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SBI cuts lending rate by 90 bps; home, auto loans to become cheaper

January 7, 2017

State Bank of India, the country’s biggest lender by assets, said on Sunday it had cut its lending rates by 90 basis points for maturities ranging from overnight to three-year tenures, after experiencing a surge in deposits.

After the move, its so-called overnight marginal cost of funds-based lending rate (MCLR) fell to 7.75% from 8.65%, while three-year loan rates will now be 8.15% from 9.05% previously.

Lending rates were also cut across other maturities effective Sunday.

Banks have received an estimated Rs 14.9 lakh crore ($219.30 billion) in old 500, and 1,000 rupees notes from depositors since the government in Nov. 8 unexpectedly banned the banknotes in a bid to fight counterfeiting and bring unaccounted cash to the economy.

That had raised expectations banks would have room to cut lending rates, which is seen as vital to increase credit growth and spark a revival in private investments.

Although India’s gross domestic product grew 7.3% in the July-September quarter from a year earlier, the fastest pace of growth among large economies, much of that has been led by consumer demand.

SBI chairman Arundhati Bhattacharya told Business Standard there is huge liquidity with banks due to large flow of deposits. “This has driven us to reduce lending rate which will kick-start credit demand and growth,” he said.

Bank would also review interest rate on deposit also, SBI chairman said.

Lower lending rates will be welcome by the Reserve Bank of India, which has cut the policy rate by 175 bps since the start of 2015 but has felt banks were being too slow in cutting their lending rates.

The SBI move also comes after Prime Minister Narendra Modi on Saturday admonished banks to “keep the poor, the lower middle class, and the middle class at the focus of their activities,” and to act with the “public interest” in mind.


Modi’s comments were made in a special New Year’s eve speech in which he defended his ban on higher value cash notes and announced a slew of incentives including channelling more credit to the poor and the middle class.


Repo Rate SBI Lending Rate
Date in % Date in %
Jan-15 8.00 Jan-15 10.00
Jan-15 7.75 Apr-15 9.85
Mar-15 7.50 Jun-15 9.70
Jun-15 7.25 Oct-15 9.30
Sep-15 6.75 Sep-16 9.10
Apr-16 6.50 Oct-16 9.05
Oct-16 6.25 Nov-16 8.90
Jan-17 8.00
Sources: SBI, RBI


 Source:  January 1, 2017,

Modi government mulls new housing scheme with just 6-7% home loan interest rate

December 1, 2016

Looking to boost the housing sector, the Modi government is mulling a new scheme that may use money from the demonetisation drive. According to an ET Now report, the government is keen to boost the housing sector via a new scheme and is already in discussion with the RBI. The new housing scheme may be announced as early as the Union Budget 2017, which is expected to be presented on February 1. The channel reported that the final contours of the housing scheme will be decided after the details of revenue earned from demonetisation emerge. The report went on to add that the government is eyeing an interest rate in the range of 6-7% for home loans up to Rs 50 lakh. This new lower interest rate option of 6-7% will be available to first time borrowers and is likely to provide a much needed impetus to the housing market.

The real estate sector has been under pressure for quite some time now, and with the government’s move to demonetise old Rs 500 and Rs 1000 notes, experts expect an initial slump in home sales. However, there are also chances that banks will find room to lower loan rates – a step that would encourage people to buy homes. ‘Housing For All’ is a dream project of the Modi government, and the new scheme that is being talked about appears to be a way to avoid demand for real estate from falling further. The proposed interest rate range of 6-7% for home loans up to Rs 50 lakh also suggests that the government is looking to make housing more affordable for all.

While rating agencies and analysts were skeptical of the impact of demonetisation on the real estate sector, some industry experts had welcomed the move, stating that it would benefit in the long-term. Nirmal Jain, Chairman of India Infoline had said that housing will no longer be a distant dream for people now. “This (demonetisation) is a very powerful measure to curb black money. PM Modi has kept his promise of taking stern measures against black money. It will have deflationary impact in general and more specifically on real estate prices and make homes affordable, and is indirectly a boon to honest tax payers,” he had said.

Source:  29 Nov, 2016

6 things to know when refinancing a car loan

August 1, 2016

You love your car – but not enough to clean out your bank account each month to make your auto loan payment. Depending on your financial situation, refinancing your auto loan could reduce your monthly payments, offer you different payment options to better fit your life, and even give you a month off from making payments. And you thought you loved your car before.

Here are six things to know before deciding to refinance your car loan.

  1. Better credit means better rates

Maybe you’ve paid off some student loans since you first bought your car. Or maybe you’ve been working hard to up your credit score in other ways. If your credit score is significantly better than it used to be, refinancing could mean lower interest rates.

  1. You can play around with an auto refinance calculator first

You don’t have to take any official action to find out whether refinancing your auto loan will save you money. Use an easy auto loan refinance calculator to estimate your savings. Then you can decide whether applying is right for you.

  1. Don’t sweat the transaction fees

If you’ve ever heard about all the fees associated with refinancing a home, you might assume auto loan refinancing would be the same. Good news: It’s not. Auto refinance loans typically have nominal fees, which are far outweighed by the potential interest savings for many borrowers.

  1. Sometimes discounts are available

Some lenders offer lower rates if you use other services of theirs. Wells Fargo, for example, offers some customers rate discounts with qualifying consumer checking accounts.

  1. You can have a co-applicant

If you’re working to build or establish your credit or have a lower credit score, you may qualify for better rates if you have a co-applicant. This might be a parent or friend who takes out the refinance loan with you. When considering a co-applicant, know that this person may maintain partial ownership of your vehicle because of it.

  1. It’s fast

Don’t apply until you’re ready to hit the gas. Auto loan refinancing can happen super fast. In fact, if you apply online, you may get a response in as soon as 15 minutes and have your funding available the same day. All you need to apply is information you’re likely to have on hand about your personal identification, employment, vehicle and current auto loan.

Source:  July 22, 2016

India Private Bank New Loans Outpace State Rivals for First Time

June 8, 2016
India’s privately owned banks are extending new loans faster than their state-run rivals for the first time ever, as government lenders struggle to bring surging bad loans under control.
New credit from private lenders amounted to 3.5 trillion rupees ($52.4 billion) in the year to March 31, taking their outstanding advances to 17.9 trillion rupees, while state banks’ loans grew 2 trillion rupees to 51.2 trillion rupees, according to a Finance Ministry document, a copy of which was reviewed by Bloomberg News. Finance Ministry spokesman D.S. Malik didn’t respond to two calls to his mobile phone on Tuesday seeking comment.

The stressed-loan ratio for state banks climbed to a 16-year high of 14.34 percent in the year through March, according to the document. Surging delinquent loans and inadequate risk buffers at India’s government-controlled lenders, which account for more than 70 percent of loans in the nation’s banking system, have been hindering Prime Minister Narendra Modi’s attempts to revive credit growth in Asia’s third-largest economy.


“Private sector banks will continue to take away market share from state-run banks in coming years,” Siddharth Purohit, a Mumbai-based analyst at Angel Broking Ltd., said by phone. “With limited capital and high bad loans, most state-run banks are not in a position to focus on loan growth.”

The private-sector banks’ faster loan growth is in line with a May 2014 estimate from a central bank-appointed committee, which predicted that the lenders’ share of total Indian banking assets will rise to 32 percent by 2025, from 12.3 percent in 2000.

Capital Constraints

Modi needs to revive bank lending as he strives to maintain the fastest growth rate among the world’s major economies. Indian credit grew 9.8 percent in the 12 months through May 13, compared with an average of about 14 percent over the last five years, fortnightly central bank data compiled by Bloomberg show.

Timely capital infusions into constrained public sector banks will aid credit flow, the Reserve Bank of India said in its monetary policy statement on Tuesday. Rules requiring government stakes of at least 51 percent have curtailed state banks’ ability to sell shares, while an audit of loan books by the RBI uncovered more soured debt, making them less capitalized than privately-owned lenders.

While some investors had anticipated the six-month-long central-bank audit, which ended on March 31, to result in higher nonperforming-asset disclosures, the scale of losses and statements from bank executives highlighting the uncertain outlook for bad debt have surprised analysts. Thirteen state-owned lenders reported combined losses of 180 billion rupees for the year to March, Finance Ministry data show.

Government lenders are the worst performers this year on the S&P BSE India Bankex Index, led by Punjab National Bank’s 32 percent slump and State Bank of India’s 6.4 percent drop. The gauge has gained 6.1 percent this year.

Source: 7 June, 2016

Indian Bank revises interest rates on home, car loans

May 13, 2016
indian bank

indian bank

As per the revised rate of interest, home loans for up to Rs 75 lakh, the interest rates has been revised from 9.65 percent to 9.55 percent while for loans above Rs 75 lakh it has been reduced to 9.75 percent from 9.90 percent.

Public sector Indian Bank   has reduced the interest rates on home and vehicle loans by up to 0.20 percent with immediate effect. As per the revised rate of interest, home loans for up to Rs 75 lakh, the interest rates has been revised from 9.65 percent to 9.55 percent while for loans above Rs 75 lakh it has been reduced to 9.75 percent from 9.90 percent. For loans towards purchase of new cars, the interest rates were cut to 9.95 percent from 10.15 percent, the Chennai-based bank said in a statement.

Source: May 12, 2016

SBI cuts home loan rates to 9.15%

May 3, 2016
sbi news

The new minimum lending rates are effective from May 1, the bank said in a release here

MUMBAI: Making its loans cheaper, the nation’s largest lender State Bank of India on Monday revised downwards its lending rates based on marginal cost of funds by 5 basis points to 9.15 per cent.

The new minimum lending rates are effective from May 1, the bank said in a release here.

Last month, the lender had set the MCLR at 9.20 per cent after the Reserve Bank cut repo rate by 25 basis points.

With this reduction, the home loan interest rate for women borrowers has come down to 9.35 per cent, while for others it now stands lower at 9.40 per cent.

Interest rates on car loans have also been reduced by 5 basis points (one basis point is equivalent to one-hundredth of a percentage point).

The state-run bank has now kept a processing fee of Rs 500 for SBI car loans, NRI car loans, SBI Combo loan scheme and SBI Loyalty car loan scheme. The processing fee for these car loan schemes were waived till April 30.

Banks moved to the MCLR regime last month for pricing their loans. The move is likely to help in better transmission of the monetary policy rates.

Source: 03 May 2016, 6:50 AM IST

How MCLR will affect your home loan

April 5, 2016

How MCLR will affect your home loan

For new borrowers, home loan rates will be automatically reset either yearly or every six months

State Bank of India (SBI), India’s largest lender, was the first to announce the new marginal cost-based lending rate (MCLR), on 1 April 2016. This is the new benchmark lending rate and it replaces the base rate for new borrowers. SBI has introduced seven MCLRs for periods ranging between overnight and three years. While MCLR will be the benchmark rate for new borrowers, for existing borrowers, the base rate regime will continue.

Here’s what the new rate means, and how it affects you.

What is MCLR?

MCLR is the new benchmark lending rate at which banks will now lend to new borrowers. Till 31 March 2016, banks used the base rate as the benchmark rate to lend.

MCLR is built on four components—marginal cost of funds, negative carry on account of cash reserve ratio (CRR), operating costs and tenor premium.

Marginal cost of funds is the marginal cost of borrowing and return on net worth for banks. The operating cost includes cost of providing the loan product including cost of raising funds. Tenor premium arises from loan commitments with longer tenors. According to brokerage and investment group CLSA, the source of funding for a bank is based on actual domestic funding mix. MCLR is closely linked to the actual deposit rates.

“If one-year term deposit is at 7.50%. Then one-year MCLR will be 7.50% plus CRR, operation cost and tenor premium,” said Ashutosh Khajuria, executive director, Federal Bank Ltd.

The Reserve Bank of India (RBI) has asked banks to set at least five MCLR rates—overnight, one month, three month, six month and one year. Besides these, banks are free to set rates for longer durations as well. The rates have to be reviewed on a monthly basis, but banks that don’t have the capacity to do monthly reviews on can do so quarterly till March 2017.

MCLR-linked loans will be reset for a maximum of one year. So, you will have a new interest rate on your home loan at a pre-decided time and for a maximum period of one year.

How does it work?

Banks are also allowed to determine a spread that is higher than MCLR. Depending on your credit profile, banks will decide this. “The spread will be decided based on credit risk and tenor. For credit risk, in case of an individual borrower, we will look at Cibil rating. Depending on the credit worthiness of the customer, we will set the spread above MCLR. Currently, the spread is in the range of 25-60 basis points (bps) for home loans,” K.V.S. Manian, president-corporate, institutional and investment banking, Kotak Mahindra Bank Ltd. One basis point is one-hundredth of a percentage point.

Not all loans will come under this rate. For instance, loans covered by government schemes where banks have to charge interest rates as per the scheme are exempted from being linked to MCLR as the benchmark for determining interest rate.

If you plan to take a floating rate home loan, your loan will now be linked to MCLR. Most banks have announced five to seven rates. For home loans, banks will either use the six-month MCLR or the one-year MCLR as the benchmark rate. Therefore, from now, all floating rate loan agreements will have a reset clause at a pre-specified interval. “Banks can decide on the tenor that they want to use to reset for longer-term loans such as home loans. We have decided to reset home loan interest rates at a six-month frequency. Hence, the six-month MCLR will be applicable for home loans,” said Manian. Kotak Mahindra Bank has announced 9.40% as its six-month MCLR and the home loan will be reset every six months in case of any changes in MCLR. If you have a home loan, the bank will reset the rate automatically at a pre-specified date.

However, banks such as SBI and ICICI Bank Ltd have set one-year MCLR as the benchmark for home loans. For instance, for salaried individuals, ICICI Bank has set a floating rate home loan at one-year MCLR of 9.20% with a spread of 25 bps for loans of up to Rs.5 crore. So, the interest rate will be 9.45%. The bank’s website stated that this will be valid till 30 April 2016. Though the MCLR is reviewed monthly, your home loan will be reset every year automatically, depending on the agreement with the bank. For instance, if you take a Rs.30-lakh loan on 1 April this year, one-year MCLR is at 9.20% and spread on it is 25 bps, your home loan will be 9.45%. You will pay instalments at this rate for the next one year. If on 1 April 2017, one-year MCLR gets revised to 9.15%, your home loan interest rate will get reset at 9.40% (MCLR of 9.15% plus spread of 25 bps). Accordingly, your instalment or loan tenor may change.

According to a report by Ambit Capital Pvt. Ltd, RBI gave banks the provision of a reset period to partly smoothen the impact of changing rates on banks’ margins (as deposits re-price with a lag, reset periods allow bank to adjust the timing of loan pricing). As the concept of reset period contravenes with the RBI’s objective of quick transmission of monetary policy, the RBI has capped reset period at one year.

Though retail loans are likely to be set at six months to one-year MCLR tenors, corporate loans may be set at shorter tenors. “Due to complexity in the retail product, a pre-specified reset has been decided. When it comes to corporate loans, there is a possibility to negotiate across the multiple sets of rates that are available,” said Manian.

Can an existing borrower who is on a base rate regime move to MCLR? According to RBI, existing loans and credit limits linked to base rate will continue till repayment or renewal, and banks will have to continue publishing base rates as well. Existing borrowers can move to MCLR-linked loans at mutually acceptable terms and these loans will not be treated as foreclosure of existing facility.

What you should know

The MCLR-linked home loan rate is currently marginally lower than a base rate-linked loan. For instance, SBI was offering home loans between 9.50% and 9.55% till 31 March. From 1 April, the rate is lower by 10 bps and ranges between 9.40% and 9.45%.

According to the Ambit report, new MCLRs are not so different from base rates: “…even if benchmark rates would have fallen, the effective loan pricing for borrowers might not have changed much. This is because banks could change spreads over benchmark rates,” the report noted.

Home loan rates will now depend on the bank’s choice of reset period—six-month or one-year MCLR rate and spread rather than one common base rate and spread. According to a Centrum Broking Ltd report, while MCLR is intended to ensure effective policy transmission, past studies, including references to global banks, suggest limited rate transmission to end-user. Hence, its effectiveness in the longer run will need to be assessed, the report noted.

Existing borrowers should wait for the new system of calculation to settle before deciding to switch loans.

Source: Apr 04 2016

Sidbi to raise Rs 10k-cr Stand Up India Fund corpus from RBI

February 28, 2016

Sidbi to raise Rs 10k-cr Stand Up India Fund corpus from RBI

The Small Industries Development Bank of India (Sidbi) will be raising the proposed Rs 10,000-crore corpus for ‘Stand Up India Fund’ from RBI, which will be disbursed to Dalit and women entrepreneurs, a top official said.

“We are working to have the corpus in place for the Stand Up India Fund corpus. It will be raised from the Reserve Bank through the priority sector lending shortfalls,” Sidbi Chairman and Managing Director Kshatrapati Shivaji told PTI here.

He said the corpus will be used to refinance loans extended by the banks to the Scheduled Castes, Scheduled Tribes and women entrepreneurs as part of the ‘Stand Up India’ scheme announced by the government earlier this year.

Shivaji said the groundwork on implementation of the scheme has already started.

Under the scheme announced by Prime Minister Narendra Modi earlier this year, each bank branch has been mandated to lend to one micro-enterprise promoted by a woman and SC/ST entrepreneur.

Shivaji said plans are also afoot to have a credit guarantee fund for such loans, wherein the entrepreneurs can pay a premium which will help her/him get a cover in case of a loan default.

Sidbi is currently working on four new credit guarantee funds, apart from the already operational Credit Guarantee Fund Trust for Micro and Small Enterprises which gives a cover of up to Rs 1 crore for MSME loans, he said.

The funds include one devoted for factoring, educational loans, Mudra loans of up to Rs 10 lakh and also the Stand Up India loans, he elaborated.

Shivaji further said the development finance institution is likely to close FY16 with a refinance of Rs 43,000 crore of loans extended to small businesses, which is up to Rs 7,000 crore more from last year.

Sidbi depends on a variety of instruments to raise resources, including certificate of deposits, commercial papers, non-convertible debentures and credit lines from external agencies.

He, however, said the landed cost of the money from external credit lines is very high due to the hedging costs and therefore Sidbi has been focusing on domestic borrowings to meet its funding needs.

“Most of our financing is in rupee terms for domestic borrowers. So, it does not make commercial sense to borrow in forex at a higher price,” he said, adding Sidbi is constantly on the lookout for instruments to lower fund raising costs.

Apart from these, Sidbi has set up a Rs 1,000 crore ‘Make in India Fund’ to refinance bank loans to the manufacturing sector, Shivaji said, adding up to Rs 400 crore worth loans have already been sanctioned under the fund.

It has also committed Rs 300 crore of the Rs 10,000 crore ‘Smile Fund’ for small businesses announced earlier this year as part of the Start-Up India initiative, he said.

Source: Feb 28, 2016

HDFC Bank cuts base rate by 5 bps

January 3, 2016

HDFC Bank Ltd on Tuesday reduced its base rate, or minimum lending rate, by five basis points (bps) to 9.3 per cent, making it on a par with that of State Bank of India.


HDFC Bank’s treasurer Ashish Parthasarathy said the base rate cut was an outcome of a mandatory review of the base rate every quarter and deposit rates would remain unchanged.

With the latest rate cut, effective December 28, HDFC Bank has cut rates by 70 basis points. On September 1, the bank had reduced its rates by 35 basis points. Before that in April and June, the bank had reduced rates by 15 basis points each.

Banks are responding to the cumulative 125 basis points rate cut by the Reserve Bank of India (RBI). In its fourth bi-monthly monetary policy on September 29, the central bank cut its policy rate by 50 basis points.

Even before the September policy rate cut, banks – including State Bank of India, HDFC Bank and ICICI Bank – had lowered their rates by 30-35 basis points.

But, the banks are yet to pass on the new policy rates to customers, which might change soon as the lenders would start calculating their base rates on marginal cost basis from April 1. Parthasarathy said HDFC Bank calculates its base rate on a marginal cost basis. India’s largest private sector lender ICICI Bank’s base rate stands at 9.35 per cent.

Source: December 29, 2015

Trend reversal: Housing loan disbursement by state-owned banks slows down

January 3, 2016

According to the bank-wise housing loan disbursement data for public sector banks, the home loan disbursement in the first six months of FY16 is less than half of what was disbursed in the full year in FY15.

If home loan disbursement by public sector banks is any indication of revival signs in the real estate sector, then 2015-16 is yet to witness it. While the RBI data shows that credit growth for housing sector rose 10.7 per cent in the first seven months for all scheduled commercial banks, the disbursement of housing loans by these banks is lagging. After having grown sharply over the last two years, this year may see a possible decline, if the disbursements don’t pick up in the second half of FY16.

According to the bank-wise housing loan disbursement data for public sector banks, the home loan disbursement in the first six months of FY16 is less than half of what was disbursed in the full year in FY15. The growth has not come even though the Reserve Bank of India cut the repo rate (at which RBI lends to commercial banks) by 125 basis points in the calendar 2015 and banks brought down their housing loan interest rates by up to 70 basis points.

As against a disbursement of Rs 1,12,364 crore in FY15, in the six month period between April and September 2015 the amount of loan disbursed by the group of 26 public sector banks stood at Rs 53,641 crore. This accounts for 47.7 per cent of the sum disbursed in the full year 2014-15. So, unless the growth is substantial in the second half of the financial year, 2015-16 will see a decline in disbursements by public sector banks and it would be contrary to the developments in recent past as the disbursements for public sector banks have grown sharply over the last two years.


The decline in growth in 2015-16, however, was not uniform across all the public sector banks. While some banks have seen a substantial jump in their loan disbursement, there are others whose performance has been dismal.

Those who top the list include are Oriental Bank of Commerce, Vijaya Bank and United Bank of India as in the first six months they disbursed more than 60 per cent of the total loans they gave in 2014-15. On the other hand, Union Bank of India and Bank of India have witnessed the slowest take-off in disbursement this year. The loans given by these two banks in the first six months only account for 28.6 per cent and 33.8 per cent respectively of the loans disbursed by them in 2014-15.

It is interesting to note that State Bank of India, which accounts for almost 30 per cent of the housing loans disbursed by the public sector banks, witnessed a growth in disbursement in the first six months. It has already disbursed almost 55 per cent of the amount that it disbursed last year. Had SBI not witnessed growth, the aggregate disbursement for PSBs would have declined further.

As a result of growth in disbursement, State Bank of India increased its dominance and the share of the bank in the aggregate of all public sector banks has risen from 26 per cent at the end of March 2015 to 29.8 per cent at the end of September 2015. On the other hand, Union Bank of India saw its share decline from 8.2 per cent in March 2015 to 4.9 per cent in September 2015.

Over the last few years, the public sector banks have witnessed strong growth in their disbursement for housing loans. While the aggregate disbursement for the 26 banks in the list stood at Rs 71,857 crore in 2012-13, the number rose to Rs 1,12,364 crore in 2014-15 witnessing an absolute growth of 56 per cent in the last two years.

In the period between March 2013 and March 2015 the biggest growth in housing loan disbursement was reported by Uco Bank (250 per cent). This was followed by Canara Bank and Union Bank of India which reported growth of 205 per cent and 157.6 per cent) respectively.

On the other hand Bank of Maharashtra has witnessed its loan disbursement decline from Rs 2,159 crore in 2012-13 to Rs 2,013 crore in March 2015.

Experts are of the opinion that since the public sector banks have their presence in the remotest parts of the country, they are well placed to play an important role in the government’s ambitious mission of Housing for All.

Source: January 2, 2016

Banks will pass on rate cuts faster to borrowers

December 20, 2015
Banks will pass on rate cuts faster to borrowers

From April 2016, banks will determine their ending rate based on a new formula which will ensure hat any reduction in interest rates is instantly passed on to new borrowers, including home loan borrowers. The new formula – marginal cost of funds-based lending (MCLR) rate – has been introduced by the RBI to ensure that loan pricing is fair and banks remain competitive.

Given that interest rates are falling, for new borrowers he lending rate will be lower by the extent to which a bank s able to bring down its cost of new deposits or borrowings.”Banks will review and publish their MCLR of different maturities every month on a pre-announced date,” the RBI said in a statement.

Old borrowers will have to wait until the reset date, which according to the RBI needs to be at least once a year.

According to SBI chairman Arundhati Bhattacharya, differential rates for different tenures will help banks to price loans more efficiently .

Marginal cost of funds is the extra cost a bank bears any additional borrowing. A borrower who contracts a loan in April will pay at the MCLR as on that date. If cost of funds for the bank drop by half a percentage point six months down the line, any new borrower would be given loans on the then prevailing MCLR while the earlier borrower would continue to pay the older rate until the reset date (announced at the time of disbursing the loan.
Earlier, banks were required to calculate their lending rate based on the average cost of funds. Since fixed deposits got repriced only on maturity, the average cost of funds for banks would not come down immediately after a rate cut and banks would hold on to their lending rate even after RBI cut its lending rates.

Source: 18 Dec, 2015



FUTURISTIC GROWTH – Now, get more loan for affordable homes

October 30, 2015
affordable homes

Now, get more loan for affordable homes

RBI rate cut expected to revive housing sales during festive season

October 4, 2015
Rbi Rate

Lowering of key interest rate by 0.50% to support Housing for All initiative

RBI rate cut expected to revive housing sales during festive season

You’ll finally have to pay less on home, car loans

October 1, 2015

Rajan Surprises With Big-Bang Rate Cut Before Diwali Lower Interest Cost To Boost InvestmentsFor borrowers, the festive season has set in a little early this year. Your home and auto loans (existing and new) will finally get cheaper as banks cut rates following the Reserve Bank of India’s half-apercentage point reduction in interest rates on Tuesday .

Big-Bang Rate Cut Before Diwali Lower Interest Cost To Boost InvestmentsSource: Sep 30 2015 : The Times of India (Delhi)

BUYER BE AWARE – Adding co-applicants in a home loan

September 5, 2015
loan 44

The advantage of having a co-applicant is that the loan amount will be calculated based on the combined incomes–yours and the co-applicant’s.


SBI incentivizes home loan referral

June 27, 2015
sbi bank

MUMBAI: State Bank of India (SBI) is looking at new ways to improve productivity in the bank through a change in HR policy. The changes include providing incentive scheme for its employees for referring home loans to the bank. Employees have a chance of getting gift cards worth Rs 16,000 and travel abroad.

Another change is the introduction of ‘choreographed branches’ where employees will be moved to man counters in the first and last week of the month when there is a surge in branch transactions. The third major change is a new performance management system which has a system-based appraisal.

SBI has 2.13 lakh employees which includes 78,500 officers and 95,000 clerical staff. The scheme is available to employees of all ranks. Apart from referring the borrower, the employee does not have to provide any service although he is free to do so. The employee incentive follows a waiver of the loan processing fee for borrowers shifting their mortgages to SBI.

A large chunk of the home loans in India are distributed by direct selling agents who help the borrower in filling the form and collect documents. While SBI does not have direct selling agents, it has intermediaries known as housing loan counselors who get an incentive of 0.25% of the loan amount for referring a loan proposal. But the entire processing of the loan is done in-house by the bank. To make up for the deficiency of feet on the street, the bank has asked each employee to bring at least one home loan proposal.

Under the new performance management system, even employees without any budgetary targets will be measured on different parameters. These parameters will vary depending on the nature of the job and could be ATM downtime, branch complaints, bad loans or any other parameter.

Moreover, each senior executive will be compared to a ‘cohort’ in similar environment elsewhere in the country.

Source:- 27 June 2015, The Times of India

HDFC Bank launches 10-second personal loan disbursement

June 21, 2015

COIMBATORE: HDFC Bank will now disburse personal loans to its customers in just 10 seconds. With this product, existing customers will have a pre-approved loan amount available to them 24×7. “The entire process to avail of the loan is completely paperless, and users can simply log into their bank account via net-banking or mobile banking and avail of this loan at a click,” HDFC Bank said.

The bank claimed that it is the first institution in the retail lending space to completely automate the entire process of loan approval and disbursement. “The 10-second loan is completely hassle-free and transparent and users will no longer have to wait for disbursement of funds, particularly in medical or other types of emergencies where there is an urgent need for cash,” it said.

“It is like having a real cheque in one’s virtual wallet and is part of our mission of enabling customer delight by creating simple and speedy banking solutions that are available at a click,” said Arvind Kapil, business head – unsecured loans, home & mortgage loans, HDFC Bank.

“Customer convenience lies at the heart of our digital initiatives and we have noticed growing demand from digitally-savvy customers to avoid paper-work and to accelerate processes,” he said. “Most customers expect banks to connect the dots between online and offline options to deliver convenient, consistent service,” he stated.

The 10-second loan is the latest initiative in HDFC Bank’s digital banking offering christened ‘GoDigital’. This campaign began in Varanasi last year with the launch of its ‘Bank Aap Ki Muththi Mein’ offering, which literally converts the mobile phone into a bank branch. Since then the bank has launched a host of digital initiatives.

“The move is part of our transformation into a digital bank which inlays digital solutions all through its value chain,” Kapil said. “This means building significant efficiencies in the back-end and streamlining of processes that are central to delivering an enriched customer experience at the front-end,” he said. At the end of 2014-15, 63% of all transactions at HDFC Bank were conducted through digital channels.

Source:- 18 June 2015, The Times of India

Urban poor will now get cheaper home loans

June 20, 2015

NEW DELHI: Owning a house by people from economically weaker section (EWS) including slum dwellers and low income group (LIG) in cities and towns will be easier as the government on Wednesday approved a steep hike in interest subsidy for beneficiaries of these categories – from 5% to 6.5% – under the flagship “Housing for All” scheme.

This means the overall interest rate payable by the beneficiaries would be around 4%, Union minister Ravi Shankar Prasad said. TOI on Wednesday had reported this proposal of government, which had emerged after an inter-ministerial consultation.

It also widened the criteria to bring more beneficiaries under this scheme by increasing the income limit. Moreover, to ensure that the marginalized sections of society get the benefit of this scheme, transgenders, widows, women, SCs, STs and disabled will get priority under this programme. The Cabinet also expanded the lending base by allowing cooperative banks, urban cooperative banks and micro-financial institutions to finance affordable housing besides the public sector banks and housing finance corporations.

Moreover, to provide greater comfort to lenders, the government has also decided that the loan subsidy amount will be given up front against the earlier practice of releasing it on quarterly basis.

The government is likely to formally launch the “Housing for All by 2022″ scheme by next week.

Sources said the higher interest subsidy decision would benefit urban poor by an amount of Rs 2.30 lakh each and as a result of this the monthly EMI would come down by Rs 2,582 per month. According to housing ministry official, at present, with the interest rate of 10.50%, current EMI on admissible loan component of Rs 6 lakh, over 15-year loan duration works out to be Rs 6,632 per month. With Cabinet deciding to increase credit-linked subsidy, EMI comes down to Rs 4,050 per month thereby benefiting the urban poor by Rs 2,582 per month, he said.

On the whole, central assistance in the range of Rs 1 lakh to Rs 2.30 lakh per beneficiary would be provided under different components of the National Urban Housing Mission in urban areas to build two crore new houses to meet the housing shortage over the next 7 years.

The Cabinet had earlier approved four components to the mission. Under the redevelopment plan of slums with participation of private developers using land as a resource component, a central grant of Rs 1 lakh on average per beneficiary would be provided. States/ Union Territories are at liberty to use this grant for any slum redevelopment schemes to be taken up to make such projects viable, if required.

In the second category, is the affordable housing through credit-linked subsidy scheme.

Under third component of affordable housing in partnership with private and public sectors, central assistance of Rs 1.50 lakh to each beneficiary would be provided to promote housing stock for urban poor with the involvement of private and public sectors, provided 35% of dwelling units of the projects proposed are earmarked for EWS category.

Individual beneficiary-led construction or enhancement of houses falls in the fourth category where a central assistance of Rs 1.50 lakh would be provided to those eligible to enable him to build his own house or undertake improvements to existing houses.

Source:- 18 June 2015,The Times of India

State Bank of India scraps processing fee for those switching home loans

June 14, 2015

MUMBAI: The State Bank of India has taken the battle for market share in the home loan market to the doors of leaders —Housing Development Finance and ICICI Bank — offering a total processing fee waiver for shifting to it from other lenders, said a person familiar with the move. State Bank of India, which is no exception to the slowdown in demand for loans from corporates, moves to establish its credentials as a serious retail player as it already offers the lowest rates on mortgages. But the bank’s continued charge of legal and valuation fee of as much asRs 8,000 could limit the gains.

“We want to offer the best combination in terms rates and charges,” said an SBI official who did not want to be identified. “Already, the pre-payment penalty is banned and our rates are lowest, so we have decided to waive the processing fee.” Home loans is the oasis for bankers who are facing a severe slowdown in demand from corporates. For the staterun banks which are not significant lenders in the credit card, or other unsecured loans business for retail borrowers, home loans remain the only segment which can keep them going.

The secured nature of the product and the low rate of defaults makes it the best for PSU banks saddled with tons of bad loans from poor corporate lending. SBI’s home loan rates are the lowest among all lenders at 9.70% for women borrowers and 9.75% for others, irrespective of the loan amount. ICICI Bank charges 9.85% for loans up to Rs 30 lakh and 9.95% for loans between Rs 30 and Rs 75 lakh. HDFC charges 9.85% for women and 9.90% for others irrespective of the loan amount.

After the RBI banned pre-payment penalty on floating rate home loans, banks across the board have seen a sharp rise in customers moving from one bank to another in search of better rates. For SBI, nearly 10% of its incremental loan is on account of migration from other banks or housing finance companies. SBI’s home loan book stood at Rs 1.59 lakh crore, which is 15% of their total loan book. However, new borrowers seeking a home loan would be charged 0.5% of the loan amount, or Rs 10,000, whichever is less. While HDFC has not waived off processing fee for borrowers, its fee is inclusive of legal and valuation fee.
Source: 12 June, 2015 The Economic Times

Home loans to be cheaper as SBI slashes base rate by 0.15% to 9.70 per cent

June 5, 2015
Home loans to be cheaper as SBI slashes

The nation’s largest lender State Bank of India on Tuesday reduced its base rate by 15 basis points after the RBI cut repo rate by 25 basis points.

The nation’s largest lender State Bank of India on Tuesday reduced its base rate by 15 basis points after the RBI cut repo rate by 25 basis points.

SBI reduced its base rate or minimum lending rate to 9.70 per cent from 9.85 per cent effective June 8.

While the Reserve Bank has cut its lending rates by 75 basis points (0.75 percentage point) in three instalments, the SBI has done so by 30 bps (0.30 percentage point) in two tranches.

“The bank has decided to cut base rate by 0.15 per cent to 9.70 per cent effective June 8,” the bank said.

After the last policy meet on April 7 also, SBI took other banks by surprise when it cut base rate by 15 bps to 9.85 per cent.

The Reserve Bank today reduced policy rate by 25 bps to 7.25 per cent from 7.50 per cent.

RBI Governor Raghuram Rajan today also urged banks to pass through the sequence of rate cuts into lending rates. Despite two repo rate cuts by RBI, very few banks have passed on the benefits to customers.

Welcoming the “timely repo rate cut” by the Reserve Bank, State Bank chairperson Arundhati Bhattacharya said she “anticipates the rate cut will transmit through the banking system sooner than later”.

She also said that “with monsoon forecast going a little awry and the RBI upping its inflation projections for March 2016, the government should now push for more public infrastructure spends that would support growth in the near term and create more jobs.”

Meanwhile, mid-sized state-owned Allahabad Bank also cut its base rate by 0.3 per cent. The base rate has been reduced to 9.95 per cent from 10.25 per cent, effective June 8, the bank said in an exchange filing.

Source: 2 June, 2015 The Indian Express  


RBI cuts rate by 0.25%; home, auto loans may become cheaper

June 4, 2015

MUMBAI: Home, auto and corporate loans are likely to cost less after RBI on Tuesday cut interest rate by 0.25 per cent for the third time this year to spur investment and growth but hinted there may not be any more cuts in the near-term sending stock markets into a tizzy.

Yielding to demands of Finance Minister Arun Jaitley and India Inc, RBI Governor Raghuram Rajan “front loaded” the repo rate cut despite worries of below normal monsoon and its impact on prices.The governor asked banks to follow suit and pass on the rate cuts — 0.75 per cent since January — to individual and corporate borrowers.

Most bankers felt that with today’s rate cut RBI has provided space for lowering lending and deposit rates. Public sector Allahabad Bank became the first to reduce the lending rate by 0.3 per cent.

RBI cut the repo rate (short-term lending rate) from 7.5 per cent to 7.25, but left all other policy tools like cash reserve requirement unchanged at 4 per cent and Statutory Liquidity Ratio (SLR) at 21.5 per cent.

Rajan lowered projections of the economic growth as measured by GVA (gross value added) to 7.6 per cent from 7.8 per cent estimated in April due to global factors and likely impact of below normal monsoon.

At the same time, inflation still remains a worry for the central bank as it expects price rise to remain subdued till August before rising to 6 per cent by January 2016.

It asked the government to put in place a “contingency plan” to manage the impact of low food production on inflation, mainly because of expected lower than normal rains.

The other concern for the RBI is rising crude oil prices. Since the last policy in April, the crude oil prices have witnessed an increase of 9 per cent. Soon after the policy announcement, the BSE Sensex plunged by over 400 points. The markets, however, later recovered slightly.
Chief Economic Adviser, Arvind Subramanian said: “These cuts are consistent with the trends in the economy including strongly declining inflation, contained current account deficit and ongoing strong fiscal discipline.”

The government and RBI agree that these cuts signify that the economy needs policy support as growth is recovering while the external environment remains weak, he said.

“The government and the RBI will work together to ensure that the macroeconomic (indicators) remain strong while investment and growth are accelerated towards their potential,” Subramanian added.

Announcing the second bi-monthly monetary policy this fiscal, Rajan said that “with low domestic capacity utilisation, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today”.

Following the downward revision in the repo rate, the reverse repo rate (short-term borrowing rate) has got adjusted to 6.25 per cent and Marginal Standing Facility rate as well as Bank rate to 8.25 per cent.

Commenting on macroeconomic conditions, RBI said, the domestic economic activity remains moderate with agriculture being the most disappointing following the unseasonal rains and hailstorms in the most part of the country in March.

Rajan said however that the risks to inflation identified in April could cloud the picture with below par monsoons forecast for the second successive year.

He also called for astute food management to mitigate possible inflationary effects in case of failure of monsoon.

Given this background, Rajan said, “a conservative strategy would be to wait, especially for more certainty on both the monsoon out-turn as well as the effects of government responses if it (monsoon) turns out to be weak.

“(But) with still weak investment and the need to reduce supply constraints over the medium-term to stay on the proposed dis-inflationary path (to 4 per cent in early 2018), a more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty,” Rajan said while explaining the rationale behind the rate cut.

Rajan said he expects banks to pass on the policy rate cut to individual and corporate borrowers.

“Banks should pass sequence of lending rate cuts,” he said.

Soon after the policy announcement, SBI chief Arundhati Bhattacharya said there is a downward bias on the interest rate and there would be tendency to pass on the rate cut.

“With inflation coming down and RBI cutting rate by 0.75 per cent, banks will look at cutting lending rate,” she said.

Echoing similar views, BoB acting CEO and Managing Director Rajan Dhawan said that “there is rate cut in store for us in the next 2-3 weeks”.

Rajan said strong food policy and management will be important to help keep inflation and inflationary expectations contained over the near term. Furthermore, he said, monetary easing can only create the enabling conditions for a fuller government policy thrust that hinges around a step up in public investment in several areas that can also crowd in private investment. This will be important to relieve supply constraints and aid disinflation over the medium term, he added.

“Banks have started passing through some of past rate cuts into their lending rates, headline inflation has evolved along the projected path, the impact of unseasonal rains has been moderate so far, administered price increases remain muted, and the timing of normalisation of US monetary policy seems to have been pushed back,” Rajan said.

The global data however points to not so rosy a picture. The global recovery is still slow and getting increasingly differentiated across regions. What is more worrisome is the US numbers where the world’s largest economy surprisingly shrank 0.7 per cent in the first quarter, even as its currency has been on record high, he said.

Source: 2 Jun, 2015, The Economic Times


May 23, 2015

Five common home-loan truths you need to know before applying for loan

Loan seekers often face two major problems one, dearth of credible information, and, two, abundance of misinformation, which may coax them into making the wrong decision.

Friends and relatives are an immediate source of information, but what loan seekers need is credible and researched data rather than hearsay.

Here are five common home loan truths that you need to know before applying for a home loan: You may not always benefit from repo rate cut: If you are a borrower who has taken loan before 2010, you might wonder why you have a higher loan rate than the current bank rates.

Borrowers who have taken loans before 2010 are gauged by the prime lending rate concept and not base rates. “All floating home loan borrowers do not get the exact rate cut benefits whenever RBI cuts its repo rate. For instance, this year, the RBI reduced its rates twice, but many banks are yet to pass this on to their borrowers,“ Adhil Shetty, CEO of, says.

Note: If you are a borrower who has taken loan before 2010 and notice a big difference between in the interest rate you are paying and the current rates, you have an option to switch to base rates by paying a fee.

Fixed does not always mean `fixe ed': Borrowers opting for fixed rates always have a safe feeling. But if you have not gone through the loan documents carefully, you may be in for a surprise at a later stage.

Many fixed-rate loans offered by banks previously are only partially fixed, and there would be a clause in the loan document that if the rate is increased beyond a certain limit, it will automatically turn into a floating-rate loan. This clause allows banks to re-evaluate and fix the rate of interest afresh after a certain period.

Note: Before taking a fixed-rate interest loan, make sure to check all the terms clearly with your bank.

Banks won’t tell you how much pre-EMI you have to pay: You are happy with the rate of interest offered to you. And the monthly EMI outflow specified by the bank official is affordable.

But if you are taking the loan for a property under construction, you will need to pay pre-EMI for the disbursed amount, until the time the construction is not over.

“At some points, pre-EMIs may even shoot beyond the EMI amount. As this expense is not anticipated, it can wreak havoc with your financial planning. If there is a delay in the project, you will be shelling out a sizable amount as pre-EMI, yet your total outstanding loan amount will not be reduced by even a rupee,“ Shetty says.

Note: Check with your bank about the possibility of a tranche EMI home-loan option. Under this you can start repaying your home loan as soon as the bank disburses the first instalment and, thereby, save on the interest payment.

Banks seek interim security for home loans: Many borrowers who seek loans for outright property purchases are being informed about the need for an interim security at a later stage only.

As you take a loan for purchasing a property, the new title deed in your name will be ready only after 3-4 weeks of the registration. But you will need money for getting the property registered in your name.

“However, banks do not risk a mortgage without any collateral, till they get the new title deed. They would ask for another property as collateral for the time period. This lands many first-time borrowers in a fix as they have no property to offer as collateral, and will have to seek help of family and friends who would be asked to stand as guarantors in that case,“ Shetty says.

Note: In India, public sector banks seek interim security more than private banks.

Banks judge property price as per their index: Often, home-loan borrowers are surprised at what the banks offer them as a maximum loan amount.

Irrespective of what you think is the price for your purchased property, banks have their inhouse team of experts and their own real estate index to judge the price of every property. Depending on that price, banks offer home loan usually up to 80% of its value.

Not te: Do not assume that bank will finance you depending on what you feel is the property price index. So, it is better to keep a realistic view rather than getting disappointed later.

There is, thus, no doubt that the easy availability of home loans is key to fulfilling the dream of owning a house, but equally there are a significant number of unhappy loan customers because they did not exercise care while signing on the dotted line with lenders.


Source: 23 May 2015, Times of India


Have gold? Soon you may get to earn tax-free interest on it

May 21, 2015
Loan Image

NEW DELHI: You may soon get an option to deposit gold in banks and earn tax-free interest on its value.

The government is planning to dig into the thousands of tonnes of gold stocked by millions of Indian families, as part of a grand plan to channelise idle assets for productive use and reduce costly bullion imports.

On Tuesday, the finance ministry released the draft of the so-called “gold monetisation scheme” that will allow households to park family jewellery with banks and earn tax-free interests on the value of their yellow metal stock. Individuals have to deposit a minimum of 30 grams of gold with banks.

The gold would be tested for purity, and melted after the consent of the customer. Any stone etc would be handed back to the customer. Interest rates haven’t been decided yet, but will likely be around the prevailing bank fixed deposit rates.

Finance minister Arun Jaitley had first announced the government’s intent to launch such a scheme in his budget speech of 2015-16, primarily to mobilise the gold held by households and institutions.

The scheme will also help the local gems and jewellery sector by making available gold as raw material on loan from banks.

The finance ministry has sought comments from stakeholders on the draft gold monetisation scheme by June 2.

A person or institution holding surplus gold can get it valued from (Bureau of Indian Standards (BIS)-approved hallmarking centres, open a gold savings account in banks for a minimum period of one year, and earn interest in either cash or gold according to the draft. On their part, banks would “Both directionally and in terms of content, this draft reflects a practical approach. Once the incentive framework falls into place to the satisfaction of banks, customers and others, we will own a ‘uniquely Indian’ scheme that allows gold to become a dynamic, fungible asset in the hands of savers, with significant benefits to the economy, and therefore provide the gold trade with consistent policies,” said Somasundaram PR, India MD, World Gold Council.

Under the proposed scheme, bank interest to customers will be payable after 30/60 days of opening of the gold savings account. If a customer deposits 100 gms of gold and gets 1% interest, then, on maturity he has a credit of 101 grams.

Customers will have the option of cashing in or taking back gold. The tenure of the scheme has been proposed at a minimum 1 year, with a roll-out option in multiples of one year. It would be like a fixed deposit where breaking of lock-in period would be allowed.

“To incentivise banks, it is proposed that they may be permitted to deposit the mobilised gold as part of their cash reserve ratio/ statutory liquidity ratio requirements with the Reserve Bank of India. This aspect is still under examination,” it said.

YELLOW GLITTER Draft gold deposit scheme sets 30 grams minimum limit, banks can use it as part of total reserves.

Loan Image

Source: 20 May 2015, Hindustan Times

Personal loans 2.0: 24×7, social-media friendly

May 19, 2015

Have you been receiving mailers from your bank offering personal loans lately? Is your bank offering you such loans at record time and competitive rates?

Personal loans, considered among the riskiest credit lines till not-too-long-ago, are making a quiet comeback as a preferred product offering.

Sample this: HDFC Bank is offering personal loans disbursed in 10 seconds through net banking, as it expands marketshare and gears up for increased competition from non-banking finance companies (NBFCs). The offer is for existing customers of HDFC Bank, and will be available 24×7

Axis Bank is offering personal loan sanctioned and disbursed instantly — at any time of the day. Not just that, you can even convert your grocery bill into an EMI at the press of a mobile application, and that too on social networking sites including WhatsApp.

Other banks are pushing similar products, offering personal loans at 13-18% interest, compared to about 24% a few years ago.

In 2010, growth of personal loans or clean loans not backed by any assets, had fallen 1.2%. In the year-ended March 2015, such loans have grown 19%.

In the last three years, the combined personal loan disbursal has grown at an annual average of 14.3%, better than all banks’ nonfarm or non-food bank credit of 11.9% during the period.

“Our customers are assessed and are pre-approved for loans, and in such cases the amount is being credited within seconds,” an HDFC Bank spokesperson said.

Better regulatory norms, stringent know-your-customer (KYC) rules, a well-established credit information industry and mounting bad loans by companies have raised the credit-worthiness of individual borrowers over the last few years.

“We are constantly assessing our existing customers and rating them to analyse if they qualify to get loans,” Jairam Sridharan, president, retail lending and payments, Axis Bank told.

Source: 19 May 2015, Hindustan Times


No financial crisis risk, but bad loans still a problem: Raghuram Rajan

May 16, 2015

BENAULIM (GOA): Raising concern over rising bad loans at some banks, RBI Governor Raghuram Rajan today said there was no danger of any financial crisis but it may be early to declare that the worst was over on the NPA front.

“I would not be prepared to make that statement today only because you see a variety of problems across banks. Some banks have managed to bring down their bad loan positions, for others it is still increasing,” Rajan said.

He was replying to a query on whether the worst was over with regard to Non-Performing Assets (NPAs) in the banking system.

“I would be more confident when there will be a uniform sort of series of results across the banks,” Rajan told reporters after a central board meeting of the RBI here.

He, however, sought to undermine the concerns, saying, “if the question is whether are we in the danger of a financial crisis? The answer is no!”

He further said that he is more worried about the losses to taxpayers and the effects on banks’ functioning due to their rising bad loan levels.

The Governor said resolution of NPAs will be possible only with higher economic growth, which he termed as “slow” and the actions which the banks take.

“Combination of action by banks as well as growth tend to restore bank health. A slow recovery is underway, I think it will help,” Rajan said.

It can be noted that bad loans are on the rise and none of the banks in FY14 have reported any major improvement on the asset quality side.

A recent International Monetary Fund report said the domestic banking sector was in trouble with a whopping 36.9 per cent of the country’s total debt being at risk, which is among the highest in emerging economies.

The stressed assets ratio, which includes NPAs and restructured loans, of public sector banks has risen by an alarming 131 bps to 13.2 per cent or over Rs 7,12,000 crore, in FY15 with their gross non-performing assets touching 5.17 per cent. This is nearly 230 bps more than that of the system, according to the RBI data.

This means that more than 8 per cent of the advances were restructured in FY15. Stressed assets were 11.02 per cent in FY13 and 11.89 per cent in FY14.

As of March 2015, while gross NPAs rose to 4.45 per cent for the system as a whole, net NPAs also climbed up to 2.36 per cent, shows the RBI data.

Deals worth $23.5 billion likely to be signed during PM Modi’s China visit

May 15, 2015

NEW DELHI: Deals worth $23.5 billion are likely to be signed during PM Narendra Modi’s China visit, including new joint ventures which could see investments of $17 billion and $6 billion of financing.

These include a $2.5-billion financing for Bharti Airtel from Chinese lenders, a $3.5-billion venture by the Adani Group as well as big-ticket investments by JSW Steel, GMR and Welspun. With the exception of Bharti, the other companies are likely to sign joint venture agreements with Chinese partners.

The traffic is not entirely one-way as big investments by Indian IT majors Wipro and Infosys in China will also be announced during the visit, said people familiar with the matter.
India’s largest telecom company by subscriber numbers and revenues is raising $2.5 billion from Chinese banks. This includes $1 billion of financing from China Development Bank, which will go towards paying spectrum fees. The bank is also providing an additional $1 billion for purchase of equipment from Chinese manufacturers ZTE and Huawei.

In addition, Bharti Airtel will sign a memorandum of understanding with Industrial & Commercial Bank of China (ICBC) for a credit facility of $500 million. Bharti Airtel declined comment on the issue.

The Adani Group is setting up an integrated photovoltaic industrial park in the Mundra special economic zone (SEZ) in a joint venture with Chinese green energy major Golden Concord Holdings. A framework agreement between the two companies will be signed during Modi’s ongoing visit.

The two are also exploring investment opportunities in gasbased power plants. Further, the Adani Group is raising $1 billion from China Development Bank for financing the expansion of Adani Power’s Mundra plant. In all, China Development Bank plans to lend $3 billion to Bharti Airtel and Adani. Welspun is setting up a $2-billion integrated steel project in Gujarat in alliance with China National Technical Import & Export Corporation, according to the people cited.


Indian companies will receive $3.5 billion of loans from ICBC. This includes $1 billion each to JSW Steel, Jindal Steel & Power Limited and Infrastructure Leasing & Financial Services (IL&FS), apart from the $500-million facility to Bharti. The IL&FS Group is setting up a 4000 mw thermal power plant through IL&FS Energy Development Company Limited with China Huaneng Group as partner. The project involves an investment of $3 billion. Infra major GMR would enter into an agreement with Guizhou International Investment Corporation for setting up a 2,000-acre industrial park in Kakinada SEZ to house high-end Chinese equipment manufacturers.

The proposed project would entail an investment of $2.5-3.5 billion. Senior GMR officials confirmed the development to ET.

Adani Group declined comment while JSW Steel officials didn’t reply to ET’s queries. Chinese solar power player CSI will sign a $500-million pact with the Sun Group to produce 5,000 mw of green energy in five years. The deal also envisages manufacturing solar modules locally under the ‘Make in India’ initiative.

Wipro is setting up a delivery centre in Dalian, China. The $1.25-billion IT project will be in partnership with the Dalian government and Yida China Holding Limited. Infosys, meanwhile, will partner the Dalian government and Yida China Holding to build a China-India Information Service Industry Corridor in Qiannan — an autonomous prefecture of Guizhu.

ET Bureau | 15 May, 2015, 06.42AM IST

HDFC among world’s top 10 list of consumer finance firms

May 15, 2015

NEW YORK: Mortgage lender HDFC has emerged as the only Indian company among the world’s 10 biggest consumer financial services firms, after giants like American Express, Visa and Mastercard.

HDFC is ranked 7th on the list, compiled by business magazine Forbes, where American Express is placed on the top, followed by Capital One Financial, Visa, Discover Financial Services and Orix in the top-five. Mastercard is ranked sixth.

HDFC is followed by CIT Group of US at eighth position, Taiwan’s Hua Nan Financial at 9th and China’s Franshion Properties is at the 10th place.

Others ranked lower include Samsung Card, Kaisa Group, Orient, Nelnet, Jabal Omar Development and KWG Property.

The list is part of Forbes’ annual compilation of 2,000 biggest and most powerful companies globally, which includes a total of 56 companies from India across various sectors.

In the overall list, HDFC is ranked 485th, while Mukesh Ambani-led Reliance Industries leads the pack of the Indian companies at 142nd overall position.

For the regional banks, China Construction Bank tops the chart, while India’s SBI is ranked 22nd, ICICI Bank is at 29th place and HDFC Bank is at 40th position.

For Oil and Gas sector, Reliance Industries is ranked 15th globally, while ExxonMobil is on the top.

In Computer Services, Google tops the list and India’s TCS is at 7th place, followed by Coginzant at 9th and Infosys at 10th position.

The overall list is dominated by the companies from the US and China.

India has added two companies to its last year’s tally. Among Indian companies on the overall list, Reliance Industries is followed by SBI, ONGC, Tata Motors, ICICI Bank, Indian Oil, HDFC Bank, NTPC, HDFC, TCS and Bharti Airtel, among others.

Forbes said the list ranks the companies on the basis of a composite score of their revenues, profits, assets and market value.

Source: May 10, 2015 The Times of India


Home loans business boomed in FY15

May 12, 2015
Home loan is here!

CHENNAI: A revival in economic sentiment, rising income levels of borrowers and cooling property prices have resulted in mortgage lenders reporting double-digit growth in disbursements. Take HDFC, India’s largest mortgage player. The lender has witnessed 16% growth in individual loan disbursements last fiscal, with the average home loan ticket size moving up in the last 12 months to Rs 23.3 lakh compared to Rs 22.1 lakh during 2013-14.

“Interest rates have been soft and real estate prices have moved up very marginally as compared to the level of increase in disposable incomes thereby making house buying more affordable,” managing director of HDFC, Renu Sud Karnad, said. There is good traction

for properties in the periphery regions of the four metros, she said.


investor sentiment for the housing sector has improved as reflected by capital infusions of Rs 1,780 crore in various housing finance companies (HFCs) during last fiscal.

DHFL’s home loan book grew 27% to Rs 51,040 crore during last fiscal as against Rs 40,451 crore during FY14. The company’s average loan size also moved up to Rs 12 lakh from Rs 11 lakh during FY14.

With interest rates south-bound, lenders see strong growth signals ahead. HDFC brought down its lending rate by 20 basis points to 9.9% which was followed by Indiabulls Housing when it, too, lowered rates to 9.9% from 10.10%. Sundaram BNP Paribas Home Finance also reduced its prime lending rates to 9.95%.

“We believe our loan book can grow 15-18% CAGR (compounded annual growth rate) over the next three to five years,” HDFC’s Karnad said.

According to ICRA, HFCs will need external capital of around Rs 18,000-28,000 crore to grow at 20-22% over the next five years, assuming an internal capital generation of 16% while maintaining the capitalization levels at current levels.


DHFL’s home loan book grew 27% to Rs 51,040 crore during last fiscal as against Rs 40,451 crore during FY14. The company’s average loan size also moved up to Rs 12 lakh from Rs 11 lakh during FY14.

With interest rates south-bound, lenders see strong growth signals ahead. HDFC brought down its lending rate by 20 basis points to 9.9% which was followed by Indiabulls Housing when it, too, lowered rates to 9.9% from 10.10%. Sundaram BNP Paribas Home Finance also reduced its prime lending rates to 9.95%.

“We believe our loan book can grow 15-18% CAGR (compounded annual growth rate) over the next three to five years,” HDFC’s Karnad said.

According to ICRA, HFCs will need external capital of around Rs 18,000-28,000 crore to grow at 20-22% over the next five years, assuming an internal capital generation of 16% while maintaining the capitalization levels at current levels.

Indian economy to grow at 8-10% for 15 years: Arvind Panagariya

April 18, 2015

The Indian economy is expected to grow at 8-10 per cent for the next 15 years, though the expansion may be higher in dollar terms, NITI Aayog Vice Chairman Arvind Panagariya said here today.

“I expect India’s economy to grow anywhere between 8-10 per cent in the next 15 years,” Panagariya said while delivering a lecture at an energy conference here.

He further said, “If the economy actually grows at 8-10 per cent in rupees, in dollar terms it would be about 11-12 per cent and that kind of growth will turn India into about an USD 8 trillion economy from the current USD 2 trillion.”

The Finance Ministry had also projected in the Economic Survey the growth at 8-8.5 per cent in the current financial year (2015-16) and double-digit in the coming years.

The NITI Aayog chief added that the country’s economy grew by 8 per cent under the earlier NDA government regime and that was sustained for a long period of time.

As per the advance estimates of Central Statistics Office (CSO), India’s economic growth is pegged at 7.4 per cent in 2014-15 while the Reserve Bank of India’s recent projection say that GDP growth will accelerate to 7.8 per cent in the current fiscal.

Referring to the challenges on the energy front, Panagariya said, the demand for power, coal, oil will expand rapidly with the country becoming richer.

“Energy demands for India are going to rise as it becomes richer. I expect India’s energy demands to grow leaps and bounds as the time goes by,” he said.

India needs rapid expansion for the simple reason that one-fourth of the households in the country lack electricity.

The growing consumption of energy, he added, will also create challenges on the environment front.

“At the end of the day India is not the largest polluter, India by any stretch of imagination has not been a mass polluter, much of the responsibility lies with the western countries,” he added.

However, there is an important angle from which India needs to promote clean energy and that is purely from the point of view of domestic use, he said.

ICICI Bank cuts home loan rates by 25 bps for all customers

April 14, 2015

ICICI Bank today slashed home loan rate for both existing as well as new borrowers by 0.25 per cent joining a rate cut war initiated by its bigger rivals HDFC Ltd and SBI.

Women borrowers and financially weaker sections will now get home loan at 9.85 per cent, while for other borrowers it will be 9.90 per cent.

The cut in the home loan rate is in line with the base rate reduction of 0.25 per cent announced last week as there is no tinkering with spreads on loans.

The country’s largest lender SBI is also offering similar home loan rates effective yesterday.

ICICI Bank said reduction of home loan rates effective today is valid for all existing and new customers.

“With this announcement, women as well as applicants from weaker sections will get home loans at 9.85 per cent. The rate will be 9.90 per cent for all others,” the bank said in a statement.

The interest rate for fixed rate home loans have also been reduced.

“The borrowers taking fixed rate home loans with tenure of 10 years for loan amount up to Rs 30 lakh will have to pay 9.90 per cent, the same effective interest rate applicable for floating rate home loans,” said the bank.

Effective April 10, the new base rate or the minimum lending rate is 9.75 per cent.

“The move will benefit all existing customers of floating home loans, whose home loan rates will be reduced by 0.25 per cent as per the change in the base rate,” the statement said.

After cutting the key rate twice this year, the central bank kept it unchanged at 7.5 per cent in its monetary policy on April 7.

The Reserve Bank had blamed banks for not passing the benefits of two repo rate cuts to borrowers and termed as “nonsense” the lenders’ claims that cost of fund was high.

“The banks marginal cost of funding (has) fallen, the notion that it hasn’t fallen, is nonsense; it has fallen” Rajan had said.

Many banks including State Bank of India, HDFC Bank and Axis Bank last week cut lending rates by up to 0.25 per cent after RBI Governor Raghuram Rajan’s tough talk with bankers on the issue.


PM Narendra Modi woos German investors with stable, transparent tax regime

April 13, 2015


Pledging a stable and transparent tax regime, Prime Minister Narendra Modi today wooed global investors, saying development is “not a mere political agenda” but an “article of faith” and sought international support to achieve the objectives crucial for growth.

“We have re-energised the Indian growth engine. The credibility of our economy has been restored. India is once again poised for rapid growth and development,” Modi said.

“It is the only emerging economy where growth rate is rising. The prospects are even better,” he wrote in an op-ed article in the German daily Frankfurter Allgemeine Zeitung.

Modi said his government has earnestly taken up the challenge of development and economic transformation of India.

“For us, development is not a mere political agenda; it is an article of faith,” he said.

“My Government has pledged a stable and transparent tax regime, reducing corporate taxes and implementing a single Goods and Services Tax in 2016,” he said.

Modi, who along with German Chancellor Angela Merkel yesterday inaugurated the Hannover Fair in which India is a partner country, said generating jobs for India’s youth is a key to harnessing India’s demographic advantage.

“This can be achieved only when we significantly and quickly ramp up our manufacturing capabilities. To meet this objective my government has unveiled the ‘Make in India’ initiative. This is a win-win for all,” he said.

“With 65 per cent of our population below the age of 35, the possibilities that India’s growth presents for global economic prosperity are immense,” he said.

Modi, who is on a three-day visit to Germany, said the focus of his government is “not merely economic growth but an inclusive development.”

“I visualise India as a key engine of global growth. Our democratic principles and practices are guarantors of stability. We have a free media and an independent judiciary that allows all opinions to be aired without fear. We believe in ‘Rahein Saath Badhe Saath’ (stay together-grow together).”

He said that global collaboration and support were crucial to meet the objectives of development.

“International support and collaboration is equally critical to achieving our objectives. I have therefore sought to build a foreign policy which is an integral part of our national development strategy.

“My interactions with leaders of USA, Russia, France, Japan and China have all aimed at creating enduring partnerships with shared stakes in global development and well-being,” he said.

Modi said Germany enjoys a “special place” in India’s quest for international collaborations, and that the country’s “needs can become business opportunities for German industry.”

“We share a strategic partnership based on our common values. India desires a mutually beneficial partnership for growth and prosperity with Germany. Our priorities fit well with Germany’s expertise,” he said.

He, however, said that a great deal of potential remains unrealised, despite more than 1600 Indo-German collaborations.

“Germany is globally renowned for its engineering, innovation and skills. The capacities of your Mittelstand and family-owned businesses are well known. I invite them to come to India,” Modi said.

“We admire Germany’s achievements in the application of technology solutions to meet environmental challenges. You are also our natural ally in my government’s ‘Clean India’ initiative. We also want to benefit from Germany’s experience in cleaning the River Ganga,” he said.

Modi also tried to allay concerns of German entrepreneurs.

“I will also listen carefully to learn what more we can do to address concerns of German entrepreneurs with regard to investment and manufacturing in India,” he said.

Modi said that through the ‘Act East’ and ‘Link West’ policy, India has the “potential of becoming the middle ground for East and West as a manufacturing hub that serves both our vast domestic market and becomes a base for global exports and general well-being.”

He said the ‘Make in India’ initiative requires urgent creation of new infrastructure.

The prime minister said the substantial enhancement in financing in the federal budget for highways, railways and energy is a step in this direction.

“In the last 11 months, we have come a long way in keeping this promise,” he said.

“Our aim is to completely eliminate poverty and to propel all Indians into a life of purpose and dignity within a generation.”