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.
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