Country’s largest lender State Bank of India, few days back extended its special schemes and also few other public sector banks have extended their special home loans schemes under which they are offering discounted rates, even though they have reduced returns on fixed deposits. On the other hand private sector banks have raised interest rates on auto loans, ending their festive offers.
SBI controls a fifth of bank loans and deposits, has its special 8% home loan scheme until March 31, 2010. Among others lenders, Bank of India and Punjab National Bank have taken decision of extending their special home loan scheme till December 31, while Union Bank of India has extended its scheme till January 15. Officials of these banks told ET that main behind extension of scheme is to get hold of market share in mortgages.
Bank of Baroda is the only bank among public sector banks to roll back its special home loan scheme from October 31. “We feel the interest rate cycle is set to change,” said an official explaining the bank’s interest rate view.
While the SBI officials said as the scheme has got huge response and there has been floppy demand for corporate loans, looking at these factors the bank has extended the scheme. But the processing fee on loans, which was waived for three months, has been reintroduced.
In mortgages the interest rates on most loans increase along with market rates, whereas auto loans are offered on fixed rates. The private banks like HDFC Bank and Kotak Mahindra the big players of car loan business after SBI, have taken preventive measure against an expected rise in interest rates. Thus HDFC bank has discontinued its festive offer discounts of 50-75 basis points from November 1.
Ashok Khanna, EVP, HDFC Bank pointed out, “There is good demand but interest rates are likely to move up. As such, there is no point in continuing with the discounts”. The bank is offering auto loans at the interest rate of up to 10.25-11.5%. After SBI, HDFC Bank is the second largest player in auto loans and gives around Rs 1,000 crore every month. Kotak Mahindra, another large player, has raised its interest rates by 25 bps from October 25 and will be raising them by another 25 bps from November 9. “Our two-month festive season offer saw strong volumes. The rates have to reflect the reality on the lending side,” said Sumit Bali, CEO, Kotak Mahindra Prime.
Meanwhile, SBI and Punjab National Bank have reduced interest rates on deposits by 25-50 basis points with effect from November 9. After revision in rates SBI will offer marginally lower rates on deposits as compared to its rival PNB. For 1-2 years, SBI is offering 6% while PNB is offering 6.5%. For 2-5 years, SBI has fixed 6.5%. PNB is offering 6.75% for 2-3 years and 7% for 3-5 years.
SBI by reducing rates is discouraging deposits growth, as it is facing a huge liquidity overhang.
Wednesday, November 11, 2009
Wednesday, October 28, 2009
In spite of cheaper loan, home loan growth declined to 5.4%
Although banks are offering cheaper home loan but there are not many borrowers to take loans from banks to buy houses. On the other hand lending to the distressed real estate developers by banks is comparatively high.
By the end of August 2009 the lending to the real estate was high at 41.5% from the previous year. Thus at the end of August 2009, the total commercial real estate loan outstanding amounted to Rs 96,701 crore which is up by Rs 28,353 crore as against the previous year.
A senior public sector banker said, “Banks lent a helping hand to big real estate companies after they got into trouble due to the liquidity crisis when foreign funds suddenly dried up. This was done so that some of the projects do not get stranded”. While, home loans has grown by just 5.4 per cent (Rs 14,668 crore) year-on-year to Rs 29,872 crore.
However year-on-year basis the increase in loans to individuals at the end of August 2009 amounted to just 4.1 per cent in contrast to credit card out standings and consumer durable loans dropped retail loan growth. This supports the sharp down fall in the private consumption demand for the first quarter of 2009-10 as projected in the GDP data.
According to a senior official working with private sector bank, “Banks are recoiling from unsecured lending. Personal loans and credit cards are now issued only to in-house customers after banks faced huge delinquencies”.
The credit card outstanding registered a declined growth of 14.3 per cent as the portfolio compressed by Rs 4,167 crore from Rs 7,173 crore in the year-ago period.
On the other hand the consumer durable loans reported a declined growth of 16.7 per cent with the portfolio compressing by Rs 1571 crore. Thus the banking system reported the total credit card outstanding of Rs 24,889 crore.
According to disaggregated data on sectoral deployment of gross bank credit of up to August 28, 2009 projected 53.8 per cent of incremental non-food credit (y-o-y) which was absorbed by industry against the 47.5 per cent in the corresponding period of the previous year. While the agricultural sector rapt around 21.8% of the incremental non-food bank credit as against 8.5% in the corresponding period of the last year.
The loans given to the industry grew by 17.9 per cent the portfolio showing increase by Rs 1,66,121 crore at the end of August 28, 2009 from Rs 2,30,229 crore in the year ago. The personal loan saw a growth by 2.3 per cent with its portfolio moving up by Rs 12,594 crore during this period from Rs 69,763 in the year ago period.
There was sharp growth of 34.5 per cent in the education loan segment with its portfolio growing by Rs 8,217 crore from Rs 6,576 crore in the year-ago period. However growth in incremental credit for services sector depicted a major deceleration. On year-on-year basis it reported a growth of 11 per cent with the portfolio increasing by Rs 62,775 crore at the end of August 2009.
The professional services segment was the most affected segment which reported the growth by 20.5 per cent while the year-ago period it had registered a growth of 64.6 per cent. Transport operators depicted a portfolio increase of 9.1 per cent from 26.3 per cent in the year-ago period.
By the end of August 2009 the lending to the real estate was high at 41.5% from the previous year. Thus at the end of August 2009, the total commercial real estate loan outstanding amounted to Rs 96,701 crore which is up by Rs 28,353 crore as against the previous year.
A senior public sector banker said, “Banks lent a helping hand to big real estate companies after they got into trouble due to the liquidity crisis when foreign funds suddenly dried up. This was done so that some of the projects do not get stranded”. While, home loans has grown by just 5.4 per cent (Rs 14,668 crore) year-on-year to Rs 29,872 crore.
However year-on-year basis the increase in loans to individuals at the end of August 2009 amounted to just 4.1 per cent in contrast to credit card out standings and consumer durable loans dropped retail loan growth. This supports the sharp down fall in the private consumption demand for the first quarter of 2009-10 as projected in the GDP data.
According to a senior official working with private sector bank, “Banks are recoiling from unsecured lending. Personal loans and credit cards are now issued only to in-house customers after banks faced huge delinquencies”.
The credit card outstanding registered a declined growth of 14.3 per cent as the portfolio compressed by Rs 4,167 crore from Rs 7,173 crore in the year-ago period.
On the other hand the consumer durable loans reported a declined growth of 16.7 per cent with the portfolio compressing by Rs 1571 crore. Thus the banking system reported the total credit card outstanding of Rs 24,889 crore.
According to disaggregated data on sectoral deployment of gross bank credit of up to August 28, 2009 projected 53.8 per cent of incremental non-food credit (y-o-y) which was absorbed by industry against the 47.5 per cent in the corresponding period of the previous year. While the agricultural sector rapt around 21.8% of the incremental non-food bank credit as against 8.5% in the corresponding period of the last year.
The loans given to the industry grew by 17.9 per cent the portfolio showing increase by Rs 1,66,121 crore at the end of August 28, 2009 from Rs 2,30,229 crore in the year ago. The personal loan saw a growth by 2.3 per cent with its portfolio moving up by Rs 12,594 crore during this period from Rs 69,763 in the year ago period.
There was sharp growth of 34.5 per cent in the education loan segment with its portfolio growing by Rs 8,217 crore from Rs 6,576 crore in the year-ago period. However growth in incremental credit for services sector depicted a major deceleration. On year-on-year basis it reported a growth of 11 per cent with the portfolio increasing by Rs 62,775 crore at the end of August 2009.
The professional services segment was the most affected segment which reported the growth by 20.5 per cent while the year-ago period it had registered a growth of 64.6 per cent. Transport operators depicted a portfolio increase of 9.1 per cent from 26.3 per cent in the year-ago period.
Monday, October 26, 2009
To get home loan approved has got little more difficult
The banks offering 8% to 8.5% interest rate on home loans have made buying house affordable which in turn has revived the real estate market. On the other hand according to prospective buyers getting a home loan approved has got a little more difficult.
After the economic meltdown, banks are rechecking the installment to income ratios (the figure that determines the EMI). Previously on the loan up to 50% of the monthly salary banks had extended EMI (equated monthly installment). But, now this installment to income ratio is between 30% and 50%. Renu Sud Karnad, joint MD, HDFC, told, "It's not advisable to have a single number".
Also, many banks are taking into consideration only the recurring income of the potential buyer to calculate the monthly EMI. Praveen Kutty, executive V-P and head (retail banking), Development Credit Bank informed, "Banks are no longer looking benevolently at other sources of income such as performance bonus, variable pay, while computing the installment to income ratio". Karnad said, "Our focus is on income sources that are consistent while arriving at the ratio".
Kotak Mahindra Bank a private sector bank takes into account only the monthly income to calculate the EMI. Kamlesh Rao, executive V-P, Kotak Mahindra Bank stated, "We don't look at other incomes such as bonus because it may not be there every year". While some banks to maintain consistency in loan disbursals, they are assigning sector-wise ‘installment to income' ratios. These ratios are calculated on the basis of the performance and the credit rating of the industry.
According to analysts banks are taking stringent steps to improve the risk management.
Clyton Fernandes of AnandRathi Financial Services stated, "Some time back, capital was hard to come by. Banks did not want to set aside huge amounts towards lending because if delinquencies arose, they would have had to make provisions for those".
The banks are scrutinizing documentation stringently before disbursing home loans. Besides checking the pre-requisite documents like IT returns of three years, PAN card copy and bank statements of the last six months, banks are also examining details such as passbook entries to check withdrawal patterns. Rao pointed out, "Banks like us are actively tapping the Cibil (Credit Information Bureau) list to check the credit card payment history. Such checking is now integral to the credit buying process".
And from the professionals who have shifted to metros, banks are asking for title deeds of house in the hometown even though it is registered in the name of the parents, to establish the repayment capacity of the executive.
After the economic meltdown, banks are rechecking the installment to income ratios (the figure that determines the EMI). Previously on the loan up to 50% of the monthly salary banks had extended EMI (equated monthly installment). But, now this installment to income ratio is between 30% and 50%. Renu Sud Karnad, joint MD, HDFC, told, "It's not advisable to have a single number".
Also, many banks are taking into consideration only the recurring income of the potential buyer to calculate the monthly EMI. Praveen Kutty, executive V-P and head (retail banking), Development Credit Bank informed, "Banks are no longer looking benevolently at other sources of income such as performance bonus, variable pay, while computing the installment to income ratio". Karnad said, "Our focus is on income sources that are consistent while arriving at the ratio".
Kotak Mahindra Bank a private sector bank takes into account only the monthly income to calculate the EMI. Kamlesh Rao, executive V-P, Kotak Mahindra Bank stated, "We don't look at other incomes such as bonus because it may not be there every year". While some banks to maintain consistency in loan disbursals, they are assigning sector-wise ‘installment to income' ratios. These ratios are calculated on the basis of the performance and the credit rating of the industry.
According to analysts banks are taking stringent steps to improve the risk management.
Clyton Fernandes of AnandRathi Financial Services stated, "Some time back, capital was hard to come by. Banks did not want to set aside huge amounts towards lending because if delinquencies arose, they would have had to make provisions for those".
The banks are scrutinizing documentation stringently before disbursing home loans. Besides checking the pre-requisite documents like IT returns of three years, PAN card copy and bank statements of the last six months, banks are also examining details such as passbook entries to check withdrawal patterns. Rao pointed out, "Banks like us are actively tapping the Cibil (Credit Information Bureau) list to check the credit card payment history. Such checking is now integral to the credit buying process".
And from the professionals who have shifted to metros, banks are asking for title deeds of house in the hometown even though it is registered in the name of the parents, to establish the repayment capacity of the executive.
You can reduce EMIs, tenures of home loans by opening current account
The EMI (equated monthly installments) paid every month in case of home loan upset your budget. But if you plan your spending you can reduce the tenure and, also the interest component in your loan - in some cases will be reduced by half.
For instance, you take a home loan of Rs 10 lakh whose tenure is 20 years you have to pay an EMI of Rs 11,361. From your savings if you keep aside another Rs 3,000, you can reduce the tenure of your installments by 48 per cent and will be able to save around 53 per cent in interest.
Such scheme works in those cases where a bank grants a home loan and at the same time opens a current account, through which the EMI is to be paid. Usually, banks charge 0.5 per cent higher for such schemes than the normal home loan rate. The banks offering such schemes are State Bank of India offers and some foreign banks such as HSBC, Standard Chartered and Citibank.
“Since the interest rate will always be higher than the deposit rate, this is an ideal product in which one can save a lot on the interest part and clear off the loan at a faster rate,” a senior SBI official said.
However bank does not give any interest on the amount kept in a current account. But you can save extra money in your current account which will be advantageous. Banks calculate interest rate of your home loan on the principal amount outstanding minus the amount that is available in the account. This is calculated every month, and on the daily basis. Although this will not bring any change in the EMI amount, but the bank will reduce the tenure depending on how much interest has accrued from your money in the current account.
According to one of the financial expert, “Overseas, these kinds of loans are very popular and are known as ‘offset loans’ as the balance in the linked account offsets the home loan amount. These loans are the best for individuals who look to repay the home loan early by saving some sum in their kitty”.
Under this scheme you have the flexibility of using the money in the current account, in case of need. According to financial expert, “The advantage of this product is that it allows you to use your cash surplus to reduce interest liability and at the same time gives the flexibility of withdrawing whenever they want”.
For instance, you take a home loan of Rs 10 lakh whose tenure is 20 years you have to pay an EMI of Rs 11,361. From your savings if you keep aside another Rs 3,000, you can reduce the tenure of your installments by 48 per cent and will be able to save around 53 per cent in interest.
Such scheme works in those cases where a bank grants a home loan and at the same time opens a current account, through which the EMI is to be paid. Usually, banks charge 0.5 per cent higher for such schemes than the normal home loan rate. The banks offering such schemes are State Bank of India offers and some foreign banks such as HSBC, Standard Chartered and Citibank.
“Since the interest rate will always be higher than the deposit rate, this is an ideal product in which one can save a lot on the interest part and clear off the loan at a faster rate,” a senior SBI official said.
However bank does not give any interest on the amount kept in a current account. But you can save extra money in your current account which will be advantageous. Banks calculate interest rate of your home loan on the principal amount outstanding minus the amount that is available in the account. This is calculated every month, and on the daily basis. Although this will not bring any change in the EMI amount, but the bank will reduce the tenure depending on how much interest has accrued from your money in the current account.
According to one of the financial expert, “Overseas, these kinds of loans are very popular and are known as ‘offset loans’ as the balance in the linked account offsets the home loan amount. These loans are the best for individuals who look to repay the home loan early by saving some sum in their kitty”.
Under this scheme you have the flexibility of using the money in the current account, in case of need. According to financial expert, “The advantage of this product is that it allows you to use your cash surplus to reduce interest liability and at the same time gives the flexibility of withdrawing whenever they want”.
Wednesday, October 21, 2009
Interest rate war brewing up in the home loan segment amongst banks
This festival season, people can gain out of the interest rate war brewing up amongst the banks, in the home loan segment. Recently Development Credit Bank (DCB) and GIC Housing are offering home loans below the 8% level. DCB has recently entered the segment, is offering 7.95% for loans up to Rs 5 crore at fixed interest rate for the first year and floating rates from second year onwards.
Praveen Kutty, executive V-P and head, retail banking, DCB said, “While affordable housing is the buzzword these days, the market would get a further boost if attractive financing options are available”. While the Central Bank of India and Punjab National Bank on certain loan segments have waived off processing fees and documentation charges. On comparing rates one will find that there isn’t much difference between 7.95% and 8% home loans, thus bankers say that it’s mainly a psychological pricing to attract more borrowers.
According to analysts borrowers prefer to go for low interest bearing home loan accounts and that too offered by the nationalized banks over private banks. VS Reddy, MD, Lakshmi Vilas Bank pointed out, “While there has been demand in the affordable home loan segment (up to Rs 30 lakh), the activity in the upper bracket (loans above Rs 50 lakh) has mostly revolved around restructuring or takeover of such accounts by another bank”.
On the other hand private sector bankers caution borrowers that before signing on the dotted line they should check through the sub 8% schemes.
Renu Sud Karnad, joint MD, HDFC says, “Many of these 8% schemes are of short duration, between three months and one year. But for us, housing finance is the only product...unlike some of the other lenders for whom home loans maybe just one of their products”. The bank is offering a floating rate of 8.75% for loans up to Rs 15 lakh, 9% (Rs 15-50 lakh) and 9.5% for loans above Rs 50 lakh up to 20 years. Thus HDFC is expecting to increase its disbursal by at least 20% this year.
On the other hand borrowers say it is not easy to do such change over. IT professional R Ram who took a Rs 8 lakh home loan from a private bank at 12% is planning to change account to a nationalized bank for sometime now.
“I am half way through my EMI repayment and have been trying to shift my account for sometime now but it’s not happening. First, the bank with whom I have a home loan said I have to pay a hefty penalty and transfer fees. After I agreed to that, they are now insisting that they need clearance from head office in Mumbai. The bank is saying some more documentation needs to be completed and more procedures need to be followed. It is quite frustrating.”
Praveen Kutty, executive V-P and head, retail banking, DCB said, “While affordable housing is the buzzword these days, the market would get a further boost if attractive financing options are available”. While the Central Bank of India and Punjab National Bank on certain loan segments have waived off processing fees and documentation charges. On comparing rates one will find that there isn’t much difference between 7.95% and 8% home loans, thus bankers say that it’s mainly a psychological pricing to attract more borrowers.
According to analysts borrowers prefer to go for low interest bearing home loan accounts and that too offered by the nationalized banks over private banks. VS Reddy, MD, Lakshmi Vilas Bank pointed out, “While there has been demand in the affordable home loan segment (up to Rs 30 lakh), the activity in the upper bracket (loans above Rs 50 lakh) has mostly revolved around restructuring or takeover of such accounts by another bank”.
On the other hand private sector bankers caution borrowers that before signing on the dotted line they should check through the sub 8% schemes.
Renu Sud Karnad, joint MD, HDFC says, “Many of these 8% schemes are of short duration, between three months and one year. But for us, housing finance is the only product...unlike some of the other lenders for whom home loans maybe just one of their products”. The bank is offering a floating rate of 8.75% for loans up to Rs 15 lakh, 9% (Rs 15-50 lakh) and 9.5% for loans above Rs 50 lakh up to 20 years. Thus HDFC is expecting to increase its disbursal by at least 20% this year.
On the other hand borrowers say it is not easy to do such change over. IT professional R Ram who took a Rs 8 lakh home loan from a private bank at 12% is planning to change account to a nationalized bank for sometime now.
“I am half way through my EMI repayment and have been trying to shift my account for sometime now but it’s not happening. First, the bank with whom I have a home loan said I have to pay a hefty penalty and transfer fees. After I agreed to that, they are now insisting that they need clearance from head office in Mumbai. The bank is saying some more documentation needs to be completed and more procedures need to be followed. It is quite frustrating.”
Thursday, September 10, 2009
IOB rules out any immediate cut in home loan rate
The Indian Overseas Bank (IOB) a Chennai-based lender is not going to follow the peers in cutting down home loan rates. IOB chairman and managing director SA Bhat informed it is not possible for the bank to lower the rates due to its cost structure.
Bhat said, “We will not be joining the rush for reducing home loan rates. It is not feasible to provide home loans with repayment tenures of 15 to 20 years at 8-8.5 per cent”.
Currently home loans up to Rs 30 lakh are being offered by IOB with a fixed repayment period of up to 20 years at a floating rate of 8.75 per cent, and for loans above Rs 30 lakh, the rate being offered is 10.25 per cent.
Recently some of the major banks such as State Bank of India (SBI), Punjab National Bank (PNB) and Union Bank of India (UBI) have introduced festive offer under which they are offering lower home loan rates. SBI under its festive offer has announced special home loans at 8 per cent interest rate for the first year, while 8.5 per cent for the next two years and at a floating rate thereafter. On the other hand PNB is offering 20-year home loans at a fixed rate of 8.5 per cent for the first two years and at floating rate after that. However UBI has announced 8.5 per cent for the first three years and floating rate subsequently.
Bhat informed IOB has plans to make venture in the private equity space. For this bank is considering a tie-up to float a new entity as one of the options. However he denied any entry into the mutual fund business in the near future as he finds the space ‘crowded’.
Bhat added, “We are considering all options for a private equity business. We may either float a new entity for this purpose in association with some other company or we may participate in one of the existing funds as a core investor. We will take a decision on this in the next few months”.
Major Banks like SBI and ICICI Bank, are already in the PE business.
In a reply to why the bank prefers to enter PE space rather than to other businesses such as asset management (mutual fund), Bhat said currently PE business is on a high-growth path and it is likely to remain so in the near future. “That’s why we want to be present in this particular space. On the other hand, the mutual fund space has become too crowded with close to 40 reputed players, which makes it very tough for a new player.”
IOB has already entered into the insurance business through a joint venture company, Universal Sompo General Insurance. Other partners in the insurance venture are Allahabad Bank, Karnataka Bank, Dabur Investments and Sompo Japan Insurance.
Bhat said, “We will not be joining the rush for reducing home loan rates. It is not feasible to provide home loans with repayment tenures of 15 to 20 years at 8-8.5 per cent”.
Currently home loans up to Rs 30 lakh are being offered by IOB with a fixed repayment period of up to 20 years at a floating rate of 8.75 per cent, and for loans above Rs 30 lakh, the rate being offered is 10.25 per cent.
Recently some of the major banks such as State Bank of India (SBI), Punjab National Bank (PNB) and Union Bank of India (UBI) have introduced festive offer under which they are offering lower home loan rates. SBI under its festive offer has announced special home loans at 8 per cent interest rate for the first year, while 8.5 per cent for the next two years and at a floating rate thereafter. On the other hand PNB is offering 20-year home loans at a fixed rate of 8.5 per cent for the first two years and at floating rate after that. However UBI has announced 8.5 per cent for the first three years and floating rate subsequently.
Bhat informed IOB has plans to make venture in the private equity space. For this bank is considering a tie-up to float a new entity as one of the options. However he denied any entry into the mutual fund business in the near future as he finds the space ‘crowded’.
Bhat added, “We are considering all options for a private equity business. We may either float a new entity for this purpose in association with some other company or we may participate in one of the existing funds as a core investor. We will take a decision on this in the next few months”.
Major Banks like SBI and ICICI Bank, are already in the PE business.
In a reply to why the bank prefers to enter PE space rather than to other businesses such as asset management (mutual fund), Bhat said currently PE business is on a high-growth path and it is likely to remain so in the near future. “That’s why we want to be present in this particular space. On the other hand, the mutual fund space has become too crowded with close to 40 reputed players, which makes it very tough for a new player.”
IOB has already entered into the insurance business through a joint venture company, Universal Sompo General Insurance. Other partners in the insurance venture are Allahabad Bank, Karnataka Bank, Dabur Investments and Sompo Japan Insurance.
Wednesday, September 2, 2009
More banks to float special home loans schemes
After some of the leading banks such as State Bank of India, Punjab National Bank and Canara Bank two more banks are planning to float special home loan schemes in couple of weeks. The chief executives of the two banks – Pune based Bank of Maharashtra and Mangalore-based Corporation Bank told Financial Chronicle the final details of the scheme are being finalized by the two banks and will be announcing there schemes in couple of weeks.
Earlier leading banks — including State Bank of India, Punjab National Bank and Canara Bank has announced special home loan schemes, in which the interest rates in the initial years tend to be fixed. It is believed afterwards to become market-driven.
According to Allen Pereira, chairman and managing director of Bank of Maharashtra the new scheme will help in lining in targeted customers through discounts being offered on a case-to-case basis. He said, “After going through the profile of various customers, particularly the existing ones, we will approach them and offer them special discounts. We will also try to rope in creditworthy customers of another bank and give them similar discounts. But, the scheme most probably will be a universal scheme”.
Pereira informed bank’s aim will be to offer something different from other bank schemes. Pereira said, “The special home loan scheme, which we plan to launch in a week’s time, will not be duplication of the schemes launched by the major banks”.
In a reply to why Bank of Maharashtra is not offering schemes similar to that of State Bank of India and other leading banks, Pereira said, “Such schemes are likely to result in a higher NPA level as when interest rates harden at a later stage; it affects the paying capability of individuals, resulting in higher defaults.”
Currently Bank of Maharashtra is offering 9.25 per cent interest rate on floating basis on home loans up to Rs 30 lakh.
Corporation Bank informed that it is also on the final stage of process of finalizing the details of special home loan scheme.
JM Garg, chairman and managing director of Corporation Bank told, “We plan to launch a special home loan scheme soon, which would be comparable with other similar products in the market”.
Earlier leading banks — including State Bank of India, Punjab National Bank and Canara Bank has announced special home loan schemes, in which the interest rates in the initial years tend to be fixed. It is believed afterwards to become market-driven.
According to Allen Pereira, chairman and managing director of Bank of Maharashtra the new scheme will help in lining in targeted customers through discounts being offered on a case-to-case basis. He said, “After going through the profile of various customers, particularly the existing ones, we will approach them and offer them special discounts. We will also try to rope in creditworthy customers of another bank and give them similar discounts. But, the scheme most probably will be a universal scheme”.
Pereira informed bank’s aim will be to offer something different from other bank schemes. Pereira said, “The special home loan scheme, which we plan to launch in a week’s time, will not be duplication of the schemes launched by the major banks”.
In a reply to why Bank of Maharashtra is not offering schemes similar to that of State Bank of India and other leading banks, Pereira said, “Such schemes are likely to result in a higher NPA level as when interest rates harden at a later stage; it affects the paying capability of individuals, resulting in higher defaults.”
Currently Bank of Maharashtra is offering 9.25 per cent interest rate on floating basis on home loans up to Rs 30 lakh.
Corporation Bank informed that it is also on the final stage of process of finalizing the details of special home loan scheme.
JM Garg, chairman and managing director of Corporation Bank told, “We plan to launch a special home loan scheme soon, which would be comparable with other similar products in the market”.
Thursday, August 6, 2009
Private Banks & housing finance companies might not get home loan subsidy
For home loan seekers it was good news when the Finance Minister announced banks will give interest subsidy of 1% on home loan. But it is not easy as it is looking, because the finance ministry will be putting some tough provisions for the housing finance companies and other private sector players.
Therefore it makes us think again before we breathe a sigh of relief on the statement given by Pranab Mukherjee that the government is subsidizing a 1% cut in home loan interest rates.
According to NDTV report complied on the information collected from the sources that not every one will be benefited from this subsidy. The finance ministry will probably put some condition for a large section of the lenders.
According to the information provided by the sources of the finance ministry the private Housing Finance Companies and banks whose interest rates are higher than public sector banks the government might not give subsidy to them. There seems to be of at least 2% of differential between the interest rate of public sector banks and private banks and housing finance companies. In this situation the government might have to give its subsidy to the lenders whose interest rates are low or it might restrict the interest rates for the home loan subsidy.
In his statement Finance Minister has said Rs 1000 crore subsidy will be offered to scheduled commercial banks and housing finance companies for a 1% cut in home loan interest rates for a period of one year.
Therefore, in case the government basis its decision on this course of action, then the private sector banks will not get this benefit.
However it’s too early to say something. Before finalizing anything a scheme should be discussed with the RBI, the National Housing Bank and finally the Cabinet will approve it.
Therefore it makes us think again before we breathe a sigh of relief on the statement given by Pranab Mukherjee that the government is subsidizing a 1% cut in home loan interest rates.
According to NDTV report complied on the information collected from the sources that not every one will be benefited from this subsidy. The finance ministry will probably put some condition for a large section of the lenders.
According to the information provided by the sources of the finance ministry the private Housing Finance Companies and banks whose interest rates are higher than public sector banks the government might not give subsidy to them. There seems to be of at least 2% of differential between the interest rate of public sector banks and private banks and housing finance companies. In this situation the government might have to give its subsidy to the lenders whose interest rates are low or it might restrict the interest rates for the home loan subsidy.
In his statement Finance Minister has said Rs 1000 crore subsidy will be offered to scheduled commercial banks and housing finance companies for a 1% cut in home loan interest rates for a period of one year.
Therefore, in case the government basis its decision on this course of action, then the private sector banks will not get this benefit.
However it’s too early to say something. Before finalizing anything a scheme should be discussed with the RBI, the National Housing Bank and finally the Cabinet will approve it.
Monday, July 27, 2009
IRF tool makes floating interest rate favorable for home loan borrowers
When you decide to take a home loan confusion arises in mind which interest rate you should opt for. Most of the time the decision is taken in favor of fixed interest rate as it does not change with the change in the interest rate in the market, while the floating interest rate changes.
But now you can decide for floating interest rates earlier which used to upset your budget because of the increased evaluated monthly installment (EMI).
Soon MCX SX a subsidiary of Multi Commodity Exchange of India Ltd (MCX) operating under the regulatory framework of Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI), will be launching a tool in the form of interest rate futures (IRF) which will enable the home loan borrowers to alleviate the risks of interest rate volatility.
However on investing only 2.5 per cent (margin money) of the home loan amount in IRF, the borrower will be able to earn that much money in the futures market which he will loose whenever there is increase in EMIs.
The MCX SX is waiting for the approval from the regulator for the launch of IRF. According to MCX SX officials globally IRFs is having a share of more than 70 per cent in the overall futures market.
It becomes easy for a home loan borrower to evade the risk of interest rate instability after investing in IRF. For example if you take a home loan of Rs 20 lakhs for a period of 15 year and bank charges interest rate of nine per cent, then the EMI calculated will amount to Rs 20,285.
So, if the interest rate increases by one per cent, the EMI will increase to Rs 21,492 which will add a yearly burden of Rs 14,500. Therefore if you invest 2.5 per cent of 20 lakhs i.e., Rs 50,000 in the interest rate futures then it would recompense the loss arise with the increase in the EMI.
This means that you will earn around Rs 14,500 in a year. Thus you will repay your home loan at the interest rate of nine per cent.
But now you can decide for floating interest rates earlier which used to upset your budget because of the increased evaluated monthly installment (EMI).
Soon MCX SX a subsidiary of Multi Commodity Exchange of India Ltd (MCX) operating under the regulatory framework of Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI), will be launching a tool in the form of interest rate futures (IRF) which will enable the home loan borrowers to alleviate the risks of interest rate volatility.
However on investing only 2.5 per cent (margin money) of the home loan amount in IRF, the borrower will be able to earn that much money in the futures market which he will loose whenever there is increase in EMIs.
The MCX SX is waiting for the approval from the regulator for the launch of IRF. According to MCX SX officials globally IRFs is having a share of more than 70 per cent in the overall futures market.
It becomes easy for a home loan borrower to evade the risk of interest rate instability after investing in IRF. For example if you take a home loan of Rs 20 lakhs for a period of 15 year and bank charges interest rate of nine per cent, then the EMI calculated will amount to Rs 20,285.
So, if the interest rate increases by one per cent, the EMI will increase to Rs 21,492 which will add a yearly burden of Rs 14,500. Therefore if you invest 2.5 per cent of 20 lakhs i.e., Rs 50,000 in the interest rate futures then it would recompense the loss arise with the increase in the EMI.
This means that you will earn around Rs 14,500 in a year. Thus you will repay your home loan at the interest rate of nine per cent.
Thursday, July 2, 2009
SBI offers two new home loan products
On Tuesday State Bank of India launched new home loan scheme under which it is offering two home loan products. Earlier bank was offering home loans at a fixed rate of 8% for the first year ended.
Under the new scheme bank is offering loans up to Rs30 lakh at fixed rates of 8% for the first year and 9% for the next two years. Moreover customers will get two options in the fourth year under this scheme – a floating rate at 2% below State Bank Advance Rate (SBAR), which is currently at 11.75%, or a fixed rate of 1% below SBAR with a five year re-set. A re-set means new rates will come into effect at the end of the specified period.
However for loans above Rs30 lakh bank will charge interest rate from the fourth year will be either a floating rate at 1% below the existing SBAR or a fixed rate of 0.5% below SBAR with a five year re-set. SBI is having a home loan portfolio of at least Rs56,000 crore.
Previously in December the Indian Banks’ Association (IBA) and member public sector banks had announced home loans, in which loan up to Rs5 lakh was offered at 8.5%, and between Rs5 lakh and Rs20 lakh at 9.25%. Both rates were fixed for five years. But SBI launched its own scheme instead of the five-year fixed rate scheme, offered a lower rate of 8% fixed for only one year.
The IBA scheme has also ended on Tuesday. A senior banker with a large public sector bank said IBA is likely to announce a new home loan scheme within a day or two similar to the scheme introduced in December last year.
On Tuesday LIC (Life Insurance Corporation) Housing Finance also announced a reduction in interest rates for its existing home loan borrowers. According to company statement the floating interest rates for existing customers has been reduced by 50 basis points on EMIs due on 1 July and payable on 1 August. One basis point is one hundredth of a percentage point.
This is the third reduction done by LIC Housing Finance in the calendar year and in the last six months the total reduction has touched 200 basis points.
Previously the company had slashed 1.50% for existing home loan borrowers in two trenches of 75 basis points each in January and April.
Under the new scheme bank is offering loans up to Rs30 lakh at fixed rates of 8% for the first year and 9% for the next two years. Moreover customers will get two options in the fourth year under this scheme – a floating rate at 2% below State Bank Advance Rate (SBAR), which is currently at 11.75%, or a fixed rate of 1% below SBAR with a five year re-set. A re-set means new rates will come into effect at the end of the specified period.
However for loans above Rs30 lakh bank will charge interest rate from the fourth year will be either a floating rate at 1% below the existing SBAR or a fixed rate of 0.5% below SBAR with a five year re-set. SBI is having a home loan portfolio of at least Rs56,000 crore.
Previously in December the Indian Banks’ Association (IBA) and member public sector banks had announced home loans, in which loan up to Rs5 lakh was offered at 8.5%, and between Rs5 lakh and Rs20 lakh at 9.25%. Both rates were fixed for five years. But SBI launched its own scheme instead of the five-year fixed rate scheme, offered a lower rate of 8% fixed for only one year.
The IBA scheme has also ended on Tuesday. A senior banker with a large public sector bank said IBA is likely to announce a new home loan scheme within a day or two similar to the scheme introduced in December last year.
On Tuesday LIC (Life Insurance Corporation) Housing Finance also announced a reduction in interest rates for its existing home loan borrowers. According to company statement the floating interest rates for existing customers has been reduced by 50 basis points on EMIs due on 1 July and payable on 1 August. One basis point is one hundredth of a percentage point.
This is the third reduction done by LIC Housing Finance in the calendar year and in the last six months the total reduction has touched 200 basis points.
Previously the company had slashed 1.50% for existing home loan borrowers in two trenches of 75 basis points each in January and April.
Tuesday, June 16, 2009
Hike in income-tax exemption likely for interest payment on home loans
In the coming Union Budget there is going to be a good news for the home loan borrowers as government is planning to hike income-tax exemption available for interest payment on home loans to Rs 2.5 lakh a year, in order to boost demand and re-establish the slowdown-hit housing industry.
An anonymous government official told the ministry of Housing and Urban Development has recommended finance minister Pranab Mukherjee to make an announcement in this regard as part of his Budget presentation in early July.
Currently the taxpayers who have taken housing loans are entitled for income-tax exemption on interest payment of up to Rs 1.5 lakh every year. In addition to this, the repayment of principal amount is part of investments entitled for benefit under Section 80(C) of the Income-Tax Act, which has a ceiling of Rs 1 lakh.
The President Pratibha Patil in her address to both the houses of Parliament has highlighted the fact that housing is one of the main focus areas of the government. It has been observed the existing tax exemption limit is inadequate as a two-bedroom house in the big cities costs as a minimum of Rs 25 lakh.
Taking in consideration that a person taking a loan of Rs 20 lakh at an interest rate of 9.5%, will have to pay Rs 1,88,493 towards interest alone in the first year. Which means his annual interest payment in the first five years will be more than Rs 1.5 lakh.
In case the exemption limit is raised to Rs 2.5 lakh, then a person paying that much home loan interest in a year will be able to save an additional Rs 31,000 in tax every year. Thus with this saving of over Rs 2,500 a month, for most of borrowers purchasing home will become more affordable.
According to existing norms, the borrower gets tax benefits only after the construction of the house is completed, which usually takes 2-3 years in case of builder flats.
The housing industry has asked the government to give the tax deduction benefit to the borrowers as soon as loan repayment starts, as this will give substantial relief to home buyers and increase the demand.
In the Budget documents an estimate of the revenue forgone on account of this exemption has not been mentioned but it is unlikely to be very significant.
Out of the total Rs 38,107-crore tax revenue given up on account of tax exemptions to individuals in 2007-08, nearly Rs 30,000 crore is on account of Section 80C benefit, one component of which is principal repayment on housing loan.
Over the past months the housing sector in the country has been hit hard by demand slowdown, due to rise in interest rates.
In addition to lowering of home loan interest rates, the industry has been continuously asking for greater tax benefit, as it had the probability of stimulating demand.
An anonymous government official told the ministry of Housing and Urban Development has recommended finance minister Pranab Mukherjee to make an announcement in this regard as part of his Budget presentation in early July.
Currently the taxpayers who have taken housing loans are entitled for income-tax exemption on interest payment of up to Rs 1.5 lakh every year. In addition to this, the repayment of principal amount is part of investments entitled for benefit under Section 80(C) of the Income-Tax Act, which has a ceiling of Rs 1 lakh.
The President Pratibha Patil in her address to both the houses of Parliament has highlighted the fact that housing is one of the main focus areas of the government. It has been observed the existing tax exemption limit is inadequate as a two-bedroom house in the big cities costs as a minimum of Rs 25 lakh.
Taking in consideration that a person taking a loan of Rs 20 lakh at an interest rate of 9.5%, will have to pay Rs 1,88,493 towards interest alone in the first year. Which means his annual interest payment in the first five years will be more than Rs 1.5 lakh.
In case the exemption limit is raised to Rs 2.5 lakh, then a person paying that much home loan interest in a year will be able to save an additional Rs 31,000 in tax every year. Thus with this saving of over Rs 2,500 a month, for most of borrowers purchasing home will become more affordable.
According to existing norms, the borrower gets tax benefits only after the construction of the house is completed, which usually takes 2-3 years in case of builder flats.
The housing industry has asked the government to give the tax deduction benefit to the borrowers as soon as loan repayment starts, as this will give substantial relief to home buyers and increase the demand.
In the Budget documents an estimate of the revenue forgone on account of this exemption has not been mentioned but it is unlikely to be very significant.
Out of the total Rs 38,107-crore tax revenue given up on account of tax exemptions to individuals in 2007-08, nearly Rs 30,000 crore is on account of Section 80C benefit, one component of which is principal repayment on housing loan.
Over the past months the housing sector in the country has been hit hard by demand slowdown, due to rise in interest rates.
In addition to lowering of home loan interest rates, the industry has been continuously asking for greater tax benefit, as it had the probability of stimulating demand.
Wednesday, May 13, 2009
PSU banks restructuring loan slabs will offer cheaper home loans
The public sector banks (PSU) are restructuring their loan slabs in order to extend the cap to the consumers. Currently PSUs on loans up to Rs 20 lakh are offering a special rate of 9.25% for the first five years, under a special scheme open till June 30, 2009.
But now the state-run banks will offer 9.25% or less interest rate for the first five years on home loans up to Rs 30 lakh aiming to stimulate housing demand.
Executive informed following this bank are working out to extend the cap for availing of the special offer to Rs 30 lakh through restructured loan slabs and keep the offer open for a longer period.
For instance Corporation Bank has indicated that it will replace two concession slabs of up to Rs 5 lakh and Rs 5-20 lakh with a new slab of up to Rs 30 lakh.
“We are working on restructuring of slabs for home loans to bring down the lowest slab to Rs 30 lakh. We find that 75 % of the demand for home loans was in this segment,” the bank’s chairman and managing director JM Garg informed.
He said the rate of interest for the first five years will have a ceiling set at 9.25% or lower. Mr Garg told, “There is further room for interest rate cuts and our next asset liability committee is to take a call”.
IDBI Bank chief financial officer RK Bansal also confirmed that the bank is having final round of discussions on restructuring of the slabs, whereas other public sector banks such as Canara Bank have already begin the exercise.
It is expected the steps taken by the state-run banks will help in stimulating demand for new homes, which cratered since September last. Indeed, the December quarter saw insignificant growth in housing loan off as compared to the previous quarter.
However the demand for lower-priced houses showed improvement in the March quarter, with developers reducing prices and banks launching special schemes.
In metropolitan cities as well as tier-I and tier-II cities banks witnessed a surge in
demand for sub-Rs 30 lakh home loans.
Kotak Mahindra executive vice-president Kamlesh Rao pointed out, “While home loans in the sub-30 lakh category industry is seeing a higher growth of around 10-15%, the Rs 30 lakh plus category is showing a growth of 5-10%.”
Currently, state-run banks are charging 9.75-10% on loans of Rs 30 lakh.
After restructuring of loan slab monthly payment on a 20-year Rs 30 lakh loan will drop roughly Rs 500 for every 25 basis cut in interest rates.
Thus, a rate of 9.25% or lower could leave Rs 1,500 or more will leave more money in the hands of the buyer every month.
According to the special IBA (Indian banking Association) package open till June 30, housing loans of up to Rs 5 lakh draw a maximum interest rate of 8.5% in the first one year, while loans between Rs 5 lakh and Rs 20 lakh attract 9.25% for the first five years.
But now the state-run banks will offer 9.25% or less interest rate for the first five years on home loans up to Rs 30 lakh aiming to stimulate housing demand.
Executive informed following this bank are working out to extend the cap for availing of the special offer to Rs 30 lakh through restructured loan slabs and keep the offer open for a longer period.
For instance Corporation Bank has indicated that it will replace two concession slabs of up to Rs 5 lakh and Rs 5-20 lakh with a new slab of up to Rs 30 lakh.
“We are working on restructuring of slabs for home loans to bring down the lowest slab to Rs 30 lakh. We find that 75 % of the demand for home loans was in this segment,” the bank’s chairman and managing director JM Garg informed.
He said the rate of interest for the first five years will have a ceiling set at 9.25% or lower. Mr Garg told, “There is further room for interest rate cuts and our next asset liability committee is to take a call”.
IDBI Bank chief financial officer RK Bansal also confirmed that the bank is having final round of discussions on restructuring of the slabs, whereas other public sector banks such as Canara Bank have already begin the exercise.
It is expected the steps taken by the state-run banks will help in stimulating demand for new homes, which cratered since September last. Indeed, the December quarter saw insignificant growth in housing loan off as compared to the previous quarter.
However the demand for lower-priced houses showed improvement in the March quarter, with developers reducing prices and banks launching special schemes.
In metropolitan cities as well as tier-I and tier-II cities banks witnessed a surge in
demand for sub-Rs 30 lakh home loans.
Kotak Mahindra executive vice-president Kamlesh Rao pointed out, “While home loans in the sub-30 lakh category industry is seeing a higher growth of around 10-15%, the Rs 30 lakh plus category is showing a growth of 5-10%.”
Currently, state-run banks are charging 9.75-10% on loans of Rs 30 lakh.
After restructuring of loan slab monthly payment on a 20-year Rs 30 lakh loan will drop roughly Rs 500 for every 25 basis cut in interest rates.
Thus, a rate of 9.25% or lower could leave Rs 1,500 or more will leave more money in the hands of the buyer every month.
According to the special IBA (Indian banking Association) package open till June 30, housing loans of up to Rs 5 lakh draw a maximum interest rate of 8.5% in the first one year, while loans between Rs 5 lakh and Rs 20 lakh attract 9.25% for the first five years.
ICICI to focus on home, car loan segments along with deposits
Just two days prior taking charge of India’s largest private sector bank, Chanda Kochhar, who just got done completed restructuring ICICI Bank, is preparing herself for an expansion force.
She told, “We will open 580 new branches, for which we have received the license, over the next one year”. In an exclusive interview to Hindustan Times, Kochhar informed the bank will be avoiding loans for risky assets like small personal loans, credit cards and two-wheeler loans.
She told but, it will be focusing more on the home loan, car loan, corporate loan and project loan segments while enhancing deposits. The bank is working on the process to increase its current account and savings account (CASA) deposits that keep costs low.
She told, “We will open 580 new branches, for which we have received the license, over the next one year”. In an exclusive interview to Hindustan Times, Kochhar informed the bank will be avoiding loans for risky assets like small personal loans, credit cards and two-wheeler loans.
She told but, it will be focusing more on the home loan, car loan, corporate loan and project loan segments while enhancing deposits. The bank is working on the process to increase its current account and savings account (CASA) deposits that keep costs low.
Wednesday, March 25, 2009
When Are You Entitled To Receive A Free Credit Report?
You can receive a free credit report once a year. However, there are some eligibility criteria for that. According to Federal regulations, you are eligible to receive one credit report free of cost from a credit reporting agency once in a year provided that you officially state that:
1) You are getting public assistance.
2) You are without a job and would be looking for a job for the following 60 days (or two months).
3) You think that there are erroneous details in your credit report as a result of fraudulence.
4) If you also have been refused for credit based on the details of your credit report, you are eligible to receive a copy of your credit report without any cost from the particular credit bureau which issued the credit report.
5) As per the state regulations, the residents of Maryland, Colorado, New Jersey, Massachusetts, as well as Vermont are eligible to receive one credit report free of cost from a credit reporting agency every year. The residents of Georgia are eligible for two credit reports free of cost on a yearly basis.
For getting authentic credit reporting services, you can make an attempt to improve your credit score, collect online credit report free of cost, steer clear of becoming an identity theft victim and rectify any mistakes in your credit report.
Your credit score is essential for getting credit. You should know this score if you want to apply for a credit card, a mortgage loan or an automobile loan. Your credit score is utilized by the lenders for determining how much credit risk you pose to them. When you have a good credit score, then you have a better chance of getting the most affordable rates. Thus, it is worth mentioning that bad credit may cost you thousands of dollars.
1) You are getting public assistance.
2) You are without a job and would be looking for a job for the following 60 days (or two months).
3) You think that there are erroneous details in your credit report as a result of fraudulence.
4) If you also have been refused for credit based on the details of your credit report, you are eligible to receive a copy of your credit report without any cost from the particular credit bureau which issued the credit report.
5) As per the state regulations, the residents of Maryland, Colorado, New Jersey, Massachusetts, as well as Vermont are eligible to receive one credit report free of cost from a credit reporting agency every year. The residents of Georgia are eligible for two credit reports free of cost on a yearly basis.
For getting authentic credit reporting services, you can make an attempt to improve your credit score, collect online credit report free of cost, steer clear of becoming an identity theft victim and rectify any mistakes in your credit report.
Your credit score is essential for getting credit. You should know this score if you want to apply for a credit card, a mortgage loan or an automobile loan. Your credit score is utilized by the lenders for determining how much credit risk you pose to them. When you have a good credit score, then you have a better chance of getting the most affordable rates. Thus, it is worth mentioning that bad credit may cost you thousands of dollars.
Wednesday, February 18, 2009
IDBI Bank to finalize sale of home loan arm by Feb
Chairman of the state-run IDBI bank told it might sell its Pune-based home loan subsidiary IDBI Home Finance (IHFL) by the end of this month.
Earlier bank had postponed its sale, as it required more information about prospective buyers.
IDBI Bank's Chairman and Managing Director Yogesh Agarwal informed, "We had deferred the plan (to sell the subsidiary) earlier as our Board felt more information about prospective buyers was needed. Our sale plan is very much on".
Although the board has not set any time limit for the sale, but expects to close the deal by February end, Agarwal informed.
Earlier on January 23 IDBI Bank's Board had met to discuss and announce the buyer from amongst three contenders -- Dewan Housing, Religare Enterprises and Tata Capital.
As per information from IDBI Bank sources, Dewan Housing has put in the highest bid.
IDBI Bank took decision to sell its home-loan subsidiary with an aim to strengthen its housing finance business, which is at present being looked by both the bank and IHFL, thereby ensuing in competition between the two.
Earlier bank had postponed its sale, as it required more information about prospective buyers.
IDBI Bank's Chairman and Managing Director Yogesh Agarwal informed, "We had deferred the plan (to sell the subsidiary) earlier as our Board felt more information about prospective buyers was needed. Our sale plan is very much on".
Although the board has not set any time limit for the sale, but expects to close the deal by February end, Agarwal informed.
Earlier on January 23 IDBI Bank's Board had met to discuss and announce the buyer from amongst three contenders -- Dewan Housing, Religare Enterprises and Tata Capital.
As per information from IDBI Bank sources, Dewan Housing has put in the highest bid.
IDBI Bank took decision to sell its home-loan subsidiary with an aim to strengthen its housing finance business, which is at present being looked by both the bank and IHFL, thereby ensuing in competition between the two.
Tata Capital home loan business likely to start by March
Tata Group's financial services a division of Tata Capital, is raising Rs 500 crore through a debenture issue, is likely to start its home loan business by March this year.
Tata Capital Managing Director and CEO Praveen P Kadle notify, "We have applied to the National Housing Bank (NHB) and are awaiting its clearance. If we get the approval we will launch the home loan business by March".
Kadle informed a couple of months back company had applied to the NHB.
On being enquired about the company's plans of starting the commodity brokering business, he stated that the company will not enter that immediately. While in August last year, Tata Capital had revealed its plans of entering into home loan business.
Lately, Anil Ambani Group firm Reliance Capital had got the approval of the NHB for introducing a housing finance subsidiary, which would be ready in the next two months.
At present Tata Capital is offering services in the diverse segments of retail, corporate and institutional clients via seven broad areas of business, that is -- Retail Finance, Corporate Finance, Investment Services, Investment Banking, Private Equity, Wealth Management and Rural Finance.
Further more, the company's plan aims to merge existing lines of business, look at new business opportunities, follow strategic alliances and power its technology advantage.
Tata Capital Managing Director and CEO Praveen P Kadle notify, "We have applied to the National Housing Bank (NHB) and are awaiting its clearance. If we get the approval we will launch the home loan business by March".
Kadle informed a couple of months back company had applied to the NHB.
On being enquired about the company's plans of starting the commodity brokering business, he stated that the company will not enter that immediately. While in August last year, Tata Capital had revealed its plans of entering into home loan business.
Lately, Anil Ambani Group firm Reliance Capital had got the approval of the NHB for introducing a housing finance subsidiary, which would be ready in the next two months.
At present Tata Capital is offering services in the diverse segments of retail, corporate and institutional clients via seven broad areas of business, that is -- Retail Finance, Corporate Finance, Investment Services, Investment Banking, Private Equity, Wealth Management and Rural Finance.
Further more, the company's plan aims to merge existing lines of business, look at new business opportunities, follow strategic alliances and power its technology advantage.
Tuesday, February 17, 2009
IDBI Bank to take over its home fin subsidiary
IDBI Bank will finally be merging its housing finance subsidiary, IDBI Homefinance, with itself. The decision on this was taken after the board of the bank decided to indefinitely postpone the plan to sell the company.
On January 23 a board meeting was held in which the government nominee Arun Ramnathan asked IDBI to postpone its sale of IDBI Homefinance without mentioning any particular reason. According to information provided by the insiders while Mr Ramnathan, who is also finance secretary, did not attend the board meeting, he sent a letter to the board asking it to postpone the proposal to sell IDBI Homefinance, without giving any reason. When ET reporter contacted, IDBI officials refused to comment on the issue.
Although IDBI Bank had short-listed three bidders — Dewan Housing Finance Company, Tata Capital and Religare — for the sale of its wholly-owned subsidiary and the board was to select the final winner in the January meeting. According to industry sources the Dewan Housing was expected to acquire the company since it had emerged as the highest bidder, offering Rs 311 crore against Rs 211 crore by Tata Capital and Rs 208 crore by Religare.
However the officials from each of the three short-listed companies told ET, “IDBI has conveyed to the three short-listed companies that the sale of IDBI Homefinance has been put on hold”.
IDBI officials remarked, “In all likelihood, it (IDBI Homefinance) would be merged with IDBI. On a standalone basis, there is no point in competing with the subsidiary for the same market”.
An official who is closely related to the development informed that the sale might have been put on hold mainly due to political reasons. The official added, “The government may not want to be seen selling a company to private players just before the elections. They may also be worried about layoffs that could occur soon after the sale, particularly at a time when the government is persuading the private sector to refrain from such activities”. Captivatingly, IDBI’s contact to IDBI Homefinance could also have thrown a spanner in the sale process.
Moreover IDBI Bank has extended over Rs 2,000 crore to IDBI Homefinance at a concessional rate. Before the sale, IDBI’s exposure could have been taken over by the acquiring company. As per a pre-condition to bidding, IDBI would have given bidders an option either to pre-pay the loan or get it refinanced within one-year.
Otherwise, the acquirer could guarantee with IDBI those assets which it (IDBI Homefinance) had financed with the loan it had taken from IDBI. However the bank has already lent over Rs 300 crore to Dewan Housing. If Dewan Housing would have been emerged as the winner, IDBI’s exposure to the group would have been high.
Thursday, January 22, 2009
Banks request RBI to relax risk-weight norms on home loan
The Indian Bankers held a meeting with RBI Governor D. Subbarao and requested the Reserve Bank to relax risk-weight norms on home loan up to Rs 20-lakh to reduce their burden before its quarterly policy review.
While currently the risk-weight for housing loans below Rs 20 lakh is 0.75 per cent therefore the lenders have to make provisions in accordance to this while giving advances to borrowers.
Indian Banks' Association's Chief Executive, K Ramakrishnan informed, "They have suggested that the existing risk-weight on home loans to be removed, which would significantly bring down the provisioning burden on banks."
In a meeting with RBI Governor D Subbarao it is believed the bankers have also suggested the Reserve Bank for further relaxation in norms related to trade finance to export-oriented firms.
He added, "With the global funding sources drying up in the wake of global financial turmoil, there is an increased pressure on Indian banks from all categories of companies for credit".
Ramakrishnan, who was also present in the meeting told in contrary to the general observation, Indian banks have increased their lending this fiscal.
Ramakrishnan further added that at present average credit growth in the Indian banking system stands around 24.5 per cent as against 22.4 per cent in the previous fiscal, with the credit-deposit ratio stands at 74.11 per cent.
Monday, January 5, 2009
HFCs under pressure to reduce interest rate on home loans
The housing companies (HFCs) will be coming under pressure to reduce the interest rates on home loans as the public sector banks have taken a final decision on this.
However HFCs are complaining that the cost of funds is showing no signs of easing because banks are still charging around 13 per cent, which is higher than their average lending rate.
For example, LIC Housing Finance Company (LICFC) and Housing Development Finance Corporation (HDFC), which leads by over 70 per cent of HFCs’ market share is charging around 11.5 per cent, while Dewan Housing Finance Company is charging between 12 and 14 per cent to customers.
Whereas the weighted average cost of working funds for HFCs set around 300 basis points higher as compared to public sector banks. After this new package HFCs’ lending rates — which is higher by 50-100 basis points as compared to public sector banks — are believed to move up further by 225 basis points to 350 basis points (for loans up to Rs 20 lakh).
“We need to figure out ways for cheaper finance as there is no option left for us but to reduce interest rates to remain competitive and protect our market share,” said an HFC CEO, who refused to be named.
It is also believed that the with the proposed cheaper window from National Housing Bank (NHB), HFCs are expected to come up with a counter strategy to protect their market share.
“We are waiting for details of the package to understand its impact. We will decide on our counter strategy in a couple of days. However, apart from the proposed NHB fund, we need to explore other alternative avenues of cheaper finance as well,” said LIC Housing Finance Director and CEO R R Nair.
According to industry approximation HFCs comprise over 40 per cent of the Rs 120,000 crore housing finance market and share of these companies with respect to the incremental market share will probably fall to 15 per cent at the end of 2008-09 from around 25 per cent during 2007-08.
However HFCs are complaining that the cost of funds is showing no signs of easing because banks are still charging around 13 per cent, which is higher than their average lending rate.
For example, LIC Housing Finance Company (LICFC) and Housing Development Finance Corporation (HDFC), which leads by over 70 per cent of HFCs’ market share is charging around 11.5 per cent, while Dewan Housing Finance Company is charging between 12 and 14 per cent to customers.
Whereas the weighted average cost of working funds for HFCs set around 300 basis points higher as compared to public sector banks. After this new package HFCs’ lending rates — which is higher by 50-100 basis points as compared to public sector banks — are believed to move up further by 225 basis points to 350 basis points (for loans up to Rs 20 lakh).
“We need to figure out ways for cheaper finance as there is no option left for us but to reduce interest rates to remain competitive and protect our market share,” said an HFC CEO, who refused to be named.
It is also believed that the with the proposed cheaper window from National Housing Bank (NHB), HFCs are expected to come up with a counter strategy to protect their market share.
“We are waiting for details of the package to understand its impact. We will decide on our counter strategy in a couple of days. However, apart from the proposed NHB fund, we need to explore other alternative avenues of cheaper finance as well,” said LIC Housing Finance Director and CEO R R Nair.
According to industry approximation HFCs comprise over 40 per cent of the Rs 120,000 crore housing finance market and share of these companies with respect to the incremental market share will probably fall to 15 per cent at the end of 2008-09 from around 25 per cent during 2007-08.
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