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April 13, 2001
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Money > Business Headlines > Report April 13, 2001 |
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Banks jettisoning collaterals in cashing-out frenzyBS Banking Bureau Foreign and private sector banks, saddled with depleted collaterals (shares received as security for loans given), are selling heavily on the bourses, thereby accelerating the downward spiral of scrips. Banks are also slowing down or temporarily shelving their loans-against-shares business. Analysts said with the stock markets on skid row, banks are left with little option but to start selling their collaterals collection as fast as possible to extract the maximum value. The banks who are reported to be selling shares include Citibank, Standard Chartered, HDFC Bank, IndusInd Bank and ICICI Bank. An executive of one of the private sector banks said: "We have already issued notices to our customers in cases where the collateral has gone down. In some cases, the customers have topped their collateral or have reduced their loans by paying off a part of their loans." Banks give a notice to the customer depending on the intensity of the fall in the collateral from two to seven days. But the way some stocks are going down it would be difficult for the customers even to top the collateral, analysts aver. Some of these bankers were holding on to these waning collaterals, hoping against hope that things will improve. These officials will have to take a hard decision now. John Band, chief executive officer of ASK Raymond James, said, "Stock prices are nearing their bottom. However, no one wants to buy stocks such as HFCL and Zee." "If banks have collaterals they have to sell them and realise the money now. If they hold on, they would be highly disappointed," he said. Banks have also temporarily stopped giving loans against shares. "There is a slowdown in the loans-against-shares business. We are reworking the margins on technology stocks. We are, however, more comfortable with the old economy stocks," said a senior banker. Powered by ALSO READ:
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