Crisis hits home, auto, personal loan portfolios of foreign banks in India

Crisis hits home, auto, personal loan portfolios of foreign banks in India
Financial Express, Jan 27, 2009, Page No. 2

New DelhiThe deepening financial crisis and ballooning losses at global banks have forced major foreign banks in India to either stop or significantly reduce the amount of various loans including home, personal and car loans given to retail customers. While HSBC has shut its home loan operations, Standard Chartered, Citibank and ABN Amro have drastically pruned fresh home loans to customers, banking industry sources said, which was confirmed by a visit to branches of the four banks by FE reporters.
Deteriorating credit conditions, rising bad debts and losses have led to a sort of a temporary halt in retail loan disbursements by these banks. While public sector banks increased lending this year, private and foreign banks have reduced credit. Credit growth of foreign banks operating in India has almost halved to 16.9% as on January 2, 2009 from 30.7% as on January 4, 2008, as per RBI data released in the third quarter review of macroeconomic and monetary policy on Monday. Public sector banks lending grew by 28.6% as on January 2, 2009, up from 19.8% last year, whereas, credit growth of private banks fell to 11.8% as on January 2, 2009 from 24.2% a year ago, the RBI data showed.
The US banks are unable to lend after suffering losses of nearly $700 billion since the start of crisis in the sub prime mortgage market 18 months ago. Indian banks too have reduced credit disbursals after facing intermittent liquidity shortages. After contracting by Rs 1,157 crore in December, the non- food credit slightly rose to Rs 11,961 crore for the fortnight ended January 2, according to RBI data. Gross non performing assets of banks in India could hit 4.7% of total loans by fiscal end 2.3% currently, a note by financial services firm Antique Finance Ltd said.
HSBC and Standard Chartered have stopped providing personal and car loans, while Citibank has stopped personal loans to new customers, executives at these banks’ branches in Delhi said. Standard Chartered has expanded its ‘negative list’ of cities wherein the bank is not granting any loans. Interestingly, Ghaziabad is part of this negative list and bank executives refused to finance any property in most of the NCR region, including the ‘laldora’ areas of Delhi that have now been regularised.
A home loan executive said this list has been there for the last 2-3 years, but it has now been expanded. “We are going slower because of the financial crisis,” he said. When FE visited an ABN Amro bank as loan seekers last Monday, two branch executives did not directly deny home loan but said they would arrange for a call in the evening. The bank had not called since then. One of these executives said on further questioning on Wednesday it would be extremely difficult to arrange for a home loan.
A Citibank branch executive, however, said on Thursday the bank was willing to provide home loan at 11.75% rate and up to 80% of the property value. The bank has stopped personal loans to new customers and car loans are available only for the Maruti brand, the executive said. Calls and e-mails to these banks did not elicit response. Standard Chartered spokesperson did not respond to a questionnaire despite repeated attempts over the past two weeks. “We will be unable to respond to the queries, as we are currently in close season (till announcement of Group results in first week of March),” said a HSBC spokesperson. FE could not reach ABN Amro bank.
A Citibank spokesperson said the queries have become outdated in light of the restructuring at the bank. She did not respond on whether retail loans operations have been shut at Citibank. Citi, the US-based parent company, last Friday jettisoned its financial supermarket model to minimise losses that stood at $8.29 billion in the fourth quarter. It is splitting the company into two entities, Citicorp and Citi Holdings, to retain good assets including the global bank and to offload bad assets in future. Citi Financial, whose business in India includes home loans, personal loans and investment products, has posted a net loss of Rs 268.6 crore during the first three quarters of 2008.
While the new administration in the US is pushing to complete the bank rescue plan, the financial losses in the country may reach $3.6 trillion, New York University Professor Nouriel Roubini said at a conference in Dubai on Wednesday. The banks that have funds to lend are parking them in gilt securities for the fear of rising bad debts.