" keywordseo="idbi-bank" source="Orion">IDBI Bank</keyword>.</li></ul> <keyword id="6368369" type="General" weightage="50" keywordseo="life-insurance-corporation-of-india" source="Orion">Life Insurance Corporation of India</keyword> along with the government are looking to divest 60.72% in <keyword id="67881" type="General" weightage="100" keywordseo="idbi" source="Orion">IDBI</keyword> Bank. The process has already been kicked off and this will be a test case for the government as it will give it a blueprint for future divestments. So far media reports have speculated that Kotak Mahindra Bank was in the fray, but now <keyword id="3313307" type="General" weightage="40" keywordseo="nomura-global-markets-research" source="Orion">Nomura Global Markets Research</keyword>, a Japanese investment bank, has come out with a report that projects various scenarios of the potential acquisition and also explains how Kotak Mahindra Bank stands to gain if it acquires the bank. For starters, a possible IDBI acquisition could take KMB’s loan book to Rs 5 trillion plus along with a CASA ratio of 50%, which would be ahead of industry’s. The acquisition would also result in a sharp expansion in its branch footprint. Analysts at <keyword id="6354527" type="General" weightage="80" keywordseo="nomura" source="Orion">Nomura</keyword> believe that the acquisition would enhance its lending capability as the loan to deposit ratio will fall to 78% from 85% in Q1FY24. Analysts at Nomura have painted different scenarios of any potential transaction which will entail acquisition of a 61% stake in IDBI Bank. The first scenario could be a full cash-based transaction while the second would be stock-based and the third could be a hybrid one – entailing cash plus stock. According to the report, “While a cash-based acquisition is strongly EPS and RoE accretive, a stock-based acquisition is BVPS (book value per share) accretive (while being RoE dilutive). In all scenarios, the end-game for KMB should be the full acquisition and amalgamation of IDBI Bank, in our view.” The Japanese investment bank is of the view that scenarios which involve cash are preferable as they would bump-up to RoEs, which are currently depressed due to KMB’s low leverage of ~6x vs 8-9x for large private banks. But this deal may not be without its share of complications, says Nomura. The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> has incrementally not been forthcoming in terms of allowing banks to pick-up stakes in other BFSI businesses, says the report. Therefore, it is unclear how such a transaction would be allowed. The central bank could make an exception Kotak Mahindra Bank is to be eventually merged with IDBI Bank. A merger also is not without its share of complication, even if it is allowed. There is no certainty on how this can impact the share price of Kotak Mahindra Bank even if the merger leads to better financial ratios.

What if Kotak Mahindra Bank acquires IDBI Bank, asks Nomura

<ul><li>The shrinking of the auto loan book is the continuation of a long trend of weakness in India’s car and two wheeler industry.</li><li>This is one of the reasons most analysts on the street expect the upcoming budget to provide some booster shot to the country’s automobile industry.</li><li>Check out the latest budget news and updates on <a href="https://www.businessinsider.in/budget">Business Insider</a>.</li></ul>The <a href="https://economictimes.indiatimes.com/markets/stocks/news/hdfc-bank-q3-results-net-profit-meets-street-estimates-rises-18-yoy-to-rs-10342-crore/videoshow/88922125.cms">18% growth in HDFC Bank’s net profit </a>did not impress investors and the share price slipped a percent on Monday (Jan 17). Shrinking retail loans was the primary reason for investor disappointment. Now, the lack of borrowers for cars and two wheelers in the last few months had a role to play, according to analysts at Emkay Global. The lender’s retail portfolio, which includes personal loans, housing, vehicle, education loans and credit cards among others, has declined sharply since March 2021. <div type="image" title="hdfc bank retail 2" height="900" width="1200" msid="88960567" hostid="261"></div> Why are <keyword id="6357149" type="General" weightage="20" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword>’s retail loans shrinking? Passenger car sales in India have been falling for four months in a row since September. Two wheeler sales are at a decade low. However, the recent declines are part of a much longer trend of weakness in India’s demand for automobiles that has persisted long before the pandemic hit. <div type="image" title="hdfc bank auto loans" height="900" width="1200" msid="88960569" hostid="261"></div>If this is the case for the country’s largest private bank, this could be a factor to watch out for in the upcoming earnings from its peers like <keyword id="6653" type="General" weightage="20" keywordseo="icici-bank" source="Orion">ICICI Bank</keyword>, <keyword id="46013" type="General" weightage="20" keywordseo="kotak-mahindra-bank" source="Orion">Kotak Mahindra Bank</keyword>, IndusInd Bank and others. These wider ramifications for the economy, due to the slump in India’s automobile sector, is one of the reasons why the upcoming budget is expected to provide some relief to India’s ailing car makers and two wheeler companies. Analysts at Prabhudas Lilladher expect measures to boost consumption, especially for the two wheeler segment, by improving the rural economy, and by providing more clarity on execution of scrappage policy. Fall in <keyword id="35527" type="General" weightage="20" keywordseo="auto-loans" source="Orion">auto loans</keyword> is not the only problem for HDFC Bank Although HDFC Bank holds the largest pie of the Indian credit card business, it has witnessed gradual slowdown in its sales. This happened after RBI had banned the bank from selling new credit cards in December 2020 after certain incidents of outages. As a result, the lender’s net interest income did not grow more than 4.1% in the last three quarters. Adding to the woes, HDFC Bank has lost credit card market share since the RBI restrictions in December 2020. Currently, the bank’s market share is at 23% from 25.6% earlier, said Kotak Institutional Equities report . <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Brokerage firm </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Target price </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">CLSA </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,025 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">JP Morgan </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,100 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Credit Suisse </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,950 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nomura </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,955 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Macquarie </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,005 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kotak Institutional Equities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,740 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Emkay Global </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,050 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ICICIdirect </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,955 </td></tr></tbody></table> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/budget/news/even-after-the-lic-ipo-indian-government-may-be-well-short-of-its-divestment-target/articleshow/88938799.cms">Even after the LIC IPO, Indian government may be well short of its divestment target ⁠— for a third year in a row</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/retail/news/amid-amazon-sale-of-2022-offline-retailers-have-lost-50-of-their-business/articleshow/88947494.cms">Small offline retailers lost 50% of their business in the first 15 days of January due to COVID-19</a>

Shrinking car and two-wheeler sales is now hurting India’s biggest private bank

<ul><li><keyword id="46013" type="CITY" weightage="20" keywordseo="Kotak-Mahindra-Bank">Kotak Mahindra Bank</keyword> is scheduled to post its earnings today, but analysts fear that its already slowing credit growth may hamper the bank’s profitability. </li><li>The bank has exposure to troubled sectors like auto and unsecured personal loans. </li><li>Kotak Mahindra Bank’s largely steady deposit base could be one factor that may provide a safe harbour. </li></ul>The coronavirus lockdown in India has had a severe impact on banks and Kotak Mahindra Bank is no exception. Its credit growth was already slowing down before the lockdown came into effect. However, its steady deposit base and lack of dependence on funds from the government could put it at an advantage against its peers. “Amid a slowing economy and asset quality risks, we believe Kotak's valuation premium to peer banks is at risk,” said UBS Research. <div type="Article" hostid="261" msid="75615861" title="ICICI Bank’s earnings on May 9 will reveal the level of economic damage caused by COVID-19 at the level of small borrowers" mstype="2" mssubtype="0"></div> Kotak Mahindra Bank’s share price has managed to recover over 15% of its loss after hitting a 52-week low of ₹1001 on March 19 but amid the volatility, it isn’t clear whether the bank will be able to recover to its past glory. “The share price has outperformed most banks under our coverage in the past 1-3 years, and after the recent price outperformance the current valuation leaves limited room for upside,” said UBS. <div type="image" title="Kotak Mahindra (2)" msid="75707986" hostid="261" caption="&amp;lt;p&amp;gt;Kotak Mahindra Bank&amp;#39;s share price since the lockdown was announced on March 25&amp;lt;/p&amp;gt;"></div> “Kotak Bank continues to trade at a significant premium to private banks. We believe the market is not factoring in the impact on asset quality of the bank's exposure to potentially vulnerable sectors,” it added. Credit growth poses a risk The bank has managed to navigate around troubled sectors in recent history. “Amidst the deposit run-down seen in mid-sized private banks post the Yes Bank saga, Kotak Mahindra Bank has not seen any disruption, given its lower dependence on government deposits,” said Emkay Securities. However, this time around it has exposure in vulnerable sectors like auto and unsecured personal loans, which are some of the worst affected in the current situation with factories closed and unemployment on the rise. Together, they account for nearly 24% of Kotak’s total loans, according to UBS. “Asset quality is likely to deteriorate more than expected as cash flows in most customer segments should be impacted by the lockdown,” it said. These are the target prices set for Kotak Bank by different brokerages: <table style="border-width: initial; border-style: none; background-color: rgb(255, 255, 255); font-size: 16px; line-height: 1.6em; box-shadow: none; width: 468pt; font-family: Merriweather; table-layout: fixed; padding-bottom: 10px !important; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important;"></colgroup><tbody><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">Brokerage </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">Target price </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">Emkay Securities </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">₹ 1,473 </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">UBS </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">₹ 1,050 </td></tr></tbody></table> Kotak Mahindra Bank’s largely steady deposit base could provide safe harbour especially since, over the past few years, it has managed to increase its branches. “It has benefited a bit from the flight of safety in deposits. Post the GFC, the bank has accelerated its branch expansion and hopefully, should continue to further strengthen its deposit franchise,” said Emkay. SEE ALSO: <a href="https://www.businessinsider.in/india/news/coranavirus-cases-in-punjab-news-and-updates/articleshow/74771047.cms">Punjab gets financial assistance of ₹638 crore — appeals for lockdown extension as the Coronavirus infections spike to 1,877</a> <a href="https://www.businessinsider.in/india/news/pm-modi-today-announced-a-stimulus-package-of-20-lakh-crore-to-revive-the-indian-economy/articleshow/75701569.cms">India’s stock market gets the stimulus package it was craving for ⁠— but it still has to wait for the details</a> <a href="https://www.businessinsider.in/india/news/pm-narendra-modi-announces-a-20-lakh-crore-financial-stimulus-for-a-self-reliant-india/articleshow/75700217.cms">Narendra Modi announces a ₹20 lakh crore financial stimulus for a 'self reliant' India</a>

Kotak Mahindra Bank's earnings may reflect the pain in India’s auto sector as well as the rising job losses and pay cuts

<ul><li>The account will be available to all corporates in India and will also come with a host of privileges and rewards.</li></ul><ul><li>Each account will come with preferential banking services, including a complimentary Zen Credit Card. </li><li>It also offers preferential pricing on a range of lending needs across personal, home and vehicle loans. </li></ul><keyword id="46013" type="General" weightage="80" keywordseo="kotak-mahindra-bank" source="Orion">Kotak Mahindra Bank</keyword> has launched a lifestyle focused salary account named <keyword id="14687983" type="General" weightage="80" keywordseo="kotak-creme" source="Orion">Kotak Creme</keyword>. The bank claims that this account will offer an upgraded experience to its customers working in MNCs, retails, law firms, unicorns etc. The account will be available to all corporates in India and will also come with a host of privileges and rewards across lifestyle, travel, <keyword id="6354525" type="General" weightage="80" keywordseo="healthcare" source="Orion">healthcare</keyword>, dining, skilling and learning experiences. “For a long time, the corporate salary account benefits used to include no minimum balance commitments, zero transaction charges and some access to other banking products with a sustained relationship. We believe now is the time to disrupt this space – by offering rewards that span beyond banking and designing a truly premium value proposition,” said <keyword id="491609" type="General" weightage="80" keywordseo="puneet-kapoor" source="Orion">Puneet Kapoor</keyword>, president — products, alternate channels and customer experience delivery at Kotak Mahindra Bank. Each account will come with preferential banking services, including a complimentary Zen Credit Card. The account holders will be able to enjoy a lot of benefits like subscription to top lifestyle brands offering health and wellness, lifestyle, entertainment, and access to complimentary airport lounges. It also offers preferential pricing on a range of lending needs across personal, home and vehicle loans. The account holders will also get the access to emergency funds via overdraft facility upto five times the salary limit and salary PayDay loan at good interest rates. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/mobile/news/samsung-launched-galaxy-z-fold-4-z-flip-4-watch-5-series-and-buds-2-pro-check-price-specifications-and-photos/articleshow/93481789.cms">Samsung launched Galaxy Z Fold 4, Z Flip 4, Watch 5 series, and Buds 2 Pro: Check price, specifications and photos</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/will-aamir-khans-laal-singh-chaddha-be-the-box-of-chocolates-bollywood-is-waiting-for/articleshow/93481202.cms">Will Aamir Khan’s Laal Singh Chaddha be the box of chocolates Bollywood is waiting for?</a>

Kotak Mahindra rolls out a lifestyle focused salary account

SBI, Kotak Mahindra and others cut home loan rates ahead of festive season

The rising demand for credit in last couple of days has prompted banks to garner funds aggressively through certificates of deposits (CD), bonds, and fixed deposits (FD). The need for aggressive fund raising arose after the surplus liquidity in the banking system dropped sharply from the record high. According to the data compiled by Prime database, banks have so far raised around Rs 42,000 crore through CDs. This was even after the rates on this instruments are rising sharply. The data also showed that Indian Bank, topped the fund raising list via CDs, raising worth Rs 13,550 crore, which was followed by <keyword id="6357149" type="General" weightage="80" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> raising Rs 6,550 crore and <keyword id="62034" type="General" weightage="80" keywordseo="punjab-national-bank" source="Orion">Punjab National Bank</keyword> raising Rs 2,875 crore so far in August. Apart from this, there are various banks such as <keyword id="6354731" type="General" weightage="80" keywordseo="state-bank-of-india" source="Orion">State Bank of India</keyword> (SBI), Indian Overseas Bank, Indian Bank, Punjab National Bank, <keyword id="46013" type="General" weightage="80" keywordseo="kotak-mahindra-bank" source="Orion">Kotak Mahindra Bank</keyword>, ICICI Bank, among others have increased their FD raised 5-20 basis points across maturities to attract more investors. "As liquidity is draining out in a calibrated manner from the system, banks are compelled to raise funds through CDs and even through fixed deposits. Some banks are offering special rates for higher FD amounts. With growth picking up, we can expect banks to aggressively raise funds from the market," said <keyword id="14789739" type="General" weightage="80" keywordseo="venkatakrishnan-srinivasan" source="Orion">Venkatakrishnan Srinivasan</keyword>, founder and managing partner at <keyword id="14790820" type="General" weightage="80" keywordseo="rockfort-fincorp" source="Orion">Rockfort Fincorp</keyword>, a Mumbai-based debt advisory firm. Banks credit growth has remained in double digits handily outpacing the deposit growth. The credit growth has increased in couple of weeks due to low base effect, small ticket size loans, higher working capital requirements due to elevated inflation and a shift to bank borrowings on account of high yields in the capital market. The bank credit has grown over 14 per cent on-year, as per data on the <keyword id="6354335" type="General" weightage="80" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> showed. Meanwhile, liquidity in the banking system has cropped sharply in last couple of months. Currently, it around Rs 45,000 crore, as compared to Rs 1.30 lakh crore last week. The sharp drop has been witnessed due to payments for government bonds and outflows on account of goods and service tax payments. Going forward, market participants expect banks to raise more funds because credit demand is likely to rise amid festive season. While, rates on the instruments will also rise due to narrowing of surplus liquidity. "This pace may continue with back of credit off take and <keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword> attempts to normalise liquidity, banks need to meet the demand and get the cheaper sources of funds be available so raising via CD and capital instruments to meet the credit demand and preparing oneself for this ahead of festivals and busy seasons," said <keyword id="261562" type="General" weightage="80" keywordseo="ajay-manglunia" source="Orion">Ajay Manglunia</keyword>, MD and Head Institutional Fixed Income at JM Financial. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/what-should-investors-ask-mukesh-ambani-at-his-companys-agm/articleshow/93727113.cms">What should investors ask Mukesh Ambani at his company’s AGM?</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/apps/news/instagram-is-reportedly-testing-a-new-feature-that-looks-like-an-imitation-of-fast-growing-app-bereal/articleshow/93727321.cms">Instagram is reportedly testing a new feature that looks like an imitation of fast-growing app BeReal</a>

You Searched For "kotak mahindra bank personal loans" and got 10 results

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Credit card growth experiencing a slowdown, as borrowers struggle to pay back loans

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What if Kotak Mahindra Bank acquires IDBI Bank, asks Nomura

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Shrinking car and two-wheeler sales is now hurting India’s biggest private bank

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Kotak Mahindra Bank's earnings may reflect the pain in India’s auto sector as well as the rising job losses and pay cuts

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Kotak Mahindra rolls out a lifestyle focused salary account

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SBI, Kotak Mahindra and others cut home loan rates ahead of festive season

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Banks aggressively garnering funds via CDs, FDs amid firm credit off take

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