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’.

EMIs set to rise as ICICI Bank, HDFC hike rates

23 Aug 2013, ENS Economic Bureau

Borrowers will have to shell out more money as EMI (equated monthly instalment) on their home and auto loans with two leading lenders, ICICI Bank and HDFC, jacking up interest rates.

ICICI Bank, India’s second largest lender, has announced an increase of 0.25 per cent in its base rate with effect from August 23. The revised rate will be 10 per cent as against 9.75 per cent at present. Home loan major HDFC has increased its Retail Prime Lending Rate (RPLR), on which its Adjustable Rate Home Loans (ARHL) is benchmarked, by 0.25 per cent with effect from August 23.

“In February this year HDFC had reduced its RPLR by 10 bps and hence on a net basis the RPLR is higher only by 15 bps since January 2013,” HDFC said.

ICICI Bank has also announced an increase of 0.25 per cent in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from August 23. This benchmark rate is used for determining interest rates on loans and advances sanctioned up to June 30, 2010. With effect from July 1, 2010, interest rates on new loans and advances, including consumer loans, are determined with reference to I-Base.

ICICI Bank has also announced an increase of 0.25 per cent in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from August 23, 2013.

The above benchmark rates are used for determining interest rates on loans and advances sanctioned up to June 30, 2010.

The fixed rate customers will not be impacted by the above revision and their contracted rates will remain unchanged.

The RBI’s cash-tightening measures had pushed short-term money market rates along with government bond yields to higher levels, creating fear of increase in cost of funds for financial institutions. But RBI had indicated that these measures were short-term in nature and would be rolled back as and when the rupee is stabilised.

As of now, the rate hike is restricted to private banks as their cost of funds has increased while none of the leading PSU banks have announced a hike in rates so far. Banks with heavy reliance on the wholesale funding are the ones raising the lending rates as the rates in the money markets hardened following the RBI moves.

“Our cost of funds is in tact. SBI is also flush with deposits,” SBI chairman Pratip Chaudhuri said while ruling out a hike in rates last week.

On Monday, Axis Bank hiked its base rate, the minimum lending rate, by 25 basis points, to 10.25 per cent, pushing up the cost of home and auto loans. This means all categories of loans will become costlier at least by 0.25 per cent. Earlier this month, HDFC Bank, the country’s second largest private lender, had raised the base rate to 9.80 per cent from 9.60 per cent.

Increased cost of funds

* ICICI Bank has announced an increase of 0.25% in its base rate with effect from August 23

* The revised rate will be 10% as against 9.75% at present

* HDFC has increased its Retail Prime Lending Rate (RPLR), on which its Adjustable Rate Home Loans (ARHL) is benchmarked, by 0.25% with effect from August 23

* The RBI’s cash-tightening measures had pushed short-term money market rates along with government bond yields to higher levels

Home, auto and personal loans to cost more

20 Aug, 2013, TNN.

MUMBAI: Retail customers of home, auto and consumer loans should brace themselves for a rough ride ahead as signals emerging from the bond market point towards an increase in interest rates. And this rise could be sharp and quick.

The indications are derived from the benchmark 10-year yield on government securities (G-secs), which touched 9.27% per annum on Monday, a five-year high and the highest in the post-Lehman era. The 10-year benchmark rate is the highest risk-free rate that one can get in the country, and hence this is the benchmark rate for banks and other lenders for setting their onward lending rates for customers.

The current level is also close to the decade high rate of 9.60%, bond dealers said. The sharp rise is mainly because of the tough liquidity situation in the market triggered by various monetary tightening measures since July 15. At close the 10-year yield was at 9.22%, up 34 basis points (100 basis points = 1 percentage point) from its Friday close at 8.88%. Since May 24, benchmark yield has risen by 2.11 percentage points, and since August 1, by 1.06 percentage points to Monday’s close at 9.22% per annum.

According to industry analysts and debt fund managers, the rise in rates would hurt those home loan customers who have gone for the floating rate plan, new auto and other consumer loan customers, besides all the large and small corporate borrowers. However, the silver lining for customers would be that along with higher borrowing rates, fixed deposit rates would also rise and one can invest during those high rates to earn better returns for several months.

In addition to the benchmark rate, yields on all other long term G-secs are either already above the 9.5% mark or very close to that level. Moreover RBI is not infusing liquidity through open market operations (OMOs), which is by buying G-secs from the market, pointed out a dealer with a local bond house.

“Local as well as global factors are contributing to this rise in rates in India,” a top debt fund manager said. “On the local front, RBI’s recent steps to curb liquidity to stem the weakness of the rupee has not had its intended impact and that is leading bond market players to assign high uncertainty premium to G-sec rates,” the fund manager said.

Since July 15, RBI has tightened liquidity in the system, assuming that would force market players to buy less dollars in the forward market and hence would stem the weakness of the Indian currency. However, since July 15, the rupee has depreciated nearly 5.5%, indicating that the measures have failed. “On the global front, the fears of tapering off of by US Fed is also weakening emerging market currencies,” the fund manager said.

Axis Bank on Monday raised its base rate by 25 bps to 10.25%. Earlier Andhra Bank and Karur Vysya Bank also raised its base rate by 25 basis points The country’s largest private lender ICICI Bank hiked its deposit rates by 50 to 75 basis points. Canara Bank also hiked fixed deposit rates in some maturities.

Along with the rise in bond yields, the rate of inflation is also going up. On Wednesday, the wholesale price index (WPI) for July showed a jump to 5.79%, the fastest rate seen in the last five months and also higher than the RBI’s comfort level of 5.5%. According to Bloomberg data, the last time the market saw 9% yield on a 10-year paper was in late August, 2008. Since then the benchmark rate has remained below the 9% level, and in between falling as low as 5.24% in early January 2009.

Fund managers believe that the government has to instill confidence among investors and that could bring in the much-needed stability in the bond market. Once that stability comes, investors would come back to invest which would lead to soften rates. “Yields are looking very attractive at this point of time. Once people see some stability on the currency front, we may see large follow up buying in bonds, including in G-secs,” said Amit Tripathi, head of fixed income, Reliance Mutual Fund.

On Monday, there was spillover impact of the hardening of the rates in the auction for government papers also. In the auction for 28-day cash management bill (CMB) for Rs 11,000 crore, the cut-off yield was fixed at Rs 12.24% per annum. Compared to Monday’s auction, the cut-off yield in the auction for 34-day CMB on August 13 was 11.94%.

ICICI Bank to offer Money2India app for NRIs

Mumbai, May 9:  Business Line

ICICI Bank will offer Money2India mobile application for non-resident Indians (NRIs) to track their money transfers to India.

The application enables the bank’s registered users to avail themselves of the money transfer tracking service through their smartphones.

The application can be downloaded from the iOS App Store for iPhones and iPads, Android Marketplace and Windows 8 Store across five countries namely the US, Canada, UK, Singapore and Hong Kong, the bank said in a statement.

Online registration

To use this service, users need to complete a simple one-time online registration at and can avail themselves of the online service for tracking money transfers from any bank in eight countries –— US, Canada, UK, Sweden, Switzerland, Singapore, Hong Kong and UAE — to any account with over 100 banks in India.

“Customers or NRIs can now easily track exchange rates, status of their money transfer requests and place new requests for tracking from their mobile phones,” an ICICI Bank spokesperson said.

With over a million registered user base, it is a preferred online service for tracking money transfers to India with round-the-clock customer service availability, the bank said.

Bank loans may not get cheaper soon

By Atmadip Ray, ET Bureau | 3 May, 2013

KOLKATA: Consumer loans may not get cheaper immediately despite a repo rate cut since banks continued to pay high to depositors to improve a modest collection.

Top bankers said that RBI’s growth direction with repo rate cut has pleased them but the absence of a cut in cash reserve ratio will not allow them to cut lending rates across the spectrum. A reduction in the reserve ratio would have released funds for banks to lend without looking for deposit mobilisation at a high price. Banks are forced to keep rates high to overcome a slow deposit growth.

“A mere repo rate cut will not help us in terms of lowering of lending rates,” Punjab National Bank chairman and managing director KR Kamath said. “One can’t go for drastic reduction of deposit rates as mobilisation has been sluggish. The issue is when it is going to be the right time for a deposit rate cut. Till such time, it will be difficult to reduce lending rates across the board.”

RBI said its assessment of the growth-inflation dynamic does not allow further monetary easing. However, the central bank governor D Subbarao assured banks that it will to actively manage liquidity to reinforce monetary transmission, consistent with the growth-inflation balance.

“The call in reduction in base rate may be taken over a period of time and would depend upon, how the deposit rates move,” Corporation Bank chief Ajai Kumar said. “In the present scenario where deposit mobilisation is still not picking up, it would be too early to comment on lending rate cut.”

A 25 basis point cut in repo rate, the rate at which RBI lends to bank, will reduce the cost of fund only for borrower banks. But banks which park their excess fund with the central bank will now earn 25 basis point less as reverse repo rate has been lowered by similar extent.

Uco Bank chief Arun Kaul said that cutting rates would depend upon cost of funds and how much it comes down in the near future. These lenders said they will try to adjust rates for some selective sectors with strong growth links.

“We need to do a fine balancing act for lowering lending rates for small sectors,” United Bank of India chairperson and managing director Archana Bhargava said.

No loan against gold coins weighing above 50 grams, proposes RBI

NEW DELHI: The Reserve Bank of India (RBI) has proposed that banks restrict the facility of advancing loan against gold coins to a maximum weight of 50 grams. This move, implemented would imply that a customer cannot avail loans against gold coins that weigh more than 50 grams.

As per extant instructions, banks are currently permitted to grant advances against gold ornaments and other jewellery and against specially minted gold coins sold by banks. However, no advances can be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold exchange traded funds and units of gold mutual funds.

“While there may not be any objection to grant of advances against specially minted gold coins sold by banks, there is a risk that some of these coins would be weighing much more, thereby circumventing the Reserve Bank’s guidelines regarding restrictions on grant of advance against gold bullion,” the bank said.

Accordingly the bank has proposed to restrict the facility of advances against the security of gold coins per customer to gold coins weighing up to 50 grams.

The detailed guidelines for the same will be issued by end-May 2013.

Credit information bureaus want access to mobile bill payment records

Mumbai, April 21:  Business Line

Could your post-paid mobile bill payment record help banks arrive at a decision on giving you a loan? Well, chiefs of Credit Information Bureaus think so.

The bureaus (CIBs) have initiated talks with the telecom regulator for allowing telecom companies to lodge customer bill payment history with them.

“Telecom service providers are willing to share information. However, there is a regulatory clause whereby TRAI (Telecom Regulatory Authority of India) does not allow information sharing by telecom operators. We are in talks with the regulator,” said Arun Thukral, Managing Director, Credit Information Bureau (India) Ltd (CIBIL).

CIBIL, the agency that tracks credit history of borrowers and assesses their credit worthiness, is also pursuing regulators such as electricity regulatory commissions to get access to utility bill payment information as this could prove to be an alternative source of credit history on consumers.
Full-file reporting

According to Mohan Jayaraman, Managing Director, Experian Credit Information Company of India, “We need more of full-file reporting, which gives a 360 degree view of the consumer, like in the US, UK and Europe. Today, it doesn’t get reported to the bureaus but this is great information to work with.”

Full-file reporting is any information that captures your repayment record with any entity and is given to the bureau. The repayments could be related to utility bills, lease rentals, and telecom service.

“With more mobile subscribers than bank accounts in India, this (full-file reporting) can help credit bureaus access wider range of information. We have spoken to the Reserve Bank of India in this regard,” Jayaraman said.

However, Cellular Operators’ Association of India (COAI) Director-General Rajan Mathews, said: “No operator would be willing to share customer details, unless mandated by a regulatory authority, due to the privacy issues involved. These are highly-sensitive data, as they divulge a lot of details such usage pattern and monthly spend among others.”

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