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.
Thursday, September 10, 2009
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”.
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