* I had applied for a credit card from the bank in which I have a savings account. But they have rejected my application. What could be the reason behind such action?
Before issuing credit cards or for that matter any credit facilities, banks obtain the credit report of the applicant from the Credit Information Bureau of India Ltd (CIBIL). A bank can reject the credit card application if the applicant has a bad credit record or inadequate income. You are entitled to know the reason for the rejection of your application from the bank. Ask for a formal rejection letter and if the bank refuses, then you can file a complaint to the banking ombudsman at bankingombudsman.rbi.org.in. You can get a copy of your credit report from CIBIL using this link www.cibil.com/ credit-score to download the form.

* I am a 44-year-old businessman, with an annual inco-me of Rs 3.5 lakh. I have a life insurance cover of Rs 12 lakh. Please tell me if this cover is enough; if not please suggest me an action plan.
Considering your age and annual income, you need to take a life cover of at least 12 times of your annual income — i.e Rs 42 lakh. So you need to take an additional life cover worth Rs 30 lakh. A term insurance policy for a 44-year-old non-smoker for 25-year term — if bought online — would be cost you upwards of Rs 11,289.

I have been investing in Reliance mutual fund growth SIP since last three years. The return is not satisfactory. I can continue my contribution to SIP for the next three to five years. Is it advisable to continue my SIP or withdraw in loss?
Never stop an SIP when the market is down. Generally, investments made in the downturn reduce your average cost and produces excellent returns over the long term. So you should definitely continue the SIP though you can review whether the fund chosen by you is still appropriate or not. Reliance MF-Growth is a mid-cap fund. By looking into the fund performance, it has not beaten its respective benchmark returns.

The tie-up will enable both M&M and Bank of India to leverage on the inherent strengths of each other’s vast network of over 250 dealerships and 3800 plus branches, respectively. The Bank has 3832 branches in India spread over all states/ union territories including specialized branches (21 Retail business centers and 52 rural credit processing hubs). These branches are controlled through 50 Zonal Offices.

Speaking on the occasion, Shri M. S Raghavan, Executive Director, Bank of India mentioned, “Our bank’s Bank of India Car Loan offers excellent terms for owning vehicles by individuals and we look forward to reach out to many more customers with this offering. Under the Festive offer which is applicable till 31^st March 2012, we are extending a 100% processing fee waiver and reduced rates of interest (currently starting at 11.50%). We are hopeful that with such competitive and customer friendly schemes we will be able to make in-roads into Mahindra counters in a short span of time and strengthen the relationship with M&M’s Automotive Sector and its customers. Further, we have a wide distribution network covering urban, semi urban and rural areas and we will leverage the same for mutual benefit.”

Mr. Arun Malhotra, Sr. Vice President, Sales & Customer Care, Mahindra & Mahindra said, “M&M has demonstrated its ability to show growth despite rising input costs & interest rates and is leading industry growth figures. We are relentlessly looking at options to provide the best schemes to our customers and give them the power of choice, and this strategic tie-up is surely a step in the same direction.”

Mr. Malhotra further added, “We see great synergy in this tie-up as this alliance will open up new markets and customers for both BoI and M&M. Bank of India reflects the successful blend of traditional values and ethics with the most modern infrastructure and we at M&M Automotive Sector are glad to be associated with the bank. With highly competitive schemes for our personal products range encompassing the Scorpio, Bolero, XUV₅₀₀, Xylo, Verito and Thar, we are hopeful of a good response from our dealers as well as customers.”

Effectively, this means that the ‘loan to value’ ratio has come down by 5-10% for home loans from what it was earlier.

Stamp duty and other levies vary from state to state. In Maharashtra, for example, stamp duty is 5%, while in Bangalore it is 8%, Kolkata 7% and New Delhi 4%.

In Mumbai, value added tax (1%), service tax (2.6%), registration fee and stamp duty add up to 9-10% of the cost of the property.

Experts believe the RBI’s latest move is aimed at curbing speculation in the property market. They point out that in December 2010, in order to check excessive lending by banks, RBI had directed commercial banks against lending more than 80 per cent of the value of a loan against property above Rs 20 lakh and not more than 90 per cent for loans below Rs 20 lakh.

While imposing the new set of curbs, the RBI has said, “This overstates the realisable value of the property, as stamp duty, registration and other documentation charges are not realisable. Consequently, the margin stipulated gets diluted.”

Property experts say the RBI’s move does not bode well for developers as it may lead to a further drop in home sales. “In the short run, the decision will put additional strain on the home buyer, at least till economic conditions improve,” said Pranab Datta, vice chairman of Knight Frank, a property consultants firm.

“It is unfortunate that inspite of clarity on importance of the need to provide shelter, RBI has issued such anti-housing guidelines,” said Lalit Kumar Jain, national president of Confederation of Real Estate Developers Association of India.

However, Om Ahuja, CEO (Residential) with JLL, another property consultants firm, believes the new notification will not impact home sales.

“So far, individuals used to put in 20% of own money. Now they will have to pay for stamp duty and registration from their own pockets. I think borrowers can do that without much issue as their loan amount also decreases,” said Ahuja.

Odisha’s gross non-performing asset (NPA) presently stands at 5%, much above the 3.5% national figure. He estimated the amount at nearly Rs 1,800 crore, with agriculture, small and medium enterprises (SME) sector accounting for the maximum default at nearly Rs 1,000 crore, a jump from the earlier figure of Rs 862 crore and still rising. “The NPA position in Odisha is quite high. States like Andhra Pradesh, UP and West Bengal have similar performances as well,” Chaudhuri.

The SBI chief said the issue had earlier come up for discussion last month at a meeting in Kolkata, in the presence of Union finance minister. “I think we need help from the government to do something,” Chaudhuri said. He hoped the situation to change after production of crops for the season is over. On the defaulting industries, he said the SBI had decided not to take a hard stand for realization of loans. “Loans have been given for steel and coal projects. We have information that they are not able to source raw material. Our endeavour is not to paralyze the projects, but to support them. We are prepared to wait a little more,” he said.

The SBI with 670 branches in Odisha has a total deposit of Rs 37,000 crore and Rs 15,743 crore given as advance. This is excluding loans given to industrial projects, he said. The loan amount includes home loans worth Rs 2,245 crore given to 52,000 customers and Rs 874 crore education loans given to one lakh students.

Chaudhuri said the SBI, the NPA position notwithstanding, has been doing its best to reach out to rural masses with banking services. “The bank during the current year will recruit about 500 non-officer employees with proficiency in Odia,” he said. The SBI chief said all saving account holders starting from March would be entitled to Rs 4 lakh worth accident insurance policy at a nominal premium. The bank is also going to introduce ‘multi-check facilities’ so that customers can use the cheques in any branch across the country. This apart, levy on outstation cheques is going to be removed in the next few months. “All this will be done in the next three months,” he said. Chaudhuri said the SBI is expected to record a good third quarter profit, to be known in a few days, of which he declined to divulge details yet. The SBI’s first and second quarter profits stood at Rs 1,550 crore and Rs 2,850 crore, he said.

Click to apply for Home Loans in Bhubneshwar

Insurance industry players say at present, almost 30 % of personal loan borrowers are buying insurance covers. And, that is increasing at a fast clip. In comparison, the penetration in case of home loans is up to 90 %, mostly for loans between Rs 10 lakh and Rs 1 crore and around 75-80 % for an average education loan of Rs 4 lakh and above.

Since personal loans are for a period of three-five years, the premium is not very high. Also, if the borrower purchases a group insurance policy, the premium is even cheaper.

“At a small cost, both banks and borrowers are assured of peace of mind,” said a public sector bank head.

The premium for a 35-38-year old is Rs 350-400 per lakh annually, if one takes the group insurance route. A single-premium policy for five years will cost Rs 1,500-2,000.

Says A S Narayanan, chief distribution officer at Bajaj Allianz Life Insurance, “Group mortgage covers are fast gaining ground. A lot of people are buying covers for personal and overdraft to avoid burdening their families in the event of their death.”

Group mortgage covers are mostly single-premium covers, especially for personal loans, as these are short-duration loans as opposed to housing loans. There are various options, such as a single-premium reducing cover, a single-premium level cover, and regular-premium reducing and level covers.

Reducing covers, as the name implies, decrease as the outstanding loan amount (principal borrowed) decreases over the loan tenure.

This results in a lower premium as the loan amount decreases. On the other hand, a level cover stays stagnant even if the loan amount decreases. “Some of these policies also have a money-back proposition where the buyer gets back a certain sum at the end of five years,” said a senior SBI official.

According to bankers, borrowers are being sold the covers under the proposition of ‘no headache to families, in case of an untimely death or even unemployment’.

“Borrowers are showing interest because if there is a default due to death, the family will not be pestered or will not be burdened with a loan,” said the retail head of a private sector bank.

Some banks have even made it mandatory to purchase a cover with a personal loan. In the case of some, the premium is included as part of the loan fee. However, a senior SBI official says since the central bank does not allow linking an insurance product with any loan, banks have to take a consent order from the customer before selling such bundled products.

As per Harshala Chandorkar, senior vice president – consumer relations, Credit Information Bureau of India or Cibil, the company is in discussions with leading telecommunication players like Vodafone and Bharti Airtel for using their respective databases and amalgamating them in the credit score.

However, there is no need to fret yet as the discussions are still in preliminary stages. Till then, familiarise yourself with concepts like credit limits for mobile bills and how these can impact. A credit limit is similar to a spending limit on credit cards.
Says Anurag Prashar, President Corporate Services, Reliance Communications says, “Cibil has approached Reliance Communication with a proposal to use their database to enable us profile our postpaid customers. Their credit profiling framework is intended to help telecommunication players in identification of defaulter. It will also assist in assigning adequate credit limits.” Amrinder Gill Judaa

According to a Bharti Airtel spokesperson credit limit is a function of a customer’s usage and past history. Numbers are assigned based on how long you’ve been with a service provider, security deposit, usage and payment history, services opted for. A steady high usage and regular payment means high credit limit. This limit is reviewed every month.

Although credit limit is also supposed to check your costs it may often exceed your average monthly usage. You are notified only once you reach a certain percentage, sometimes on using 90 per cent of the limit. When you exceed your limit, there’s a temporary restriction on outgoing calls and messages. To restart the services, you are required to make an interim payment. Say your credit limit is Rs 2,000 and by the twentieth of the month your bills reads Rs 2,500. You will have to pay a specific amount to bring the outstanding within the credit limit. The balance will be payable in the next bill.

Bharti Airtel is currently exploring mutual partnership with Cibil to leverage their databases. Industry players suggest that the phone payment history when shared with credit bureaus will aid in setting credit limits. Much like the credit card issuers.

This may make it difficult for consumers to move to new service providers without clearing off dues. “There is no central database for service providers currently. If the telecommunication companies share their data with Cibil, this may change,” feels Sanjay Agarwal, senior vice president and group head – retail strategy and branding at Arcil.

Sample this: in the western countries, users without no prior credit history rarely get a post paid connection. They must use a prepaid connection first and after sufficiently building the credit history apply for a postpaid one. Even then, if there are any defaults in payments, customers find it difficult to change service providers for postpaid connections. A practice that may well be applied in India as well.

CMP Asia, a Carlyle Group fund, sold 2 crore shares (about 1.4%) of HDFC, about a quarter of its stake in the home loan major, at Rs 677 per share, aggregating Rs 1,354 crore, block deal data on BSE showed. The disclosure on the BSE, on which the deal was stuck, did not give any name of buyers of the stake. However, market sources said SBI Life Insurance and Vontobel Funds, an FII, were among the buyers. Deutsche Securities acted as the broker for Carlyle, institutional dealers said.

In 2007, Carlyle had picked up 5.6% stake in HDFC for $650 million. At Wednesday’s selling price, the PE fund has already made a profit of about 60% on this 1.4% stake, bought less than five years ago. Sheera Jasvir Ehsaas HDFC stock on the Bombay Stock Exchange closed the session at Rs 688, down 1.3% on the day.

Through another deal, USbased PE major Warburg Pincus sold 1.75 crore shares (2.4%) in private sector bank, Kotak Mahindra Bank, for Rs 875 crore. Disclosures about the deal, done on NSE, showed that SBI Life Insurance, ICICI Prudential MF, Blackrock foreign institutional investors (on behalf of Kuwait Investment Authority Fund), Vantobel Funds, and Deutsche Securities Mauritius were the buyers.
Institutional dealers pointed out that the Deutsche arm was a participatory note which bought the stake on behalf of Vantobel. The deal was done by India Infoline’s institutional securities arm, dealers said. The Kotak Bank stock closed 2.3% higher at Rs 509.

Last month, Standard Chartered Bank bought the performing portfolio of Barclays’ credit cards business in India. Barclays has decided to exit retail assets business in India and is also looking for buyers for its Rs 3,000 crore retail loan portfolio.

The portfolio acquired by Kotak Credit Card is estimated to be around Rs 250-300 crore and comprise nearly 200,000 cards. The private sector lender’s in-house asset reconstruction team will be responsible for recovering the dues from these accounts.

While the deal value was not immediately known, banks in India have to follow the Reserve Bank of India’s (RBI) guidelines on valuation of stressed asset sale.

According to RBI guidelines released in October, 2007 banks while selling non-performing assets have to work out the net present value of the estimated cash flow associated with the realisable value of the available securities net of the cost of realisation. The sale price, generally, should not be lower than the net present value.

Banks in India have once again expanding their credit cards businesses aggressively after a gap of nearly three years.

Standard Chartered Bank became the fifth largest credit card issuer in the country after it bought 170,000 credit cards from Barclays. The foreign lender is believed to have acquired this portfolio at a hefty discount to the book value, which was estimated around Rs 180-200 crore.

The transaction was the second buy-out in the credit card space following IndusInd Bank’s acquisition of Deutsche Bank’s credit cards business earlier in 2011. Yaad Teri Awarapan 2 Mp3 Song

IndusInd Bank bought 200,000 cards portfolio from Deutsche Bank including the foreign lender’s operating platform, technology, and staff. The private bank launched ‘IndusInd Credit Cards’ on June 1, 2011 and aims to grow the portfolio four-fold to Rs 800-900 crore within three years.

“We believe after three to four years of bloodbath and washout, the credit card industry is now ready to take off once again. This is a high-risk, high-reward business, and we think if we manage the risks properly, the rewards will be higher now,” Romesh Sobti, managing director and chief executive of IndusInd Bank, told Business Standard in an interview post acquisition of the cards business.

Even the established players have turned aggressive in growing their credit cards operations.

HDFC Bank, the largest issuer of credit cards in India, aims to double its portfolio in the next couple of years. The bank, which has 5.05 million cards, expects its portfolio to touch 10 million in two years, including two million cards exclusively for its women customers.

The bank also launched ‘Infinia’ cards last year for the uber-rich community, positioning it against the American Express, or Amex cards.

Bankers said that unlike the last time, there will not be significant erosion in the banks’ asset quality, since the expansion strategies are backed by rich information on borrowers’ credit histories obtained from the credit bureaus.

In September, 2011 the number of outstanding cards in the industry increased for the first time in eight months to 17.6 million. The number of cards has remained around the same level since then.

The event is also beneficial for customers who want information regarding a variety of other products and services like mobile and internet banking, insurance and financial planning solutions, said a SBI press release. The special attraction is the offer of 50 % waiver in processing charges in car loan and on the spot sanction of housing and car loans. Several builders and car dealers are participating in the event, it added.tnn

Apply for loans and credit cards at http://www.deal4loans.com

• What you can do

This mandate implies that more banks would come out with chip-based cards and they would look at including more customers, rather than offering it to a select category.

State Bank of India, for example, since mid–2011, offers EMV chip credit card to almost all its new customers.

If you are an existing SBI Card customer, check with the bank. You could be entitled to a chip card on renewal.

Besides, the RBI has also said that by June 30, 2013, banks must issue EMV chip and PIN-based credit/debit cards to customers who have made at least one purchase using their debit/credit card in a foreign location.

Three, if you are a customer of a bank that currently issues chip cards, visit your branch. If you have a credit card with dated credit limits or a higher average balance which entitles you to a debit card with enhanced features, you may be eligible for an upgrade to a chip card.

Going by the guidelines, the infrastructure is expected to catch up quickly too. In fact the working group report (May 2011) mentions that about 90 per cent of the POS terminals are already chip-ready.

Says Dhruv Shah, Product Manager, Electracard Services, “While EMV-supporting ATMs are not yet available in India, switches, which drive the transaction processing at ATMs, are already geared to support EMV transactions.”

Moreover, as EMV adoption rates vary worldwide, none of the issuers give you cards that are only chip-based.

All chip cards contain the magnetic stripe at the back. So, while an EMV-compliant machine will use the chip, a non-EMV machine can still process your transaction using the magnetic stripe.

That way, at least some of your transactions will be more secure.

Plastic money has made life much easier for all of us. But unless we have had a personal experience, we don’t realize how much of a security nightmare it can be. Here are a few things that will make our card transactions more secure.

• Chip cards reduce risk

Both these risks can be reduced to a great extent if you use cards that are ‘chip’ based rather than ‘magnetic stripe’ based and cards that require a PIN to be entered at POS terminals.

Unlike magnetic stripe cards, chip cards (also called EMV cards) use superior technology that helps guard against skimming and cloning. PIN requirement at POS terminals brings in a second layer of authentication, making misuse of stolen cards difficult.