Package for small, medium sector also on cards.
--------------------------------------------------------------------------------
New package
Housing loans will be available at cheaper rates and under simpler terms
The modalities of the new package were being worked out
--------------------------------------------------------------------------------
Our Bureau
New Delhi, Dec 11 Home loan borrowers looking for finance of up to Rs 20 lakh
are likely to see a slew of concessions coming their way in the next few days.
State-owned banks are close to finalising a package to give a boost to the
housing sector by making such loans available at cheaper rates and under
simpler terms.
The move to provide relief for home loan borrowers comes in the wake of the
Government's recent fiscal stimulus booster in which it promised that public
sector banks (PSBs) would shortly announce a package for two categories - up to
Rs 5 lakh, and between Rs 5 lakh and Rs 20 lakh.
Borrowers are now expecting at least 200-300 basis point cut in interest rates
as relief under the package. They want interest rates on fixed rate home loans
to come down to between 7 and 9 per cent say for a 10-year term period.
"The package that we are discussing will not be confined to interest rates. If
we are going to stop with interest reduction, it will not augur well for the
package. There has to be other incentives," Mr T.S. Narayanasami, Chairman,
Indian Banks Association (IBA), told reporters after an IBA meeting here on
Thursday.
The Finance Secretary, Mr Arun Ramanathan, and senior Finance Ministry
officials were also present at the meeting.
The IBA Chairman said that bankers were still discussing the modalities on how
the package should be structured and that they had not come to any definite
conclusion. Besides interest rate reduction, the public sector banks were also
looking to include concession on margin requirements, waiving of processing fee
for loans and changes in pre-payment clause in the package, Mr Narayanasami
said.
PSBs are also looking at making credit more accessible and cheaper for small
and medium enterprises (SMEs). Indications are that some form of interest
subvention would be provided.
However, for the proposed interest concession on home loans up to Rs 20 lakh,
Mr Narayanasami made it clear that no interest subvention was contemplated or
even necessary.
"The whole exercise is to make interest affordable for housing and SME sectors.
There will be a pragmatic view in cutting interest. We have not decided to what
extent we will cut the interest rate. You wait for the package to be announced
in a day or two," he said.
Meanwhile, sources in the banking industry said that at today's meeting the
issue of cost of funds for banks was discussed, especially from the context of
bulk deposits. The Finance Ministry had issued instructions that there should
be no acceptance of bulk deposits outside the card rates.
Central public sector enterprises (CPSEs) were also instructed to strictly
adhere to Finance Ministry guidelines and desist from inviting bids from banks
for parking their surplus funds. The practice of inviting bids were leading to
competition among PSBs and thereby raising their cost of deposits, which in
turn led to increased lending rates, according to the Finance Ministry.
The Government was now closely monitoring, through a committee, as to whether
PSBs as well as CPSEs were complying with the directions or not, sources
said.PSU banks set to offer cheaper, easy home loans
Package for small, medium sector also on cards.
--------------------------------------------------------------------------------
New package
Housing loans will be available at cheaper rates and under simpler terms
The modalities of the new package were being worked out
--------------------------------------------------------------------------------
Our Bureau
New Delhi, Dec 11 Home loan borrowers looking for finance of up to Rs 20 lakh
are likely to see a slew of concessions coming their way in the next few days.
State-owned banks are close to finalising a package to give a boost to the
housing sector by making such loans available at cheaper rates and under
simpler terms.
The move to provide relief for home loan borrowers comes in the wake of the
Government's recent fiscal stimulus booster in which it promised that public
sector banks (PSBs) would shortly announce a package for two categories - up to
Rs 5 lakh, and between Rs 5 lakh and Rs 20 lakh.
Borrowers are now expecting at least 200-300 basis point cut in interest rates
as relief under the package. They want interest rates on fixed rate home loans
to come down to between 7 and 9 per cent say for a 10-year term period.
"The package that we are discussing will not be confined to interest rates. If
we are going to stop with interest reduction, it will not augur well for the
package. There has to be other incentives," Mr T.S. Narayanasami, Chairman,
Indian Banks Association (IBA), told reporters after an IBA meeting here on
Thursday.
The Finance Secretary, Mr Arun Ramanathan, and senior Finance Ministry
officials were also present at the meeting.
The IBA Chairman said that bankers were still discussing the modalities on how
the package should be structured and that they had not come to any definite
conclusion. Besides interest rate reduction, the public sector banks were also
looking to include concession on margin requirements, waiving of processing fee
for loans and changes in pre-payment clause in the package, Mr Narayanasami
said.
PSBs are also looking at making credit more accessible and cheaper for small
and medium enterprises (SMEs). Indications are that some form of interest
subvention would be provided.
However, for the proposed interest concession on home loans up to Rs 20 lakh,
Mr Narayanasami made it clear that no interest subvention was contemplated or
even necessary.
"The whole exercise is to make interest affordable for housing and SME sectors.
There will be a pragmatic view in cutting interest. We have not decided to what
extent we will cut the interest rate. You wait for the package to be announced
in a day or two," he said.
Meanwhile, sources in the banking industry said that at today's meeting the
issue of cost of funds for banks was discussed, especially from the context of
bulk deposits. The Finance Ministry had issued instructions that there should
be no acceptance of bulk deposits outside the card rates.
Central public sector enterprises (CPSEs) were also instructed to strictly
adhere to Finance Ministry guidelines and desist from inviting bids from banks
for parking their surplus funds. The practice of inviting bids were leading to
competition among PSBs and thereby raising their cost of deposits, which in
turn led to increased lending rates, according to the Finance Ministry.
The Government was now closely monitoring, through a committee, as to whether
PSBs as well as CPSEs were complying with the directions or not, sources said.
http://www.thehindubusinessline.com/2008/12/12/stories/2008121252230100.htm
I keep six honest serving-men (They taught me all I knew); Their names are
What, Why, When, How, Where and Who.
-- Rudyard Kipling
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