Daily News

What is a top-up loan and when should you go for it?

A top-up loan, along with a personal loan, a credit card, and other loan options, is an excellent way to obtain emergency cash. However, experts advise that at first, you must understand what a top-up loan is. And, when should you go for it?

Banks, housing finance firms, and other financial institutions offer top-up loans; which allow borrowers to borrow a specific amount of money in addition to their home loans. As a result, they are financing choices for borrowers who already have a loan with the lender, such as a home loan. Borrowers are normally only eligible for a top-up loan in this situation if they have been paying their EMIs on time and without default for at least a year.

“A borrower’s track record of repayments is one of the primary determining elements for the eligibility for top-up loans,” says Gaurav Jalan, CEO, and Founder of mpocket. This type of loan normally comes with the same terms and conditions as the original.”

In the event of an emergency, most people will either take out a personal loan. Or they will liquidate assets such as gold and property to get money. Experts believe that in some cases, a top-up loan on an existing house loan is a preferable option. Since top-up loans are readily available and come with a low interest rate.

Why top-up loan is right for you?

The most significant advantage of a top-up loan is that the borrower only has to complete minimal documents. Simply put, their existing loan EMIs will increase in proportion to the increased borrowing. It eliminates the need for the borrower to apply for a new loan; because it is approved based on the borrower’s existing loan with the lender. This streamlines the procedure and speeds up disbursement. As a result, this loan is a considerable choice for immediate funding.

Top Up Loan

“This makes it a perfect option in case of an urgent need for money,” Jalan explains. These loans are available for similar use as the original loan, but with fewer restrictions”. A home loan, for example, can only be used for that specific purpose. However, because a top-up loan is tied to an existing home loan, the borrower is not obligated to use the money for refurbishment or house repair. So this kind of loan is a good choice to borrow funds for house repairs or furnishing; as well as larger needs like business expansion, kid education, medical emergencies, and weddings. In summary, top-up loans have no restriction for their use.

“These loans are a perfect alternative in case of unanticipated occurrences or whenever one requires a personal loan, a loan against their property, or even gold,” Jalan continues. It’s a more convenient and hassle-free option in such situations.

Daily News

Reforms help banks recover Rs 5.5 lakh crore of bad debt: Govt

Reforms help banks recover Rs 5.5 lakh crore of bad debt, according to the central government. The government took many steps in the pursuit of recovering the bad debt in the country. These reforms hugely contributed to the active recovery of the money stuck in these bad loans.

money bad debt

The steps taken by the government such as enacting the Insolvency & Bankruptcy Code (IBC) helped in the recovery of around Rs 5.5 lakh crore of bad debt. Out of this, an approximate value of Rs 1 lakh crores was recovered from accounts that were technically written off.

Considering that the build-up of non-performing assets (NPAs) is lower than anticipated. The government is also positive in its beliefs that the state-run lenders are well poised to meet credit requirements. As per the state government sources, a provision coverage ratio of 83.7 percent is protecting the public sector banks against any potential hit.

How pandemic is affecting the recovery?

A senior finance ministry official mentioned that despite the ongoing pandemic, the turnaround for public sector banks has been remarkable. According to the official, the recent reforms and the proposed asset reconstruction company will further clean up their balance sheets. Moreover, it will make fresh capital available from the sale of bad assets, which will again push credit growth.

The government believes that the Rs 8 lakh crore of write-offs in the past seven years are technical in nature. These write-offs will bring adequate transparency to the bank balance sheets.

bad debt recovery

The official said that the banks put forth every attempt to recover even after writing off a loan. A sum of Rs 99,996 crore is recovered from such loan accounts. Which includes the IBC process in cases of Bhushan Steel, Bhushan Power & Steel, and Essar Steel. Banks also recovered their money from other write-offs as well such as Kingfisher.

Since 2018, the government has reportedly recovered Rs 3.1 lakh crore. However, the process is still ongoing and it will expectedly recover from more such loans. In the process, Banks used multiple sources such as internal accruals, fundraising from the market, and capital infusion by the government, in order to comply with the regulatory requirement.

For more such updates, keep watching this space!

Daily News

Collection Efficiency of Bank Loans Improves in June

An observation tells that the collection efficiency of bank loans improves in June. The banks started witnessing an improvement in loan collection efficiency in June. This observation came after the relaxation of multiple lockdowns in various states as the second Covid wave recedes.

For Equitas Small Finance Bank, the gross advances grew 15 percent YoY in the June quarter ending to Rs 17,839 crore. Earlier, it was Rs 15,573 crore in the corresponding quarter, last fiscal year. Sequentially, the bank’s gross advances have remained flat compared to Rs 17,925 crore in Q4FY21.

equitas small finance bank

Equitas Small Finance Bank (ESFB) on Wednesday said its collection efficiency had improved to 83.49 percent in June, up from 77.8 percent in May. However, there is a decline in efficiency from the April figure of 105.16 percent. The billing efficiency of the bank has also inched up to 69.52% in June from 66.97% in the previous month. These trends are available as per the provisional figures filed by the ESFB with the stock exchanges. In April, the bank had clocked a billing efficiency of 84.68%.

A few reasons for the observed collection

Its MD & CEO P N Vasudevan, “The bank’s borrowers are largely in the informal segments, dealing in daily use products and services. There is a temporary disruption in the supply chain for these products and services due to the imposition of Covid-19 restrictions. However, during the month of June 2021, states in the west and north experienced improved collection efficiencies as lockdowns eased while southern states opened up towards the end of the month. We anticipate a sharp improvement in collections in the coming months as Covid wave two recedes.”

Indian Overseas Bank

For Indian Overseas Bank, an improvement in the loan collection efficiency rate for small loans, vehicle, and housing loans is observed. The loan collection efficiency is seen at 85% between June and July from 70%-75% in May. The state-owned bank expects the recovery to be better in the September quarter.

Motilal Oswal has come out with its first-quarter (April-June 21) earnings estimates for the bank and insurance sector. The brokerage house expects Kotak Mahindra Bank to report a net profit of Rs. 1,563.4 crore up 25.6% year-on-year (down 7.1% quarter-on-quarter).

In a research note from Kotak on banks’ asset quality, the recovery environment showed improvement in 1QFY22. Although, even after the improvements it is still not fully normal. More discussion on the recovery environment will come as a trend for 2QFY22 given the impact of the second Covid wave. Besides small loans, the report expects banks to provide a positive outlook on corporate recovery. Especially, due to a few large resolutions that have been completed or will be completed soon.

For more such updates, keep watching this space!

Business Daily News

PM Modi Calls the Inclusion of Retail, Wholesale Traders as MSMEs ‘landmark’ Step, Says Committed to Empowering Traders.

Prime Minister Narendra Modi termed revised guidelines for MSMEs as a landmark step. He said that this move would help the traders boost business. It would also give them various benefits. Traders were waiting for this decision for since long.

Union Minister of MSMEs and Road Transport and Highways, Nitin Gadkari on Friday announced revised guidelines for MSMEs with the inclusion of retail and wholesale trade as MSMEs. Official sources explain that the move will have an immediate impact on smaller retailers and wholesalers with businesses up to Rs. 2.5 crores. He tweeted that retailers and wholesalers will come under the definition of MSMEs.

Earlier traders and wholesalers were facing lots of problems when they were not considered MSMEs.While applying for the loan they were not considered in the definition of MSMEs and hence never get any financial benefit out of it. Now every business person can get the benefits for the same. This is really an appreciable step for all traders and businessmen.

What is Udyam Registration Portal?

udyam portal

Udyam Registration Portal helps the business person to get the Government tenders. Due to Udyam, the loans get cheaper. The interest rate on these loans is up to 1.5% lower than the interest rate on regular loans. For the facilities, Higher preference is always given to businesses that are registered under Udyam for Government licence and certification.

All the traders and wholesalers will now be able to register themselves on the Udyam portal under newly revised guidelines.

How much time does it take?

Udyam registration takes around four to five working days for the issuance of the certificate. Usually, you get an email alert with the registration number and important details regarding the certification.

Is GST mandatory for Udyam MSME registration?

No, the GSTIN number is not mandatory for registration. The Ministry of Micro, Small, and Medium Enterprises notified that there is no need for GSTIN for MSME Udyam registration.

With this Traders will be availing of immediate-term finance as part of various schemes announced under the “Atma-nirbhar Bharat” program. this landmark decision will have a structural impact on the sector. It will be further formalized by giving better finance options for businesses that went to get structured. In addition to it, it will give retail MSMEs the support they need to survive, revive and thrive.

Interestingly, Retail and trade associations have welcomed the move. They say it will enable traders to get access to needed capital having been impacted greatly due to the pandemic.

For more such updates, keep watching this space!