Banks sweeten home loans with festival offers

MUMBAI: In an attempt to shore up credit demand, banks are rolling out festival schemes on home loans ahead of Diwali. Deals include teaser rates  for initial years, with some lenders giving an option to shift to either fixed or floating rates in subsequent years.

Lenders like Canara Bank, Bank of Maharashtra (BoM) and Dena Bank are offering fixed-rate loans for the first five years, and subsequently, linking the loans to their prime lending rates. While others like Bank of India are offering fixed-rate loans for the first two years. India’s largest bank SBI is offering fixed rates for the first three years. The competition to gain market share has resulted in a small price war.

On Thursday, Development Bank of Credit introduced a fixed rate of 7.95% for the first year — the lowest, at least, for the first year. From the second year onwards, the home rates will be linked to floating rate loans. BoM and Dena Bank offer a fixed rate of 8% for loans up to Rs 30 lakh in the first two years, while Canara Bank offers 8% in the first year for Rs 30 lakh and SBI offers 8% for the first five years for loans up to Rs 5 lakh.

Most banks have also waived off the processing fee during the festival season. Traditionally, home sales peak ahead of the academic year in June, with families looking out for new homes during summer vacations. However, this year’s summer sales were flat due to uncertainties. Now, builders and lenders are making a fresh pitch to push sales during Diwali through limited period offers. Interestingly, the offers are coming largely from PSU banks. HDFC, ICICI Bank and LIC Housing have not yet announced any festival offers, but announcements closer to Diwali are not ruled out either. The three lenders charge interest at 8.75% on their lower-end loans.

Bank officials are hopeful that the retail credit growth will contribute substantially for the credit demand in the third quarter of this fiscal year. Most offers are till December 31, 2009. “The demand for home loans is better than the past years. But at the same time, we are seeing many applications which are transfer cases (from another bank),” said AC Mahajan, chairman and managing director of Canara Bank.

Banks like SBI, Canara Bank, BoM, BoI and Dena Bank are offering fixed-rate loans for the initial years. However, banks like BoB and PNB are offering fixed rates, besides giving floating rate loans.

“The demand for auto loans continues to be higher than home loans. But at the same time, we are witnessing better demand in the past few weeks in small- and mid-sized towns,” pointed out M Narandran, ED of BoI.

Source : http://economictimes.indiatimes.com/personal-finance/loan-centre/home-loans/home-loans-news/Banks-sweeten-home-loans-with-festival-offers/articleshow/5088346.cms

Home loan rates could go up soon

With the Indian economy showing positive signs of recovery, the home loan rates might increase. According to India’s second largest lender, ICICI bank, the interest rates could rise in the latter half of the fiscal.

“There is growth already seen in auto and home loans…In the latter part of this fiscal, I expect that project finances will also pick up…We will continue to focus on home, auto and infrastructure loan segments,” said Chanda kochhar,ICICI Bank’s Managing Director and CEO”

C Rangarajan, chairperson of the Prime minister’s EAC, expressed a similar view regarding the interest rates.

This week, the inflation rose by 0.12 per cent while it had fallen by 0.12 percent the preceding week. Inflation in India is measured on the basis of wholesale price index, which considers a basket of 435 commodities.

The likely increase in the lending rates could shatter your plans of buying a new house at cheaper rates. The rising inflation could force RBI to put a check on the liquidity in the market by increasing the lending rates and the CRR.

Realty firms may also suffer losses as people might decide against buying houses. The finance minister, Pranab Mukherjee, said that the government had been expecting this trend.

http://www.rupeetimes.com/news/home_loans/home_loan_rates_could_go_up_soon_2774.html

Auto, home loans see revival: Kamath

Credit demand from consumers seemed to be back on track, especially in sectors such as auto and home loans though banks had cut down unsecured loan exposures, said KV Kamath, chairman of ICICI Bank.
“So far as mortgages are concerned, I think they are back from where they were a year ago. The tension between buyer, builder, and the lender is now more or less off. Auto sector financing is also back,” Kamath said at the sidelines of a banking seminar.
The chairman of the country’s largest private sector bank felt 80 per cent of the consumer loans were back, the remaining 20 per cent mostly unsecured loans had taken a back seat.
“Unsecured consumer credit is certainly hit. Banks are not lending unsecured loans,” he said. “We at ICICI Bank have significantly slowed down unsecured loans since one year. We only give unsecured loans to few existing clients, which have deposits and a good track record with us,” he said while adding that ICICI Bank took the lead in slowing down unsecured loans.
Though home loans have picked up, commercial real estate loan demand is still slack due to excess capacity creation.
The growth of retail credit demand was not reflected in the overall credit growth numbers as a slowdown in working capital demand dragged down the overall numbers, felt Kamath.
“It’s not reflected in the numbers because lack of working capital. This loan is distorting the numbers. If we keep the working capital loan aside, lending rate will be healthy by the end of the year,” he said while adding that credit growth for 2009-10 was likely to be 29 per cent except the working capital loan.

Credit growth during April 1 to August 14 was only 1 per cent compared with 3.3 per cent a year ago.
Also, the projects, which were in a conception stage a few months back, were being implemented now, he said.
Kamath saw interest rates remaining stable going ahead.
“To me, I do not fear interest rates to go up immediately. What the Reserve Bank of India will do if inflation rears up, we think we have to wait for one month for the monetary policy. It may react based on the what is the type of inflation and whether monetary policy action will help or not,” he said.

Source : http://www.business-standard.com/india/news/india-likely-to-grow-by-7-75-in-fy10-kamath/72805/on

ICICI reduces rates for new home loans

New Delhi: The largest private sector bank, ICICI Bank, launched new home loan schemes at lower interest rates for new borrowers . Under the new offer, interest rates for up to Rs 20 lakh is 8.75%. For the loan between Rs 20-Rs 50 lakh, the new interest rate is 9.25% and 9.75% above that. The new scheme has already been made effective from August 20.

Except for the special offer , ICICI Bank’s interest rates are in the range of 9.25 % to 11%. Prior to this, the other major home loan lenders the SBI and HDFC Ltd have already cut their interest rates. SBI is charging only 8% on home loan for the first year. In the second and third year, the interest rates vary between 8.50% and 9.25% depending on the loan amount. However, from the fourth year onwards, the interest rates will be levied at the rate linked to the benchmark prime lending rate of bank. TNN

Source : http://lite.epaper.timesofindia.com/getpage.aspx?pageid=27&pagesize=&edid=&edlabel=CAP&mydateHid=27-08-2009&pubname=&edname=&publabel=TOI

ICICI puts Rs 200 cr realty on sale

Mumbai: ICICI Bank is selling a clutch of commercial and residential properties. The space, totalling 1.39 lakh sq ft, is spread across Mumbai, starting with a 6,800 sq ft commercial space in Apeejay House, Fort.

Brokers value the total property at over Rs 200 crore. The biggest chunk is the 65,845 sq ft ‘A’ wing building of Mafatlal Chambers at N M Joshi Marg in Lower Parel.

Another 31,773 sq ft in the basement and third floor of the ‘B’ wing of the same building has also been put on the block.

Also for sale are 32 residential flats in Sundaram-I, Raheja Complex in Malad East, totalling 26,660 sq ft built-up area.

ICICI confirmed the properties were being sold by them. “Among the commercial properties — Apeejay House, Mafatlal Chambers (Wing A & B) and Laxmi Towers (Gala 5 and Gala 2) are currently occupied. The Borivali West property Abhilasha is vacant,” a bank spokesperson said via email.

The bank had earlier sold 10,000 sq ft of office space in Laxmi Towers at Rs 21,000 per sq ft to Federal Bank in March, broking sources said.

The bank is selling 2,275 sq ft plus basement of 485 sq ft in Borivali. A spokesperson from the bank said the sale of commercial properties has been planned to achieve “operational efficiencies.”

“There will be no retrenchment of staff. They would be relocated. The residential property Sundaram, Malad (32 flats) has been vacant for the last 2 years,” the spokesperson said, replying to a questionnaire by email.

The spokesperson said commercial space in Apeejay House was being sold because they had office space in the same area after taking over Sangli Bank in late 2006.

“The time taken for completion of the sale process will depend on the market opportunity,” the spokesperson said.

Sources said the bank has also moved or is in the process of moving people from departments as a part of this ‘rationalisation’ strategy.

The bank has been under pressure to get its house in order after poor results recently. In the quarter ended March, the bank’s profit fell 35% to Rs 744 crore from Rs 1,150 crore in the same period last year.

Analysts said ICICI Bank’s efforts to rationalise costs will bear fruits in the next one year, and will probably help the lender get back on track.

Vaibhav Agarwal, vice-president of banking research at Angel Broking, said that though a few hundred crores extra from selling this property may not have a sizeable impact on the bank’s profits, the steps taken together with these sales are already showing results.

“They have taken a number of steps like restructuring departments, workforce and land. They are also planning to hive off ATMs, brought the investment banking division back into the bank, have changed reporting standards and have avoided high-risk lending. So there has been this comprehensive rationalisation, results from which will be seen in the next one or one-and-a-half years,” he said.

Agarwal said this rationalisation will help ICICI to add more branches till March 2010 without increasing operational costs. The bank has 1,438 branches and is in the process of opening 580 branches till March 2010.

Source : http://www.dnaindia.com/money/report_icici-puts-rs-200-cr-realty-on-sale_1270246

Home loan rates go down

Bangalore: With the inflation in the negative territory and the liquidity crunch alleviating, banks are slashing the home loan interest rates. Taking the lead, ICICI Bank has reduced its home loan rates from 13 percent to 11.5 percent. The rate cut will be applicable on home loans of less than Rs 20 lakh.

HDFC Bank has announced that it is planning to reduce its interest rates post-budget and it also plans to cut the deposit rates by 25 bps (basis points). It was early in the year that HDFC had reduced its lending rates to offer home loans up to Rs 30 lakh at a rate of 9.75 percent, while loans above Rs 30 lakh were set to be extended at 10.75 percent to the new borrowers.

Dewan Housing Finance Corporation (DHFL), which provides home loans to the lower and middle class categories, plans to slash the interest rates by 25-50 bps in the near-term. DHFL also expects the interest rates to remain lower for some more time, because of the relief in liquidity.

The decision by the banks comes on the heels of the rate cuts announced by the Reserve Bank of India (RBI). The Repo rate, at which the RBI lends to banks, was reduced by 100 bps to 6.5 percent. The Reverse Repo rate, at which banks deposit their money with the RBI, was also cut by 100 bps to 5 percent. The government is also pressurizing RBI to lower interest rate further to ensure credit flow for all productive economic activity.

Earlier this month, the Union Finance Minister, Pranab Mukherjee in a meeting with the top executives of public sector banks (PSBs) urged the bankers to cut the lending rates further. State-run Union Bank of India has indicated a reduction in the lending rates by July, when it expects the related cost of funds to lower. The current benchmark prime lending rate of the bank is 12 percent.

Source : http://www.siliconindia.com/shownews/Home_loan_rates_go_down_-nid-58422.html

ICICI drops home loan rates for existing customers

The rate cut war continues. When the State Bank of India (SBI) offered new home loans at 8 per cent interest (for the first year), HDFC upped its switching fees to 3 per cent to prevent the exodus of its customer.

Now, in a move to retain old customers, ICICI Bank is offering attractive home loan swaps for existing customers. If you have already taken a home loan from ICICI Bank at a higher rate of interest, you could now book yourself at 9.75 per cent interest rate by paying 0.5 per cent as switching fee on your existing loan. And, you need to decide if you want to switch by April 30, 2009.

In such a scenario, Wealth explores if these are indeed deals to grab. CEO of Apnaloan.com, Harsh Roongta advices, “If the current rate on your loan is 11 per cent, by switching you will be saving a considerable amount – a difference of 2.25 per cent this year!”

As a thumbrule, Roongta suggests that if the interest rates on your new loan and is even 0.5 per cent lower than the old one, you stand to gain by shifting.

The fine print:

Experts say that limited period offers are called teaser loans. And typical features of teaser loans are that you might have to pay a high charge if you decide to pre-close the loan or you will have to bear high interest rate at the expiry of the teaser schemes.

Though that does not mean the current slew of schemes would adopt such practices, it pays to be aware and stay vigilant.

So before you sign the dotted line, make sure you read all the terms and conditions in your agreement, especially with respect to the prepayment penalty clause and the interest reset clause.

Interest rate offered for new customers

For a loan amount of Rs 20 lakh, you can get a home loan for 20 years at the following interest rate: SBI – Special Home Loan Schem 8%, LIC Housing Finance Limited 8.75%

ICICI Bank 9.75%, HDFC 9.75%.

Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.

Source : http://ibnlive.in.com/news/icici-drops-home-loan-rates-for-existing-customers/89593-15.html

ICICI Bank cuts interest rates for home loans

Housing and Development Finance Corp. Ltd(HDFC), the oldest mortgage lender in the country, is also expected to review its home loan rates by the end of this month

Mumbai: The country’s second largest private sector bank, ICICI Bank Ltd on Friday cut interest rates on floating home loans for new customers by 25 to 50 basis points. One basis point is one hundredth of one percentage point. According to the bank, “home loan up to Rs20 lakh which qualify as priority sector loans will carry an interest rate of 9.75%, down from 10%”. The bank will charge an interest rate of 10%, instead of 10.5%, on home loans in the range of Rs20-30 lakh, while loans exceeding Rs30 lakh will attract an interest rate of 11.5%, down from 12%.

Housing and Development Finance Corp. Ltd (HDFC), the oldest mortgage lender in the country, is also expected to review its home loan rates by the end of this month.

Source : http://www.livemint.com/2009/03/06221356/Banking–ICICI-Bank-cuts-inte.html

Loans to get even cheaper

NEW DELHI: Interest rates on loans — for homes, cars and other kinds of consumer finance — are set to go down by another 0.5 percentage point  following a decision by the Reserve Bank of India to cut key rates to that extent on Wednesday.

The RBI announced that the repo rate, effectively the rate at which it lends short-term funds to banks, and the reverse repo rate — which it gives on funds parked by banks with the central bank — would be cut by 0.5 percentage point with immediate effect. The new repo rate will be 5% and the reverse repo rate 3.5%.

Banks, which have been aggressively slashing rates of late, indicated after the announcement that they would pass on the RBI’s cuts to customers in the form of fresh reduction of interest rates. However, they would also cut interest rates on deposits by a corresponding amount.

Uco Bank chairman and managing director S K Goel said, ‘‘Banks will soon decide to cut rates, which should help in reviving the economy’’. A senior official of ICICI Bank also echoed this view.

In the past, banks have on occasion cut rates for new borrowers without changing the rate paid by existing ones. But this time, old customers on floating rates are also likely to benefit. That is because banks will most probably cut their prime lending rates (PLR), to which the floating rate is benchmarked.
Home loan rates are now around 10% for most public sector banks, while private sector banks are maintaining rates of 11-12%.

SBI has emerged as the most aggressive player with a special scheme under which new home loan borrowers are being offered an 8% rate. Following Wednesday’s announcement, other banks may use the opportunity to come closer to the SBI rate.

Source : http://timesofindia.indiatimes.com/Business/Loans-to-get-even-cheaper/articleshow/4226197.cms

Few takers for ‘cheap’ home loans news

Two months after lower interest rates were announced for home loans up to Rs20 lakh, the public sector banks have cleared only 28,000 proposals, involving Rs1,550 crore, through these special schemes.

India’s second-largest public sector bank, the Punjab National Bank, has approved only 35 loan proposals, disbursing just Rs1.70 crore under the new scheme, according to data compiled by industry bodies and the government. State Bank of India has done rather better, clearing around 6,500 applications.

Analysts say this is because there is no clarity about how the borrower’s ‘equated monthly instalments’ (EMI) would be affected; and this is a primary concern for home buyers. In fact the Reserve Bank has had to instruct SBI to ensure that customers borrowing under the bank’s special scheme don’t get a rude awakening on their EMIs.

The RBI has asked SBI to give some indication to its home-loan borrowers on the possible EMIs they would have to pay after one year, when the special fixed rate of eight per cent no longer applies.

Under the special loan package pushed by the government to boost real estate demand, public sector banks were more or less ordered to freeze interest rates on home loans up to Rs5 lakh at 8.5 per cent for five years. For loans between Rs5 lakh and Rs20 lakh, the rate has been frozen at 9.25 per cent.

SBI went ahead and dropped the rate further to eight per cent for the first year, and others such as Central Bank of India have also responded similarly.

Further, the banks have decided that borrowers can avail themselves of a loan of up to Rs5 lakh by paying 10 per cent upfront. In case of home loans of Rs5-Rs20 lakh, the upfront payment has been fixed at 15 per cent, compared to 25-30 per cent for other loans.

But with buyers expecting real estate prices to fall further, many are deferring a purchase for the moment, said bankers.

Most public sector banks are charging 8.5-10.5 per cent on a floating rate basis. The country’s largest bank privat sector bank, ICICI is charging as high as 11-12.5 per cent, while HDFC, the largest private mortgage finance company, is charging 10.25 per cent for loans up to Rs20 lakh and 11.25 per cent for loans above Rs20 lakh.

Source : http://www.domain-b.com/finance/banks/20090303_home_loans.htmlThe lowered interest rates for home loans announced recently by public sector banks have not led to the expected increase in demand. For instance, the State Bank of India’s low-interest home loan scheme, which was expected to shake the market, has in fact barely created a ripple.

Property prices may come down by another 20%

MUMBAI: Real estate developers are likely to cut home prices by an additional 20% in a bid to lure purchasers and customers who might otherwise  shift to other financial commitments, as the current fiscal draws to a close in March.

With banks also starting to cut home loan rates, people close to the development say that the first quarter of the next fiscal could see a substantial jump in home sales.

Property rates across the country have fallen by about 15-20% with the decline in the economic situation.
According to analysts, the impact from the ongoing financial crunch and mounting pressure from various other circles, could peak by the end of March. That’s when many developers will be forced to sell unsold stock at a much cheaper price, said one executive with a leading developer.

Currently, a lot of real estate developers are rushing to clean up their highly leveraged balance sheets. “In their last attempt to save diminishing margins, we could see some developers make their moves in the last quarter of FY09. To boost sales, a further cut in prices are unavoidable,” said an analyst from a leading investment bank.

India’s property market has been among the hardest hit by the global financial turmoil, as high interest rates and gloomy economic prospects have driven out buyers and squeezed funds for real estate developers.
DLF vice-chairman Rajiv Singh, India’s largest real estate company, has already gone on record to say that prices could crash by another 15%.

Real estate consultants have factored a sharp reduction in rates. “Past experiences show that if the rates range between 7-8%, sales volumes jump substantially,” said Knight Frank India chairman Pranay Vakil, a property consultancy firm.

“After SBI, ICICI Bank and HDFC Bank cut rates, I expect a jump in sales volumes. Developers are also under mounting pressure to meet their interest payment deadlines. It seems, they are also ready to cut the prices further,” he added.

Source : http://economictimes.indiatimes.com/Markets/Real_Estate/Property_prices_may_come_down_by_another_20/articleshow/4072643.cms

Home & corporate loans to get cheaper

MUMBAI: Home loan and corporate borrowers have something to cheer about early in the year. Interest rates on home and other loans, particularly for Tax deduction on home loan corporates, are set to fall soon. The Reserve Bank of India (RBI) has cut its key policy rate by one percentage point, signalling a reduction in banks’ lending rate.

This time, banks that many corporates still see as reluctant to lend, have reacted swiftly. Union Bank of India was the first to announce a 25-75 basis point cut in deposit rates across maturities on Friday night.

Allahabad Bank too announced that it would cut its prime lending rate by 75 basis points to 12.5%. Other banks are expected to follow suit over the next few days, after they have reduced their deposit rates.

Private banks, however, may wait a while before they decide to cut rates, according to officials in these banks.
The consensus among bankers is that at best, interest rates could go down by 50-100 basis points. A further cut in lending rates will make cheaper credit available to borrowers and boost demand.
Friday’s package will also give firms under stress, including those in real estate, an opportunity to restructure their loans. In a policy move co-ordinated with the Central government’s stimulus package, RBI on Friday reduced its repo rate, the rate at which banks borrow from RBI, from 6.5% to 5.5%.

The reverse repo, the rate RBI pays to banks for parking funds with it, was slashed by one percent from 5% to 4%, the lowest ever. The cash reserve ratio, the slice of deposits that banks need to park with RBI, has also been reduced by 50 basis points to 5%.

This is the fourth time since early October 2008 that the central bank has eased its monetary policy stance, after having adopted a tight policy since October 2004. The liquidity infused into the financial system through these measures amounts to Rs 300,000 crore.

With Friday’s move, another Rs 20,000 crore will be available for lending. According to Chanda Kochhar, CEO designate, ICICI Bank, interest rates are likely to see a fresh correction. “Interest rates are likely to fall between 0.5% and 1%. In the past, banks had to wait for bulk deposit rates to come down. However, bulk deposit rates have already started falling.”

“Demand for investments will take a little while to pick up as corporates will first wait for their inventory to wind down,” she added.

ICICI Bank had cut rates earlier this week, and Ms Kochhar said the bank has not taken a decision on further rate cuts. She, however, feels there would be simultaneous cuts in deposit and lending rates, a view that senior officials of some state-owned banks do not subscribe to.

MD Mallya, CMD of Bank of Baroda said, “In fact, there is a case of further softening of interest rates, given that there are expectations that inflation will come down further.” A senior HDFC Bank official said the bank would wait and watch before it takes a decision on interest rate cuts. However, he feels there will be a cut of between 0.50% and 1%. A senior Axis Bank official said the bank’s rates are among the lowest, and it is likely to cut its deposit rates first.

According to Ajit Ranade, group chief economist, Aditya Birla group, the impact of the monetary measures on real sector will take time.

“A reduction in interest rates also brings down the treasury yields on bond portfolio of banks, which leads to substantial capital appreciation. As for borrowers, the issue is more of access to credit than cost of credit. In such a situation, banks will make a lending decision based on their risk perception of the proposal. Bank lending will ultimately depend on business confidence,” he said.

MV Nair, CMD of Union Bank of India, said there was adequate liquidity in the system to support the credit growth requirement. ”We expect the demand for credit to go up following the stimulus package,” he said.

Unlike this time round, the measures announced in December by RBI were aimed at certain sectors, including SMEs and real estate. Interestingly, credit growth was quite strong in the previous quarter, during which a series of monetary and fiscal packages were anounced.

SS Kohli, CMD of India Infrastructure Finance Company (IIFCL), said the National Highway Development Authority is expected to sanction projects worth Rs 1,25,000 crore in the next two years.

”Several port projects are also in the pipeline. We expect a robust credit flow to all these projects with the money raised from the market. We would raise the first tranche of tax-free bonds by the middle of next week. Since there is a lag between raising money and its disbursal, we will raise the second tranche as the disbursal of the first tranch progresses,” he said. IIFCL has been allowed to raise Rs 30,000 crore through tax-free bonds.

RBI data indicates that since the beginning of the September quarter, credit growth was higher compared to the same period last year. Since the beginning of October, loan disbursals touched Rs 1,02,061.2 crore, compared to Rs 87,000 crore in the same period last year. Deposits, too, were higher at Rs 1,06,670 (Rs 64,055 crore).

According to Hemant Mishr, MD and head global markets, Standard Chartered Bank, “The repo and reverse repo cut of 50 bps was already factored into the market. Given the aggressive monetary easing, we would expect the bond market to rally significantly. This would lead to deposit and lending rate to ease up further. Given that the government has no more latitude towards fiscal measures, we continue to expect an aggressive monetary stimulus of a further 100 bps repo rate cut and a CRR of 150 over the first half of this year.”

Friday’s package will soothe firms under stress. Loans that were standard accounts on September 1, 2008 would be treated as standard accounts on restructuring, provided it is taken up on or before January 31, 2009. The restructuring package would also have to be in place within 120 days.

Source : http://economictimes.indiatimes.com/Personal_Finance/Loan_Centre/Home_Loans/Home_Loans_News/Home__corporate_loans_to_get_cheaper/articleshow/msid-3928865,curpg-2.cms

Interest rates may dip further

MUMBAI: It’s a new year gift from the Reserve Bank of India (RBI) that will perhaps make life easier for a large number of people in India. In an 
attempt to allow banks to cut interest rates further, the central bank on Friday reduced three key policy rates cash reserve ratio (the percentage of a bank’s total deposits that it must park with RBI), repo rate (the rate at which banks can borrow from RBI) and reverse repo (the rate that banks get when they keep money with RBI).

While CRR was cut by 50 basis points (100 basis points = 1%) to 5%, repo rate and reverse repo rates were reduced by 100 basis points each to 5.5% and 4%, respectively. These cuts give banks the elbowroom to lower lending, deposit, housing and auto financing rates. All these are monetary policy measures that central banks around the world adopt for managing liquidity in the banking system.

After Friday’s cuts, while CRR is at over a two-year low, repo and reverse repo are over eight-year lows. RBI resorted to the latest round of cuts to infuse more funds into the economy amid a global slowdown.

For RBI, despite strong economic fundamentals in the economy, the rationale for the current spate of rate cut were the evidence of slowing economic activity. “Once the crisis is behind us, and calm and confidence are restored in the global markets, economic activity in India would recover sharply,” the central bank said in a release. “But a period of painful adjustment is inevitable,” it added.

The latest RBI measures were on expected lines and came after the recent declines in the rate of inflation. “The reduction in CRR, repo and reverse repo rates is a welcome measure which reflects confidence in the declining trend of inflation,” said Chanda Kochhar, joint MD, ICICI Bank.

RBI’s rate cuts now pave the way for banks to cut interest rates. “The RBI measures would lead to adequate liquidity in the system which in turn could reduce cost of funds. There is a possibility that the interest rates could come down,” said Tarini Vaidya, head, trading, HDFC Bank.

In line with the expected decline in banks’ lending rates, deposit rates would also fall. “We could expect a bottoming out of government bond rates and further decline in deposit and lending rates from the current levels,” Kochhar said.

Housing loan rates could also fall. Speaking to TOI, Renu Karnad, joint MD, HDFC, said if the RBI measures translate to lower cost of funds, there is a possibility housing finance companies would consider cutting rates further. On its part, last month the housing finance major had cut home loan rates for all customers. Other leading mortgage financiers like ICICI Bank and SBI had also cut home loan rates in December.

Industry players said that asset-liability management committees of commercial banks and other lenders would meet soon to decide on their lending and deposit rates.

Source : http://timesofindia.indiatimes.com/India_Business/Interest_rates_may_dip_further/articleshow/3928348.cms

ICICI Bank finally cuts home loan rates

MUMBAI: ICICI Bank has finally brought down its interest rates on home loans both for existing as well as new customers by 0.5%. Tax deduction on home loan.

In a statement issued here the bank said that it has effected a reduction of 0.50% in its Floating Reference Rate (FRR) for home loans with effect from December 31, 2008. The revised FRR will be 13.75% p.a. as against 14.25% p.a. at present. All existing home and auto loan customers on floating interest raes will benefit from this reduction.

Existing home loan customers are likely to get almost immediate benefit as the interest rates for most customers are reset on the 1st day of every quarter. The bank has also announced a reduction of 0.50% in its Benchmark Advance Rate (I-BAR). The revised I-BAR will be 16.75% p.a. as against 17.25% p.a. at present.

The cut in rates is not likely to impact the bank’s interest rate margins as the bank has also announced a reduction in interest rates for various tenors of retail Fixed Deposits by 0.50% to 0.75%.

Last week, State Bank of India, the country’s biggest lender, said it would slash its lending rate by 75 basis points from January 1.

The Reserve Bank of India has cut its main short-term lending rate by 250 basis points to 6.5 percent since October as the economy showed signs of slowing more than many had expected.

Source : http://economictimes.indiatimes.com/ICICI_Bank_finally_cuts_home_loan_rates/articleshow/3919456.cms

ICICI to cut home, auto loan rates

Housing, auto and personal loan customers of ICICI Bank will get their new year gift in the form of a cut in interest rates, its CEO and managing director K V Kamath said on Monday.

“We are looking at cutting interest rates very early in January for our housing and other loan customers,” Kamath told PTI over telephone from Mumbai.

“The lowering of interest rate would be in new year,” he said when asked if the bank was all set to give a new year gift to its customers.

The extent of the rate cut is being calibrated and would be announced soon, he said when asked if the rate could be more than 100 basis points.

ICICI had earlier this month reduced home loan rates for new customers by up to 1.5 percentage point.

There are indications that the fresh cut in interest rates would benefit both existing and new customers.

The prime lending rate of the bank currently stands at 17.25 per cent. The bank last revised the benchmark lending rate by effecting 75 basis points hike in August this year.

SBI [Get Quote] has cut its prime lending rate by 75 basis points to 12.25 per cent with effect from January 1.

Home loan major HDFC [Get Quote] has also cut its prime lending rate by 50 basis points, while a number of other private and public sector lenders such as HDFC Bank, Punjab National Bank [Get Quote] and Bank of Baroda [Get Quote] have also announced rate cuts.

Earlier in the day, two leading public sector lenders Punjab National Bank and Bank of Baroda said they would reduce their prime lending rates by 50 and 75 basis points respectively, with effect from January 1.

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 beginning 2009.

Earlier this month, the bank had reduced its peak deposit rate to 9.50 per cent from 10.5 per cent.

Separately, Bank of Baroda said: “The bank has decided to reduce its prime lending rate by 75 basis points from existing 13.25 per cent to 12.50 per cent with effect from January 1, 2009.”

The PLR of PNB would stand reduced to 12 per cent, from the existing 12.50 per cent, effective from January 1.

PNB has also reduced interest rates on various retail lending schemes like floating rate housing loans, car and education loans by 50 bps.

“The interest rates on fixed rate housing loans have been reduced by up to 175 bps with effect from January one,” the bank added.

Further, the bank has introduced a housing loan scheme — PNB Special Housing Loan Scheme– for new accounts from January 1, 2009 till June 30, 2009.

Under the fixed housing loan of up to Rs 500,000 for maximum period of 20 years, PNB would charge interest rate at 8.5 per cent.

Also fixed rate housing loans of above Rs 500,000 to Rs 20 lakhs (Rs 2 million) for a maximum period up to 20 years would attract interest of up to 9.25 per cent.

“The interest rate will be subjected to reset on July 1, 2014 for the scheme,” PNB added.

State-owned lender Union Bank of India [Get Quote] has also reduced its deposit rates and Canara Bank [Get Quote] has cut its deposit as well as MSME lending rates.

Source : http://inhome.rediff.com/money/2008/dec/29bcrisis-icici-to-cut-home-auto-loan-rates.htm

Relief for home loans: ICICI cuts rate by 1.5 pc points

Barely two months after it raised the home loan rate for new customers by 1.5 percentage points, ICICI Bank on Thursday reduced its home loan rate from 13 per cent to 11.5 per cent for all home loans of less than Rs 20 lakh.

“Priority sector lending (PSL) has always been one of our key focus areas and we have a differential offering for our PSL customers,” an ICICI Bank spokesperson said. “This is our special pricing to promote the priority segment and offer affordable housing.”

There has been no change in the bank’s prime lending rate — PLR or the rate at which the bank lends to top companies — and hence the benefits of the low interest rate will not flow to existing customers.

A cut of 1.5-percentage points in the interest rate on a 20 year, Rs 20 lakh loan will reduce the equated monthly instalment (EMI) by Rs 2,102. This is one of the biggest cuts imposed by the ICICI bank at one go.

It is also the first cut by the bank after the Reserve bank of India (RBI) cut the repo rate (the rate at which commercial banks take short-term loans from the RBI) and the cash reserve ratio (CRR or the share of deposits banks must keep with the RBI). Since October, RBI has reduced the CRR from 9 per cent to 5.5 per cent and the repo rate from 9 per cent to 7.5 per cent.

At a time when the demand of property is on a downside, a cut in the home loan rates should help revive the demand for property. Several state owned banks have already announced a cut in their PLR.

Source : http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=HomePage&id=c80e8c47-fd46-4174-b4af-3b416cd93ed5&&Headline=ICICI+cuts+rate+by+1.5+percentage+points

Banks, housing finance cos get ready to reduce rates

Mumbai: Banks and housing finance companies are getting ready to reduce their lending and deposit rates further. YES Bank said with effective December 8, it has reduced its prime lending rates by 50 basis points.

Chanda Kochhar, CFO and joint MD of ICICI Bank which has announced reduction of rates by 150 basis points for the new customers for the housing finance below Rs 20 lakh said the interest rates are also expected to soften with these current measures. “Another important announcement is the concept of restructuring of loans for the corporate sector. These measures are critical for bankers to support and stand alongside our borrowers in these turbulent times,’’ she said.

ICICI Bank continues to monitor the interest rate on a daily basis and will take necessary measures accordingly, she said. TS Narayanasami, chairman & MD of Bank of India said the banks would revisit interest rate on lending. going by various proactive measures by RBI and the government as banks have to play a role in making available credit affordable to the common man. “The short-term borrowing would become less expensive. These are welcome measures duly taking care of current needs of some sectors which are reeling under pressure in view of the slowdown in economic growth.,’’ he said. Keki Mistry,managing director & vice chairman, Housing Finance Development Corporation said they are waiting for a reduction in the bank interest rates as that will help the institution to lower its cost of funds.

“As soon as it happens —and that is likely to happen in the near future—we will be able to lower our lending rates,’’ he said.

MD Mallya, CMD, Bank of Baroda, said “ The interest rate scenario is likely to go southwards. In my bank’s case we will assess the liquidity before taking a call.”

The RBI’s move to restructure NPAs beyond 90 days is a good sign for the growth of the sector.”

Alok Misra, CMD, Oriental Bank of Commerce explained “ Both lending as well as deposit rates are bound to come down in a week’s time, Banks will definitely think of reducing their rates for housing loans below Rs 20 lakh, possibly to the extent of 50 basis points or beyond, after the same being categorised under the priority sector lending. With inflation coming down to lower than 7% in near future, prices of oil falling, we can now say that adequate liquidity has been ensured by the Reserve Bank of India. We can say that the cost will be manageable and hence the banks can lend to the stressed sectors like real estate and manufacturing.”

Source : http://www.financialexpress.com/news/banks-housing-finance-cos-get-ready-to-reduce-rates/395213/2

Loans to get cheaper as RBI cuts repo rates again

Mumbai: The Reserve Bank of India (RBI) sent a strong signal to banks to lower interest rates on all types of borrowings by cutting the repo and reserve repo rates by 100 basis points. The cuts are part of a mega economic stimulus package to make borrowing more affordable.

With this, the repo rate—the interest charged by the RBI on borrowings by commercial banks—will be down to 6.5 per cent and reserve repo—the rate at which the central bank borrows money from commercial banks—will be down to 5 per cent.

The RBI has, however, kept the cash reserve ratio (the portion of deposits banks have to keep with the RBI) unchanged at 5.5 per cent, stating there was enough liquidity in the system. The statutory liquidity ratio (the portion of deposits banks have to invest in Government securities) has also been left untouched.

In another measure that will result in lower home loans, the RBI has decided that loans granted by banks to housing finance companies (HFCs) for on-lending to individuals may be classified under the priority sector, provided the loans granted by HFCs do not exceed Rs 20 lakh per dwelling unit per family. The priority sector status will enable banks to reduce interest rates on such loans significantly.

The RBI had cut the repo rate from 9 per cent to 7.5 per cent in October-November as a signal to commercial banks to bring down rates, but not many private banks did that. This time, RBI Governor D. Subbarao, while announcing the cut in rates in Mumbai on Saturday, said in no uncertain terms that commercial banks “need to get the signal”.

“We hope that commercial banks (will) act accordingly. It is a matter of time before banks take a decision on interest rates on home loans. Monetary transmission takes time. However, as there is adequate liquidity in the system now and the demand for money is also falling, interest rates will also move down,” Subbarao said.

On Friday, ICICI Bank reduced its interest rate for home loans of Rs 20 lakh and below by 1.50 per cent to 11.50 per cent. Bankers said that with a comfortable liquidity position and fall in inflation, interest rates would now fall across the board.

A reduction in the repo rate will make borrowing cheaper for commercial banks. The cut in reverse repo rate—the first this year—to 5 per cent will make it less lucrative for banks to park funds with the central bank.

The apex bank did not make any changes in the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR). To provide easier credit to micro and small enterprises, the RBI enhanced the refinance facility for the Small Industries Development Bank of India (SIDBI) by Rs 7,000 crore. The RBI is also working on a Rs 4,000 crore refinance facility for the National Housing Bank (NHB).

Commenting on the health of the economy, the RBI governor said, “The outlook for the Indian economy is mixed. Confidence in global credit markets continues to be low, and credit lines remain clogged. There is evidence of economic activity slowing down.”

Among various measures, the RBI also allowed buyback of foreign currency convertible bonds (FCCBs) of companies out of rupee resources. With export growth turning negative, it also said overdue export bills up to 180 days will get credit not exceeding BPLR minus 2.5 percentage points.

Source : http://www.indianexpress.com/news/loans-to-get-cheaper-as-rbi-cuts-repo-rates-again/395198/2

Invest in real estate by getting home loans in India

The loans that actually exist seem to be a far cry when a potential borrower is bound by the constraints of income. But, in reality procuring such loans is not that difficult as it seems.

Right after the green signal for cent percent FDI in the real estate sector from the Indian government there has been a sea change in this sector in India. As such, FDI in the real estate sector has gone up from 4.5% in 2003- 2004 to 16% in 2005-2006 and it has been increasing since then.

This liberalisation of the Indian economy has led to the emergence of many lenders in the country. As such, this trend has brought about a favourable change for the potential borrowers as well i.e. the changes in the payback terms and conditions. Moreover, with the application of the information and communication technology procuring a loan has become much easier. All these factors have led to the elimination of the time that was required earlier to procure a loan and the processing fee.

There are various types of businesses within the domain of Real Estate. A large number of people earn their living with such businesses associated with Real estate. Such businesses may be professional valuation services, mediator, broker etc., between two parties in the business pertaining to real estate. There are also businessmen who do construction works on a land and management of these constructions and the real estates. There are also professionals who deal with the sales and marketing of this sector.

In order to procure a home loan in India an employed borrower must furnish documents pertaining to employment status and the salary slips of around last six months. When the borrower is a self employed man, he is generally required to furnish a balance sheet, profit and last account of at least three years etc. Further, an individual must have attained 18 year of age, possess permanent residential proof like PAN card, Voter ID card etc. In addition, a bank statement would put a client on an advantageous position.

A home loan in India can be utilised to construct new building, reconstruct already existing building and for various other purposes pertaining to house construction. Such loans are available in two different forms which are secured and unsecured. When it is a secured loan the prospective borrower should pledge an asset as security against the loan sought. Due to the involvement of the security the rate of interest of secured loan many reasonably be less and the debtor may bear the loan for a longer period. The debtor may also be in an advantageous position to bargain for more loan amount. Similarly, this security puts the lender also at the advantageous position by lowering the risk on his part to lend loans.

On the contrary, when it is an unsecured loan the prospective debtor need not pledge any security. Thus he may not be in a position to bargain for himself. Owing to the insecurity the client may need to bear higher rate of interest and shorter repayment period. Moreover, the credit amount may also be relatively smaller.

Home loan in India is offered by a number of banks like Punjab National Bank, HDFC, SBI, ICICI. These banks deliver the loans at relatively easy EMIs and decrease the burden on the borrower to pay of the credit.

Home loans are also very helpful in purchasing real estate property in India. It is because the population of the country is more than hundred corers and purchasing a real estate property here is definitely a big deal since the majority of the population of the land are not sound enough to purchase a real estate without the support of home loan in the country.

Source : www.loftyvistas.com

PBAB, ICICI tie up to offer cheaper home loans

The Promoters and Builders Association of Pune (PBAP) has tied up with ICICI Bank to offer home loans at 10 per cent rate of interest to buyers, which will be applicable for 24 months after booking. The move will help attract buyers at a time when they are shying away from property purchases due to heavy home loans. As per this agreement, the ICICI will charge 12.5 per cent rate of interest on home loans, out of which, the flat buyer will pay for 10 per cent of interest rate while the remaining would be taken care by the respective real estate developer. PBAP president Lalitkumar Jain announced this scheme expressing concerns over the recent slowdown in the real estate sector. “The boom in real estate sector in Pune is over and the market has stabilised. The demand for 1BRHK flats is increasing on a steadfast note in Pune. A major problem is the higher rate of interest on home loans and hence, we are trying to address the same,” Jain said.

The scheme will be available from October 3 to 5 when PBAP will organise its annual real estate exhibition in Pune. “We expect the home loan interest rate to go down within next 8 to 12 months. While this happens, we want customers to book flats with us through lower interest rate. As of now, people are paying around Rs 1,080 per lakh per annum interest on home loans. If they book flats with PBAP members, this amount would be around Rs 966,” Jain stated. PBAP is planning to incorporate other major players in home loan segment such as HDFC in this scheme. “We will announce more tie-ups soon,” Jain added. The PBAP members are planning to sell more than 6,000 flats through this scheme.

Hike In Home Loan Rates

ICICI Bank and HDFC have increased home loan rates by 0.75 percentage points, moving quickly to preserve margins in the wake of RBI raising key interest rates. This is the second hike from the top two home loan providers in the phase of a month. ICICI Bank hiked the floating reference rate (FRR) for consumer loans, which also includes home loans, to 14.25 from 13.5 per cent, with effect from July 31. HDFC’s adjustable rate home loans will be priced at a minimum of 11.75 per cent with effect from August 1. Its fixed rate remains unchanged at 14 per cent per annum. The bad news is that a 0.75 percentage point hike will mean customers on floating rate home loans will have to pay an additional EMI of Rs 51 per lakh on a 20-year term. The good news is that the increase in interest rates may be offset by a fall in real estate prices.

Real estate growth impacted due to high interest rates: ICICI

Leading home loan lender ICICI Bank on Thursday said that growth in the real estate sector has been impacted due to high interest rates and prices but maintained that there was no asset bubble in the sector.

“Clearly there is a slowdown in the number of deals …interest rates have gone up from eight per cent in the past to now 12 per cent and prices too have gone up but an asset bubble is not there,” ICICI Bank Joint Managing Director Chanda Kochhar said.

She said that a correction was expected as the present slowdown was in number of deals and not so much in prices. “Since it is genuine demand in general and the salary levels are increasing, both customers and builders are playing a wait and watch game,” she said.

Kochhar said that builders were able to hold prices as they were sitting on equity capital and not debt, which had to be paid off. “Now they can afford to sit with the capital and that is the reason why prices have not corrected…the question is who will blink first,” Kochhar added. She said that in India the speculative part in real estate had always been small and growth was largely driven by actual demand and affordability of people.