50 basis points reduction in lending rates by SBBJ

State Bank of Bikaner and Jaipur, an associate bank of SBI, on Tuesday announced a reduction of 50 basis points each in its prime lending rates and deposit rates effective from January 1 next year.

The bank has reduced its benchmark prime lending rates by 50 basis points to 12.75, SBBJ informed the Bombay Stock Exchange today.

The bank has slashed deposit rates by 50 basis points. New interest rates will be applicable from the beginning of the next month, it added.

Interest rate on term deposits for a period of one to two years has been revised downward to 9 per cent from 10.25 per cent, while the rate on deposits for 3 to 5 years has been revised downward to 8.5 per cent from 9 per cent.

However, senior citizens for deposits of more than one year will get an interest which will be 0.5 per cent higher than the general rates, the bank informed.

Up to 125 bps reduction in interest rates by PNB, BOB

In response to soft monetary stance of the Reserve Bank, three public sector lenders – Punjab National Bank, Bank of Baroda, on Monday announced a reduction in their benchmark lending rates by up to 75 basis points with effect from January 1.

The country’s second largest public sector lender, PNB, in a statement said that with the reduction, “the benchmark prime lending rate (BPLR) would come down to 12 per cent from the existing 12.50 per cent”.

Besides, PNB also announced a reduction in its peak deposit rate by 100 basis points to 8.5 per cent for deposits of one year to less than three years.

Accordingly, interest rates in the time buckets having maturities of 46 days and above have also been reduced by 25 bps to 125 basis points, the bank said.

Bank of Baroda in a communique to the Bombay Stock Exchange said, “The bank has decided to reduce its BPLR by 75 basis points from existing 13.25 per cent to 12.50 per cent with effect from January 1, 2009.”

1.75-2.25 bps reduction in home loan interest rates by LIC Housing Finance

On the heels of public sector banks slashing home loan rates, LIC Housing Finance has announced a 1.75-2.25 percentage point cut in lending rates for home loans up to Rs 20 lakh from December 17.

LIC Housing Finance Director and Chief Executive R R Nair said, “We have reduced our lending rates with effect from December 17. For a five-year term, our lending rate for loans up to Rs 20 lakh is 9.25 per cent and for those beyond five years, the rate will be 9.75 per cent.

For loans above Rs 20 lakh, the rate has been reduced from 11.50 per cent to 11.25 per cent, Nair said. Public sector banks recently cut their lending rates on home loans up to Rs 5 lakh to 8.5 per cent and loans of Rs 5-20 lakh to 9.25 per cent for the first five years, after which the lending rates will be reset.

The scheme, which is applicable for loans taken till June 30, also offers free life insurance cover and exemption from pre-payment penalties to borrowers in these categories.

LIC Housing Finance is offering floating rates for home loans. Within six months it will be linked to prime lending rates (PLR) minus 3 percentage points, or 2.5 per cent, depending upon the customer profile, Nair said. The rates will be reviewed on April 1 or July 1 next, he said.

Nair said, “Though the Government has directed public sector banks to give a five-year fixed rate, we cannot give fixed rates for five years because of possible uncertainties in market trends.”

Interest rates slashed by SBI, Allahabad Bank

India’s largest lender State Bank of India and Kolkata headquartered Allahabad Bank today slashed interest rates for new loans to micro, small and medium enterprises by up to one per cent with immediate effect in line with the special package announced by the Reserve Bank of India and India Banks’ Association.

State Bank of India cut interest rates on working capital loans to micro, small and medium enterprises by 0.5-1 per cent to be effective from 16 December. “With this reduction, the micro enterprises will be able to avail working capital finance at as low as 10.25 per cent,” State Bank said in a release here today. The reduction in rates would be applicable for small firms with working capital limits up to Rs 10 crore, the bank said.

Allahabad Bank said that interest rates for all existing and new loans to micro industries would stand reduced by 100 basis points and interest rate for small and medium enterprises with fund based exposure up to Rs 10 crore would stand reduced by 50 basis points.

Allahabad Bank has also decided to reduce interest rates for fresh housing loans up to Rs 20 lakh for a maximum tenure of 20 years to be available from the bank till 30 June 2009. “The revised rate of interest for a loan up to Rs 5 lakh will now be 8.5 per cent (fixed) and for loan over Rs 5 lakh to Rs 20 lakh, the interest rate will be 9.25 per cent (fixed)”, the bank said in a Press release issued here today.

75 bps reduction in FD, lending rates by UCO bank

Public sector lender UCO Bank on Tuesday said it would lower both deposit and lending rates by more than 75 basis points with effect from January 1.

“We will lower both deposit and lending rates from January 1. We will have our asset liability committee meeting on December 26,” UCO Bank Chairman and Managing Director S K Goel told reporters on the sidelines of an interaction with the Merchants Chamber of Commerce in Kolkata.

Asked whether the bank would reduce the rates by 75 basis points, he said, “It is difficult to say. It could be more than that. We will link that with the inflation rates.”

Later Goel said that he expected other public sector banks to follow suit.

Besides, state-run Indian Bank today slashed deposit rates across various maturities by up to 150 basis points with effect from December 15.

For fixed deposits with a tenure of 46-90 days the deposit rate has been cut from 7.5 per cent to 6 per cent, Indian Bank said in a filing to the Bombay Stock Exchange.

Last week, PSU lender Union Bank had also slashed its benchmark prime lending rates (PLR) by 75 basis points to 12.5 per cent.

The rate reduction comes after the Reserve Bank of India signalled a rate cut by reducing the short-term lending and borrowing rates by 100 basis points each, prompting banks to cut rates. The short-term lending rate (repo) now stands at 6.5 per cent and borrowing (reverse repo) rate at 5 per cent.

SME Loans by Union Bank to be rescheduled

Public sector lender Union Bank on Thursday said it has taken a series of measures to help the micro, small and medium enterprises (MSMEs) facing liquidity crisis including reschedulement of loans on a case by case basis. “The global turmoil has affected the MSME sector and the bank wants to reduce the severity of the pain,” said Mr M V Nair, Chairman and Managing Director. He said the slowdown in economy has not led to higher NPA levels of the sector as of September 2008 which worked out to only 1.24 per cent. He, however, felt “higher NPAs cannot be ruled out and the bank is addressing the issue proactively”.

Among the measures the bank announced today include offering of adhoc advancing and extending stock holding period as also the reschedule of loans on a case by case basis to help the sector’s liquidity problems. The bank will also extend the period of c redit on bill purchases while margin payment would be reduced wherever warranted. The bank has identified ten clusters in the country where the economic downturn is affecting the small and medium business units. Among them are Ludhiana, Pune, Jamshedpur , Tirupur, Surat and Varanasi.

Banks to unveil package for below 20 lakh home loan

An official statement, signaling a move that will usher incheaper credit for buyers in the low and middle-class segments said, “Public sector banks will shortly announce a package for borrowers of home loans in two categories — up to Rs 5 lakh and between Rs 5-20 lakh,”

The government said there was a large unmet demand for housing, especially among the middle and low-income groups.

It said housing would be kept under “close watch” and promised that additional measures would be taken, as necessary, to promote an accelerated growth trajectory. Housing is an important source of employment and generates demand for critical sectors.

Analysts said the demand in the residential segment had declined in the last six months because of high interest rates on loans and a steep rise in property prices in the last two to three years.

The government highlighted the RBI’s decision to provide a refinancing facility of Rs 4,000 crore to the National Housing Bank.

To give a fillip to the real estate sector, particularly housing, the RBI had yesterday said that banks could classify housing loans up to Rs 20 lakh as “priority sector” advances, subject to a ceiling of five per cent of their total priority sector target.

Loans by banks to housing finance companies for lending to individuals for purchasing or setting up of units may be classified under the priority sector, provided the loans granted do not exceed Rs 20 lakh per unit per family, the RBI had said.

We should just use a computer with internet and compare home loan rates and services provided by the different lenders in the market. You can just compare the various home loan quotes and find out which one cost you less. This method is appropriate for people who dream to own a home.

HFC’s in no mood to lower home loan rates

A slew of measures by RBI during the last few weeks may have led to a reduction in home loan rates by public sector banks, but housing financial companies (HFCs) are in no mood to lower lending rates.

HFCs are complaining that the cost of funds is showing no signs of easing as banks are still charging around 12-13 per cent, which is higher than the average lending rate of HFCs.

For instance, HDFC and LIC Housing Finance Company, which together account for over 70 per cent share of the HFC market, charge around 11.5 per cent, while home loans from Dewan Housing Finance Company costs between 12 and 14 per cent.

HFCs said the high cost of funds is affecting their ability to compete with public sector banks as the weighted average cost, on an averge, is 300 basis points higher. In contrast, lending rates are 50-100 basis points higher than those of public sector banks, he added.

“We are lending to NBFCs at about 13 per cent, which will not come down as we consider it as a high-risk sector,” said an executive of a large public sector bank.

According to the industry estimate, HFCs constitute over 40 per cent of the Rs 1,20,000-crore housing finance market. Executives at these companies said HFCs would now account for 15 per cent of an increase in the pie as against 25 per cent in 2007-08.
Again, the recent move by the National Housing Bank (NHB) to raise the refinance rate to up to 12 per cent from around 9 per cent also did not help the cause of HFCs.
Although bigger players, backed by strong parentage, are still able to sustain the higher cost of funds, their smaller peers are finding it tough to operate in the current environment.
“The recent measures by the regulators have not translated into the availability of credit from banks. We operate in the lower-income group, with an average loan ticket size of Rs 6-6.50 lakh with a very low margin. So, if things do not improve soon, we will be left with no choice, but to increase lending rates,” said Dewan Housing Finance Vice-Chairman and Managing Director Kapil Wadhawan.
Wadhawan admitted that in the present year, the disbursement growth has slowed down compared with that of the last year.
“The real estate market is reeling. So, the demand is bound to come down. But, we hope to grow at around 18-20 per cent in incremental disbursement this year compared with over 25 per cent growth last year,” he added.

Maruti Udyog and BoB, Maruti sign MoU to finance cars

Bank of Baroda and Maruti Suzuki India, have signed a Memorandum of Understanding whereby dealers of Maruti cars would apprise prospective Maruti car-buyers about the car-loan advantages of the bank and help them in applying for it.

The nearest branch of the bank will promptly process the application and disburse the loan within 48-hours, a press release issued here today said.

Presently, the bank provides car loans at a competitive rate of 11.25 per cent, the release said.

This tie-up will cover over 600 Maruti dealers and over 2,800 branches of Bank of Baroda across the country.

Mantra of ‘Affordable housing’

Low cost housing – that had almost become a bad word for real estate companies – is the latest buzzword in the business now hit by an economic slowdown. Companies, which prided in building luxury villas and houses for higher segments, have suddenly started chanting the mantra of `affordable housing.’

“Villas for Rs 55 lakh are out, now-a-days apartments for Rs 20 lakh are in. We are targeting young professionals who may not have been affected by the recession (read: non-IT professional) and want their own home,” says an industry observer. Companies now rushing into the Rs 20-22 lakh range include Janapriya Engineers Syndicate, Puravankara Projects, Golden Gate and Modi Builders among others.

Analysts, of course, point out that there is no definition of affordable housing and aver: “It’s just that builders think a home that’s priced around Rs 20 lakh is within the reach of more buyers.”

A developer reputed for low-cost housing here explains the rationale for many builders now rushing into this segment. “When considering an expensive home, a buyer will definitely wait a few months for the prices to drop, but this does not happen with affordable homes, because prices are quite low already,” he says, adding, “the effective EMIs on home loans for this category come around Rs 15000-18000 per month, which many can afford.”

Real estate companies also think that cheaper affordable houses will draw not only more but also younger customers. Bhanumurthy PVS, deputy general manager of Golden Gate Properties, says, “by keeping the prices low, we are trying to bring down the average age of the home buyer from 25-35 years to 25-30 years.” The company recently ventured to offer 960 sft 2BHK apartments at Rs 19.9 lakh.

Nitish Ranjan, a 26-year old says, “Together, my wife and I earn Rs 80,000 per month. It wasn’t difficult to get a home loan since we could convince the banker that we could pay the EMI,” adding that he is not sure if he would have got a loan for a higher amount that a luxury home requires. Apart from the young, retirees are also drawn to houses at this level. “Even pensioners can afford these homes, when they come with frills like `Book now, pay on possession’, life-time guarantees on title deeds and other lucrative warranties,” says V P Arvind, a retiree who recently booked an apartment at Miyapur.

Developers are also buoyed by volumes. “Thinner profitability spread over a larger volume will result in large profits,” explains a builder. India’s housing shortage increased from 19.4 million units in 2004 to 22.4 million in 2005-06 and “there has been a steady 25% year on year growth for the past five years in this segment,” says Ravinder Reddy, CMD of Janapriya Engineers Syndicate, adding, “we have already developed 21,000 such apartments, including 12,000 in the last five years.”
This unwavering demand has led to a steady price rise in this segment that has never seen a `correction’, not even during the current slowdown. “It’s the Rs 50 lakh plus segment that has the jitters; the Rs 15-20 lakh range is still selling fine,” say observers. In fact, Puravankara Projects recently announced an investment of Rs 80 billion for affordable housing. It plans to develop 64,500 homes and a built-up area over 59.80 million square feet in major cities, including Hyderabad, in the next five years.

City-based players are also increasing projects around Madinaguda, Miyapur, Patancheru, University of Hyderabad and Nagole which are either industry hubs or close to the MMTS and metro zones.