Tag: gold loan

Banks to see 15% plus credit growth in FY22-25 period: ICICI Securities

Banking & Finance

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India Inc, after undergoing a phase of deleveraging over the past few years, is now better positioned and confident to embark on the path of re-leveraging, according to ICICI Securities.

Indian financiers, too, have fortified themselves with ample liquidity/ capital buffer to tap the emerging opportunity, said research analysts Kunal Shah, Renish Bhuva and Chintan Shah.

They observed that Year-To-Date (YTD) growth of 2.2 per cent suggests bank credit growth in FY21 will settle upwards of 5 per cent (at least 3-4 per cent accretion is witnessed in February/March historically).

Post that, the analysts expect 9-10 per cent credit growth in FY22. Recovery in economic activity and derivative effect of increased investments and corporate/government spending on consumption will sustain the momentum of 15 per cent plus growth over FY22-25

Gold loans shine

In a report, ICICI Securities said Banks’ gold loan portfolio has seen 67 per cent compounded annual growth rate (CAGR) growth over the past 2 years and is also up 65 per cent YTD and 132 per cent YoY to ₹43,100 crore.

The report attributed this largely to focus of banks towards secured lending products post loan-to-value (LTV) relaxation.

NBFCs

The analysts said service segment credit (led by lending to non-banking finance companies/NBFCs and financial services) is now gathering pace – up 1.6 per cent YTD/8.4 per cent YoY.

Lending to NBFCs and financial services was up 2.6 per cent MoM/10 per cent YoY.

Loans to public financial institutions have jumped 79 per cent YTD/151 per cent YoY, while lending to housing finance companies (HFC) has shrunk 31 per cent YTD (flat YoY).

“This clearly shows banks’ lending preference more towards public institutions than HFCs.

“NBFCs, after having consolidated for almost 2 years now, significantly deleveraging the balance sheet by running down high risk profile assets, are now more confident to pursue growth opportunities in a risk-calibrated manner,” the analysts said.

Consequently, bank lending to NBFCs should stabilise in FY22 rather than decelerate like FY21.

Retail credit

Retail credit is now inching closer towards double-digit mark (6.7 per cent YTD/9.1 per cent YoY) – housing, credit card, vehicle have picked up buoyancy over the past couple of months, per the report.

It assessed that one of the key segments that has retraced faster than anticipated is credit card – outstanding up 5 per cent YoY, now up 7.6 per cent YTD building over almost 14 per cent YTD decline in May 2020.

ICICI Securities noted that despite strong real estate sales and spike in registrations in housing projects, there has not been much traction in housing portfolio till January 2021.3.7

Housing (including priority sector lending) is up 7.7 per cent YoY and 1.7 per cent MoM, while YTD growth stands at 5.9 per cent which is not significant considering the strong traction seen in real estate deals, it added.

Vehicle loans led by improved sales amidst festive demand is up 2.5 per cent MoM, 6.9 per cent YTD and 7.0 per cent YoY.

MSME sector

The report said the MSME (micro, small and medium enterprise) sector was under a prolonged downcycle of credit growth over the past few quarters.

The sector saw momentum July 2020 onwards, post the introduction of the Emergency Credit Line Guarantee Scheme (ECLGS) by the government as an aid to MSMEs, which were in trouble, it added.

Banks, in particular Public Sector Banks, extended full support to MSMEs which resulted in MSME credit book jumping 33 per cent in a period of seven months to ₹1.27 lakh crore from ₹96,000 crore in June 2020. In terms of YoY growth, it is up 19.1 per cent and up 20.5 per cent YTD.

The report said the agriculture sector is leading the credit growth momentum with 9.5 per cent YTD/10 per cent year-on-year (YoY) growth (1.8 per cent month-on-month/ MoM).

Industry credit

Industry credit is still lagging with YTD decline of 4.3 per cent (down 1.3 per cent YoY). However, downward trajectory in industry credit (particularly large industries) has been arrested since past three quarters and there is a marginal MoM uptick since November.

The analysts underscored that the key sectors that are deleveraging continuously include telecom and other infra, construction, metals and petroleum. On the other hand, textiles, chemical, plastics, paper products have gathered credit momentum.

“However, with revival in consumer demand and rise in government spending, we believe industry growth can emerge as a key driver for credit growth in coming years.

“We believe industry growth can emerge as a key driver for credit growth with 6 per cent growth in FY22 and 13-15 per cent growth over FY23-25,” the analysts said.

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SBI lures tweeple with ‘hai-nahi hai’ campaign to grow retail loans

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State Bank of India (SBI) has posed three crucial questions to its current and prospective customers relating to “Bride and Budget for marriage”, “Business idea and Investment”, and “Trip and Car” as part of a ‘hai-nahi hai’ (have-don’t have) campaign.

In a racy Twitter campaign, India’s largest bank has specifically asked tweeple questions in Hinglish (mix of Hindi and English) such as: “Shaadi ke liye bride hai but budget nahi” (you have a bride but no budget for marriage), “Business ke liye idea hai but investment nahi” (you have a business idea but no money to invest), and “Doston ke sath trip pe jaana hai par car nahi hai” (you want to go on a trip with friends but don’t have a car).

And SBI gives a ‘not to worry’ assurance to tweeple as it has answers to the aforementioned questions in the form of products — personal loan for a marriage, gold loan for business and a car loan for the road trip with friends.

The bank wants to expand loans in these three segments as the non-performing asset (NPA) level is below 1 per cent.

In the third quarter of FY2021, SBI’s Xpress Credit (personal loans) portfolio reported a 36 per cent year-on-year growth and stood at ₹1,77,366 crore as at December-end 2020. NPA in this portfolio was at 0.36 per cent.

Auto loans, including car and two-wheelers, nudged up about 3 per cent YoY and stood at ₹75,937 crore as of December-end 2020. NPA in this portfolio was at 0.73 per cent.

Personal gold loans portfolio soared about 559 per cent YoY to ₹17,492 crore. NPA in this portfolio was only 0.04 per cent.

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Gold loans: A place to be in, for banks

Banking & Finance

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Gold loans stood out in banks’ loan portfolio in the first nine months of the current financial year, both in terms of growth and asset quality.

Banks aggressively expanded their loan against pledge of gold ornaments and jewellery (jewel loans) portfolio in the wake of the Covid-19 pandemic.

Gold loans shine as small businesses, borrowers look for ready cash

During the first nine months of FY2021, banks preferred to lend either against highly liquid collateral such as gold or Government guarantee as they feared the economic downturn would affect customers’ ability to repay loans.

State Bank of India’s (SBI) personal gold loan book jumped four times in six months (up to December-end 2020) to stand at ₹17,492 crore.

Mobile app for gold loan launched in Kochi

Gross non-performing assets (GNPAs) of India’s largest bank was only at 0.04 per cent of its gold loan portfolio, per the bank’s analyst presentation. The bank, however, did not disclose the size of its agriculture gold loan in the presentation.

Bank of Baroda’s (BoB) agriculture gold loan portfolio was up 29 per cent year-on-year (yoy) to ₹21,116 crore as at December-end 2020 (₹16,325 crore as at December-end 2019).

“When we look at the agriculture side, nearly 40 per cent of the growth that we see in agriculture has come from gold loans. Gold loans are 20-21 per cent of our total agriculture book.

“…And we do hope that going ahead, 40-50 per cent of agricultural growth will come from gold loans,” Sanjiv Chadha, MD & CEO, BoB, told analysts last month.

Risk-averse market

The gold loan portfolio of Thrissur (Kerala) headquartered CSB Bank jumped about 60 per cent yoy to ₹5,644 crore as at December-end 2020 (₹3,523 crore).

Gold loans accounted for 40 per cent of the private sector bank’s total advances against 30 per cent in the year-ago quarter.

“We will not slow down the gold loan growth. We will increase the growth of the other products so that as a proportion (of total advances), gold loan will go down. I think, this (gold loan portfolio) is only about ₹6,000 crore. There is a big public sector bank, which has ₹70,000 crore of gold loans, so gold loan is a place to be in today,” C VR Rajendran, MD & CEO, CSB Bank, told analysts last month.

Federal Bank’s gold loan portfolio registered a y-o-y growth of 67 per cent and crossed ₹14,000 crore in the third quarter of FY2021, per its third quarter analyst presentation.

The proportion of gold loans in total advances in the case of Karur Vysya Bank (KVB) increased to 23 per cent as at December-end 2020 as against 17 per cent as at December-end 2019.

As at December-end 2020, KVB’s gold loan portfolio stood at ₹12,069 crore (₹8,580 crore)

Karthik Srinivasan, Group Head — Financial Sector Ratings, ICRA, observed that gold prices have been going up and this has been providing comfort to both lenders and borrowers.

“The market is still risk-averse. And banks, especially public sector banks, have been offering gold loans at relatively finer rates. So, that is an option that many people are availing,” he said.

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Mobile app for gold loan launched in Kochi

Banking & Finance

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Kochi-based Gold Dimensions Pvt Ltd has introduced a mobile app using which customers can take out gold loans on easy and borrower-friendly terms from banks.

The app named My Gold Bazzar.com helps locate suitable banks, both in the private and public sectors, for speedy disbursal of loans at lower interest rates and high per gram rate, Tomy K Augustine, one of the promoters of the company, said.

Also read: Big Story | Five cautions against money-lending apps

The main feature of the app is that prospective borrowers can easily locate lenders that offers customer-friendly features such as low rate of interest, high per gram rate, low service charge, and quick service, among others. The facility of takeover of existing loan is also offered by this app.

This is for the first time in the country that an app for gold loans has been launched, he said. Users can also obtain daily gold rates through this app. In an initial offer, the company will return a part of the interest paid if the loan is closed after 30 days, he said.

Also read: CSB banks on gold loans to drive growth

The company intends to expand across South India within three months, and pan India in the next six months, he added.

The app was launched by Jose Dominic, Director and Co-founder of CGH Earth Group.

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CSB banks on gold loans to drive growth

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CSB Bank seems to be going the whole hog on gold loans, going by its latest business update. The bank reported a 60.36 per cent year-on-year (yoy) jump in these loans in the third quarter of FY2021.

‘Advances against Gold & Gold Jewellery’ alone accounted for about 42 per cent of its gross advances as at December-end 2020, against 31 per cent as at December-end 2019.

In absolute terms, Advances against Gold & Gold Jewellery stood at ₹5,633.75 crore (provisional) as at December-end 2020 against ₹3,513.25 crore as at December-end 2019, as per the Thrissur (Kerala) headquartered bank’s regulatory filing.

Also read: CSB Bank partners IIFL Fin for sourcing retail gold-loan assets

Overall, CSB Bank’s gross advances increased by 22.64 per cent yoy to ₹13,425.24 crore as at December-end 2020 from ₹10,947.28 crore as at December-end 2019.

Tailwinds from relaxed LTV

This expansion in the Advances against Gold & Gold Jewellery comes in the backdrop of the Reserve Bank of India (RBI) increasing the permissible loan to value (LTV) ratio for loans against pledge of gold ornaments and jewellery for non-agricultural purposes to 90 per cent on August 6, 2020 from 75 per cent earlier.

The enhanced LTV ratio (the amount of loan a borrower can get against the appraised value of his collateral) is applicable up to March 31, 2021 to enable the borrowers to tide over their temporary liquidity mismatches on account of Covid-19.

In CSB Bank’s second quarter earnings conference call, CVR Rajendran, MD & CEO, observed that gold loans had grown by ₹1,100 crore, up 30 per cent quarter-on-quarter, capitalising on the tailwinds provided by RBI’s relaxation in LTV norms.

“Retail is driven mainly by the gold loan growth. There’s been a growth of 47 per cent in gold loans. But another bank, which is much larger, has grown by 54 per cent.

Also read: CSB Bank Q1 net more than doubles to ₹53.6 cr

“So there is much scope for improvement in gold loan itself, going forward, and we will continue to lend,” the CSB Bank chief said.

Rajendran then emphasised that gold loan is safer and the bank is tightening its systems, underwriting standards, and inspection, among others, to ensure that losses are kept to the minimum.

“We still have an average LTV of 71 per cent. Risk rateable value of the portfolio is only ₹184 crore. It is a portion above the 78 per cent LTV worked out individually,” he said in the earnings call.

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