Now banks are promoting payment for consumer durables through credit cards rather than giving loans to buy consumer durables. So if you are planning of taking loan to buy an expensive laptop for your personal use or wide screen 34 inch LCD TV for your family then it is not possible. You have to have credit card for buying these things.
ICICI Bank, India's largest retail bank, is in a procedure of closing down its retail service finance or consumer loans division. Earlier GE-Money and CitiFinancial, two of the most aggressive firms in the segment, have already stopped consumer durable financing.
Bankers say that banks which are still having consumer loan divisions would rather not give out such loans.
The post-dated cheque is being taken over by credit card payment mode. "Cost of operations in the consumer durable loan business is very high because of the small tenure and small ticket size," says an official from Kotak Mahindra Bank.
Then what should consumers do who are looking for credit to buy a consumer durable? They have to search for a merchant EMI (equated monthly installment) scheme between a bank and a product maker/seller. Under this scheme, the price of the product is split in 0% EMIs across 3 to 24 months.
"The price of the product is added to the overall credit card limit of the customer. These loans are normally through a tie-up with the merchant or a seller. The EMIs are for a short period - normally six months to one year - and it's a win-win for both banks and customers as the latter get reward points for payment of EMIs," said an official from Axis Bank.
Bankers say it is easier to keep track of a borrower through the credit card, especially when there is rise in defaults on consumer durable loans.
In case there is no merchant EMI scheme for the product and no consumer durable loan is available either, then the other option left with consumers is to take a personal loan on credit card. "Using credit card to pay a loan means a bank saves on processing cheques and it is also easier to track the loan repayment," says the official from Kotak Mahindra Bank.
Similar to most of credit cards, these personal loans also have a free credit period of around 45-50 days. After that the repayment EMIs start. The rate of interest charged on the loan is built into the EMI.
One thing to be taken care is that late payment on these loans invites rates of interests similar to those on credit cards. And the interest can vary anywhere from 40-45%. The interest charged will be double i.e. interest charged will be over and above the interest charged for the personal loan.
In comparison to this new scheme most consumer durable loans used to charge an interest of around 20%. Also prepaying these loans involves paying a prepayment charge of 2-3% on the principal outstanding amount.
Wednesday, April 30, 2008
Wednesday, April 16, 2008
Through smart cards banks reach to rural, urban poor
More and more banks have reached to the doorsteps of the urban and rural poor through smart cards and biometric cards. Smart card provider, FINO (Financial Information Networks and Operations) has just brought in one million households under its fold, in a joint arrangement with a number of banks including Union Bank of India, ICICI Bank and PNB.
The company has issued 8.5 lakh cards bringing million of house holds under its umbrella “The card issuances happen with a lag, but we have got a million customers already and issuances will follow,” FINO CEO Manish Khera said.
From few years the central bank has been emphasizing for reaching out the banking facilities to the poor people in rural areas. Working on these lines the banks are trying to draw in more people into the formal banking network by reaching out to the poor people in rural areas as well as hawkers in urban areas.
The Union Bank of India chairman and managing director MV Nair, stated that his bank has brought in two lakh people and the number is split between rural and urban poor. “Union Bank’s target for 2008-09 is to include half-a-million customers in rural as well as urban areas. We will issue cards to them as well, and encourage them to be a part of the formal financial system,” he said.
Smart cards, or biometric cards are similar to debit cards, but they use fingerprinting for identification instead of personal identification codes. According to Mr Khera this technology is actually safer than the current one used for debit and ATM cards.
He gave the suggestion that with the introduction of the fingerprinting and client-details in their database can contribute to the National ID program, as they are unique identification devices. He further added that the client’s ‘e-passbook’ is loaded on the card itself and contains all the financial details of the holder. The scheme got a good response since they are actually reaching out to the customers. “Banks normally adopt a passive approach to the poorer segments, further their procedural requirements can not be satisfied by most of the hawkers and migrants,” said Mr Khera. Banks, which have joined with FINO, have relaxed some of their know-your-client (KYC) requirements.
The company has issued 8.5 lakh cards bringing million of house holds under its umbrella “The card issuances happen with a lag, but we have got a million customers already and issuances will follow,” FINO CEO Manish Khera said.
From few years the central bank has been emphasizing for reaching out the banking facilities to the poor people in rural areas. Working on these lines the banks are trying to draw in more people into the formal banking network by reaching out to the poor people in rural areas as well as hawkers in urban areas.
The Union Bank of India chairman and managing director MV Nair, stated that his bank has brought in two lakh people and the number is split between rural and urban poor. “Union Bank’s target for 2008-09 is to include half-a-million customers in rural as well as urban areas. We will issue cards to them as well, and encourage them to be a part of the formal financial system,” he said.
Smart cards, or biometric cards are similar to debit cards, but they use fingerprinting for identification instead of personal identification codes. According to Mr Khera this technology is actually safer than the current one used for debit and ATM cards.
He gave the suggestion that with the introduction of the fingerprinting and client-details in their database can contribute to the National ID program, as they are unique identification devices. He further added that the client’s ‘e-passbook’ is loaded on the card itself and contains all the financial details of the holder. The scheme got a good response since they are actually reaching out to the customers. “Banks normally adopt a passive approach to the poorer segments, further their procedural requirements can not be satisfied by most of the hawkers and migrants,” said Mr Khera. Banks, which have joined with FINO, have relaxed some of their know-your-client (KYC) requirements.
Saturday, April 5, 2008
PNB decide to go solo in credit card business
Delhi-based Punjab National Bank (PNB) the second largest government-owned bank had announced in September 2007 that it has entered into a partnership with AIG and Infotech Global for credit card business. The bank has applied with the Reserve Bank of India for the approval of its joint venture. Following the delay from the RBI in granting them approval for the joint venture with American International Group (AIG) and Venture Infotech Global the bank has decided to go on its own with its credit card business.
When PNB’s chairman and managing director K C Chakrabarthy was contacted for his comments he declined.
As per the sources of the bank it has waited for about six months for the approval from the RBI and subsequently decided to go ahead with credit card business departmentally, rather than floating a subsidiary.
The bank has plans to launch the credit card business by October this year. Currently, the bank is having a co-branded card with HSBC, wherein PNB would only source clients, the risk and the rewards are reflected in HSBC’s books. Once the bank launches it’s own card, it will discontinue the tie-up with the foreign bank.
While RBI has not given any clear reason for delay, but according to the sources RBI might not be very comfortable with PNB’s tie-up with foreign partners for the credit card business as they do not have full regulatory control over the JV which would fall in the NBFC category.
“We have decided to start it within the bank since it does not require regulatory approval. Subsequently, as and when RBI approves the JV, we will hive off the credit card department as a separate subsidiary,” said a senior bank official. Among other Indian banks, State Bank of India and Bank of Baroda has separate subsidiaries for credit card business, while Bank of India is considering it. “We will approach the RBI when we have identified a partner for the alliance,” said Bank of India officials.
When PNB’s chairman and managing director K C Chakrabarthy was contacted for his comments he declined.
As per the sources of the bank it has waited for about six months for the approval from the RBI and subsequently decided to go ahead with credit card business departmentally, rather than floating a subsidiary.
The bank has plans to launch the credit card business by October this year. Currently, the bank is having a co-branded card with HSBC, wherein PNB would only source clients, the risk and the rewards are reflected in HSBC’s books. Once the bank launches it’s own card, it will discontinue the tie-up with the foreign bank.
While RBI has not given any clear reason for delay, but according to the sources RBI might not be very comfortable with PNB’s tie-up with foreign partners for the credit card business as they do not have full regulatory control over the JV which would fall in the NBFC category.
“We have decided to start it within the bank since it does not require regulatory approval. Subsequently, as and when RBI approves the JV, we will hive off the credit card department as a separate subsidiary,” said a senior bank official. Among other Indian banks, State Bank of India and Bank of Baroda has separate subsidiaries for credit card business, while Bank of India is considering it. “We will approach the RBI when we have identified a partner for the alliance,” said Bank of India officials.
Thursday, April 3, 2008
In India credit card user percentage increase by 50% in FY08
According to the reports from the banks and credit card issuers in India such as Citibank, American Express and Standard Chartered, have recorded a sharp jump of 50% in card usage in FY08.
Although in India on an average consumers spend Rs 4,000 per month per card, which is considerably less in comparison to other Asian nations like China, Japan and Thailand. In India the disposable income has gone up with this the use of plastic money is gaining prominence and has started picking up the pace after holding on to steady growth for years.
Three to four years ago, in India consumers used to spend around Rs 1,500 a month on their cards. Credit Card Management Consultancy (CCMC) director Vijay Mehta, said, “With disposable income going up in India and organized retail gaining prominence, consumers are increasingly getting used to credit cards”.
It is not only the organized retail sector responsible for the increase in the usage of plastic money but the co-branded cards and the benefits they offer are also responsible for more usage of credit card. Consumers in India are slowly shifting to co-branded cards, because of the benefits offered by the cards in the form of reward schemes and discounts given by both the credit card companies and tie-up firms.
For instance, American Express has tie-ups with Kingfisher Airlines and Airtel, Citibank has teamed up with MTV and Jet Airways and market leader ICICI has co-branded cards with HPCL and India times.
American Express vice-president-marketing Amit Dutta said, “Co-branded cards are doing extremely well and are instrumental in fuelling proportionate growth in the industry. We have witnessed a significant growth of 50% in the credit card section.”
With change in lifestyle, there has been change in the outlook of the consumers. Slowly the consumers are shifting to using credit cards for purchasing products and services against the traditional forms of payment such as cash or cheque. Increase in the usage of internet has also helped credit card industry.
“Since a host of services like airline or railways tickets, hotel bookings and movie shows can now be booked through the Internet by using credit cards, average spends per card have gone up,” said a Citibank official.
According to CCMC, figures at present there are about 25 million credit card holders in the country and it is expected the number will increase significantly in 2008-09. Around 40% of the cards are still inactive as a large number of consumers have multiple cards, but most of them use only one or two actively.
Although in India on an average consumers spend Rs 4,000 per month per card, which is considerably less in comparison to other Asian nations like China, Japan and Thailand. In India the disposable income has gone up with this the use of plastic money is gaining prominence and has started picking up the pace after holding on to steady growth for years.
Three to four years ago, in India consumers used to spend around Rs 1,500 a month on their cards. Credit Card Management Consultancy (CCMC) director Vijay Mehta, said, “With disposable income going up in India and organized retail gaining prominence, consumers are increasingly getting used to credit cards”.
It is not only the organized retail sector responsible for the increase in the usage of plastic money but the co-branded cards and the benefits they offer are also responsible for more usage of credit card. Consumers in India are slowly shifting to co-branded cards, because of the benefits offered by the cards in the form of reward schemes and discounts given by both the credit card companies and tie-up firms.
For instance, American Express has tie-ups with Kingfisher Airlines and Airtel, Citibank has teamed up with MTV and Jet Airways and market leader ICICI has co-branded cards with HPCL and India times.
American Express vice-president-marketing Amit Dutta said, “Co-branded cards are doing extremely well and are instrumental in fuelling proportionate growth in the industry. We have witnessed a significant growth of 50% in the credit card section.”
With change in lifestyle, there has been change in the outlook of the consumers. Slowly the consumers are shifting to using credit cards for purchasing products and services against the traditional forms of payment such as cash or cheque. Increase in the usage of internet has also helped credit card industry.
“Since a host of services like airline or railways tickets, hotel bookings and movie shows can now be booked through the Internet by using credit cards, average spends per card have gone up,” said a Citibank official.
According to CCMC, figures at present there are about 25 million credit card holders in the country and it is expected the number will increase significantly in 2008-09. Around 40% of the cards are still inactive as a large number of consumers have multiple cards, but most of them use only one or two actively.
Wednesday, April 2, 2008
ICICI Bank and American Express launched new line of credit card
ICICI Bank and American Express together signed an agreement in 2003 under which the ICICI Bank can issue American Express branded cards that can be used on American Express’ global merchant network.
ICICI Bank India’s second largest bank and American Express bank one of the world's leading financial services companies, in a joint venture launched two credit cards the “ICICI Bank Ascent American Express® Card” and the “ICICI Bank Business Ascent American Express® Card” .
The ICICI Bank Ascent American Express® Card offers customers a powerful value proposition of accelerated rewards and exclusive privileges for the sophisticated, affluent Indian consumer.
The second card ICICI Bank Business Ascent American Express® Card has been designed exclusively for entrepreneurs who will benefit from the Business Advantage Program featuring attractive savings on business related expenses.
Addressing at the launch, Mr. Sachin Khandelwal, Head Cards Group, ICICI Bank said, “Over time a card reflects upon the purchasing power and the changing lifestyle of a customer. Currently ICICI Bank has over 9.5 million customers and the increasing usage of credit cards in India makes it vital for us to meet the diverse needs of our customers.
The tie up with American Express will provide us with the platform to extend our offerings and the enhanced rewards program will assure our customers greater value every time they use the card.”
Mr. Kula Kulendran, Senior Vice President, Head of Global Network Services for Japan, Asia-Pacific and Australia region, American Express said, “We are delighted to have partnered with ICICI Bank to develop a very relevant and differentiated value proposition and I am confident that customers will be thrilled by this suite of products. Around the world, American Express partners with banks that share our commitment to superior customer service and providing quality products to customers. With ICICI Bank we have found the right partner to meet the needs of the Indian consumer.”
A comprehensive rewards program is attached to the ICICI Bank Ascent American Express Card that offers up to 6% of the value of transactions on the card. ICICI Bank and American Express have aligned with Taj Hotels Resorts and Palaces, Yatra.com and Provogue to create a world class rewards program and attractive year long privileges to card members. The card also offers various services like a personal concierge service, comprehensive travel insurance and the American Express Selects SM program providing exclusive discounts and privileges to card members in India and when traveling overseas.
ICICI Bank India’s second largest bank and American Express bank one of the world's leading financial services companies, in a joint venture launched two credit cards the “ICICI Bank Ascent American Express® Card” and the “ICICI Bank Business Ascent American Express® Card” .
The ICICI Bank Ascent American Express® Card offers customers a powerful value proposition of accelerated rewards and exclusive privileges for the sophisticated, affluent Indian consumer.
The second card ICICI Bank Business Ascent American Express® Card has been designed exclusively for entrepreneurs who will benefit from the Business Advantage Program featuring attractive savings on business related expenses.
Addressing at the launch, Mr. Sachin Khandelwal, Head Cards Group, ICICI Bank said, “Over time a card reflects upon the purchasing power and the changing lifestyle of a customer. Currently ICICI Bank has over 9.5 million customers and the increasing usage of credit cards in India makes it vital for us to meet the diverse needs of our customers.
The tie up with American Express will provide us with the platform to extend our offerings and the enhanced rewards program will assure our customers greater value every time they use the card.”
Mr. Kula Kulendran, Senior Vice President, Head of Global Network Services for Japan, Asia-Pacific and Australia region, American Express said, “We are delighted to have partnered with ICICI Bank to develop a very relevant and differentiated value proposition and I am confident that customers will be thrilled by this suite of products. Around the world, American Express partners with banks that share our commitment to superior customer service and providing quality products to customers. With ICICI Bank we have found the right partner to meet the needs of the Indian consumer.”
A comprehensive rewards program is attached to the ICICI Bank Ascent American Express Card that offers up to 6% of the value of transactions on the card. ICICI Bank and American Express have aligned with Taj Hotels Resorts and Palaces, Yatra.com and Provogue to create a world class rewards program and attractive year long privileges to card members. The card also offers various services like a personal concierge service, comprehensive travel insurance and the American Express Selects SM program providing exclusive discounts and privileges to card members in India and when traveling overseas.
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