Month: September 2013

SBI hikes base rate by 10 bps to 9.80%, still the lowest in the industry

Sep 20, 2013, ET Bureau.

MUMBAI: State Bank of India (SBI) has hiked lending rates wherein new borrowers will have to pay more as compared to existing borrowers. SBI hiked base rate by 10 basis points to 9.80% a day before the Reserve Bank of India’s new governor, Raghuram Rajan is slated to announce his first mid quarter policy statement.

Interestingly for the first time existing borrowers are spared from a steep hike. New home loan borrowers of SBI will have to pay 10.05% for home loans for loans upto Rs 30 lakhs while the existing home loan customers will be charged 10%. For home loans between Rs 30 lakhs to Rs 75 lakhs, new customers will be charged 10.30% while existing customers will be charged 10.20%.

SBI is the first government owned bank to raise rates after RBI started tightening liquidity to protect the rupee from weakening in mid July. Following this, SBI and HDFC Bank offers lowest lending rate at 9.80%.

The difference in rates between existing and new customers is mainly because the bank has hiked spread or mark-up on base rate for new customers. The bank has increase mark up for home loans upto Rs 30 lakhs from 25 bps to 30 bps while the mark up for loans between Rs 30 to Rs 75 lakhs is raised from 40 bps to 50 bps.

Officials from the bank said that the bank has raised rates since the cost of money has gone up in the recent weeks. On Thursday, SBI bank also announced a hike in retail deposits in the range of 25 to 100 basis points. The bank would offer 100 bps higher for 179 days and one-year deposit at 7.50%. Early this month, the bank had raised interest rates on short-term bulk deposits to 9% from 7.25%.

SBI has also raised spreads on base rate for corporate loans. Officials from the bank who did not want to be named said that mark-up on base rate for top rated corporate is raised by 15 bps to 105 bps.

Several private banks such as HDFC Bank and ICICI Bank had announced a hike in lending rates after RBI tighten liquidity to prevent rupee from weakening against dollar. Among others HDFC and LIC Housing Finance, the housing finance companies also raised lending rates.

Among PSU banks, Andhra Bank, Union Bank of India and Bank of India had rolled back the reduction in rates to 10.25% in recent weeks. These banks had cut rates at the instance of FM days before RBI began tightening liquidity.

RBI ups repo rate by 25 bps; markets in free fall

Mumbai, Sept 20:  The Hindu Business Line

In his first credit policy since taking over earlier this month, the RBI Governor, Raghuram Rajan, has hiked the key policy repo rate.

The RBI has increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.

It has also reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect. MSF is the rate at which banks borrow from the central bank.

The RBI has reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0 per cent.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent and the Bank Rate stands reduced to 9.5 per cent with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 200 basis points above the repo rate.

“The need to anchor inflation and inflation expectations has to be set against the fragile state of the industrial sector and urban demand. Keeping all this in view, bringing down inflation to more tolerable levels warrants raising the repo rate by 25 basis points immediately,” RBI Governor, Raghuram Rajan, said in the mid-quarter policy review statement.

Highlights of the monetary policy review

Stock markets reacted negatively to the policy announcement. The Bombay Stock Exchange’s sensitive index Sensex dropped nearly 500 points to a level of 20,155 points at 11.30 a.m, minutes after the announcement. Except software majors – TCS, Wipro, Infosys and pharma major Sun Pharma,which were flat, all other constituents of the index were in the red.

The rupee opened at 62.04, moved up slightly to 61.88 before reversing and trading at 62.38 to the dollar at 11.32 a.m.

Cautious unwinding of exceptional measures

Explaining the rationale for its moves, the RBI said in a statement that it had earlier taken a number of exceptional measures to tighten liquidity with a view to dampening volatility in the foreign exchange market. These had the impact of raising the effective policy rate to 10.25 per cent, and were intended to maintain tight liquidity conditions till there was improved prospects of stable funding took efect. With the improvement in the external environment, the RBI is now in a position to contemplate easing these measures, it said.

Inflation high

Conceding that “inflation is high and household financial savings is lower than desirable”, the RBI hopes that a better harvest and negative output gap will help offset the consequences of the currency depreciation and inflation.

Costlier food items sent wholesale price inflation to a six-month high of 6.1 per cent in August.

Growth trailing

Stating that economic growth has weakened with continuing sluggishness in industrial activity and services, the RBI said the pace of infrastructure project completion is subdued and the start of new projects remains muted.

“Consequently, growth is trailing below potential and the output gap is widening. Some pick-up is expected on account of the brightening prospects for agriculture due to kharif output and the upturn in exports,” it said.

Rajan said concerns on the current account deficit have been mitigated by steps taken by the government and the RBI.

Also, steps have been taken to improve the environment for external financing, turning the focus to internal determinants of the value of the rupee, primarily the fiscal deficit and domestic inflation, he said.

“Further actions need not be announced only on policy dates. However, any further change in the minimum daily maintenance of the CRR is not contemplated,” he added.

NHB caps home loan rates at 10.75% for weaker sections

ET Bureau, 12 Sep 2013

KOLKATA: The National Housing Bank has capped lending rates for specialist mortgage lenders such as LIC Housing Finance which seek refinance from it.

The move comes when interest rates are climbing and the government may have pushed it with an eye on elections as in the case of the Food Bill and accelerated direct cash transfers.

The housing finance regulator has capped lending rates at 10.75% on home loans for the economically weaker sections. This cap is applicable to specialised housing finance companies, while banks will lend at base rate to the targeted segment.

Borrowers with a household income of less than Rs 4 lakh will get the benefit of interest rate ceiling under the government’s dedicated urban and rural housing schemes. NHB said it will provide refinance at a subsidised 8.25-8.75% rate to lenders, so that they earn 200-250-bps interest spread.

Normally, NHB provides refinance at 9.8-10% rate of interest. “The idea behind the interest rate ceiling is to pass on the benefit of concessional funding to ultimate borrowers,” NHB chairman and managing director RV Verma told ET. He said the ceiling was finalised after taking inputs from the government and the Reserve Bank of India.

“Lenders will get good enough spread to give the scheme a fair trial,” Verma said. NHB will send a note to all lenders about this cap later this week. However, lenders will be free to charge any rate if they don’t take refinance from NHB.

“The spread is not enough, taking into account the risk factor attached in funding to economically weaker section,” said DHFL Vysya Housing Finance managing director R Nambirajan. “We will make a request to NHB to increase the spread to at least 3% to cover higher risks,” he said. SBI too may not gain from this move.

LIC Housing Finance raises interest rates on home loans by 35 basis points

3 Sep 2013, ET Bureau

MUMBAI: LIC Housing Finance has raised interest rates on home loans by 35 basis points but has spared its existing customers from a rate hike. The company has not hiked its prime lending rates – the rate which is linked to floating rate that is charged to customers- to protect the existing customers. It raised rates on two of its schemes – Bhagyalashmi Plus and Super Choice – and has also launched a new scheme wherein it would charge a fixed interest rate of 11.50% for 10 years.

Under ‘Bhagyalakshmi Plus’ scheme aimed at women borrowers, LIC Housing would charge 10.35% against 10% charged in the past.

If the first borrower is not a woman, the person can opt for ‘Super Choice’ scheme wherein LIC would charge 10.60% against 10.25% charged earlier. In both these schemes – Bhagyalakshmi Plus and Super Choice’ scheme – rates are fixed for first two years and floating rate thereafter.

“We do not have any plan to raise interest rates in immediate future because it will only add to the burden of our existing customers,” said V K Sharma, MD and CEO of LIC Housing speaking to ET. “But the current rates are not sustainable as it is hurting our margins.” He said that the move by LIC HF is also aimed take care of shareholders interest since raising rates for new customers would ensure healthy margins.

In the recent weeks, after Reserve Bank of India tightened the liquidity in the system, private banks and housing Finance companies like HDFC has raised interest rates on the home rates. For instance HDFC floating rate home loan is pegged at 10.40% for loans below Rs 30 lakhs and 10.65% for loans between Rs 30 to 75 lakhs.

At present, it charges 10.60% for loans above below Rs 75 lakhs and 11.10% for loans between Rs 75 lakhs and Rs 3 crore.

Meanwhile, the housing finance company is mainly owned by LIC, launched a ‘New Fixed 10’ scheme wherein the customer wherein interest rates would be fixed for ten years at 11.50%. Further, the customers would have an option to shift to the floating rate loan after five years.

However those wishing to take fixed rate loan for the entire tenure of the loan, the company charges 12.50% under the scheme ‘sure fixed scheme’.

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