| 6 Million Brits Consolidating Their Loans
The preferred method of debt consolidation in the UK is where unsecured personal loans are combined into one loan with a lower monthly payment. While this is a positive move in the short term, it can be fiscally devastating over the long-term if done in the wrong way. Unsecured personal loans are the preferred method of consolidating loans. The interest rate is normally lower than interest being charged on credit cards and store cards. Research from uSwitch.com revealed that a number of Brits who consolidate their loans continue to use their credit cards and store cards to create further debt. The number of UK consumers who apply for personal loans that are higher than the amount they need to consolidate their loans are using the extra money, not for wealth generating, but to maintain a higher lifestyle.
MORTGAGE DEMAND MAY BE SLOWING - BBA
Total sterling lending to the UK private sector showed a net underlying increase of 9.5bn (+0.7%) to 1,297bn. This compares with an underlying rise of 20.7bn in January and an average of 12.6bn over the previous six months. Net mortgage lending rose by an underlying 5.2bn. This was lower than both the increase of 5.4bn last month and the monthly average of 5.7bn over the previous six months. Unsecured personal lending fell by 0.2bn in February, compared with a fall of 0.3bn in January. Loans & overdrafts accounted for all of the fall, with credit card borrowing unchanged. There was a strong lending increase to real estate companies (+1.9bn) and lending to construction rose by 0.3bn, although there were decreases in lending to cold water supply companies (-0.3bn), wholesale & retail trade (-0.3bn) and agriculture & fishing (-0.2bn).
Increased provisioning to cost banks Rs 4000 cr
The Reserve Bank of India (RBI), in its third-quarter review of the monetary policy for 2006-07 (refers to financial year, April 1 to March 31), has increased the provisioning requirements for scheduled commercial banks (SCBs or banks) from 1% to 2%; the increase applies to banks exposure in the standard assets category towards the real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure, and personal loans. Further, the provisioning requirement for banks exposures in the standard assets category to the non-deposit-taking systemically important non-banking financial companies (NBFCs-ND_SI) was increased to 2% from 0.4%. The increase in provisioning requirements would have a significant impact on banks profitability if the entire enhanced provisioning quantum were to be borne by banks in 2006-07.
Govt wants banks to go slow on sensitive sectors
MUMBAI: The government is nudging all public sector banks to go slow on loans to sensitive sectors like stock market and real estate and prune outstandings like credit card receivables. In a recent letter to the state-owned banks, the finance ministry has said "public sector banks need to have a re-look at the continued high credit growth in the sensitive sectors and take necessary steps for rebalancing overall credit portfolio." The March 29 letter, issued by Amitabh Verma, joint secretary in the banking division, comes against the backdrop of a continued rise in the share of sensitive credit — real estate, commodities and stock market. The banking regulator, RBI, has also shown concern on ballooning personal loans and credit card portfolio of banks. These loans are unsecured in nature and are more prone to defaults.
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