Tag: home loan interest rates India

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.

How to secure your Home Loan?

With the high competition between banks it has become so easy to raise a home loan for purchase of property in a week days of time with the best and least home loan interest rates, but the actual challenge lays post disbursement of the loan. There are people who sold their property or left them to bank due to failure of EMI payments. These are some cases where people are suffering for not knowing how to manage the loan post home loan disbursement.

The process of securing your home loan starts from the day 1 when you start the home loan process. Every customer is advised to take photo copies of all documents submitted to bank and keep it for future references and cross check the home loan rates with other banks before applying.  Most of the customers sign the home loan applications and agreements when they are blank which is not at all suggestible, will you sign a blank cheque without writing anything and give it to somebody then why you are ok to sign the home loan agreement without filling it, ask the bank officials to fill the agreement and then sign it.

All the customers will sign two copies of home loan agreements one of which will be received by customer post home loan disbursement. The agreement will have all the details of your loan and their terms i.e loan amount, interest rate, repayment period, EMI, Processing fee paid, list of documents deposited etc. one should retain this copy of agreement till the loan completion. The agreement will have a copy of General Power of Attorney which should be read before signing if any clause is objectionable to you then you can ask bank for a clarification.

Along with these one should make more down payment towards the property and raise lesser loan amount which will ease the process of making EMI payments and gives us the scope of saving to pre close the loan. On a blink calculation any customers who go for a home loan will pay 125% of the loan amount as interest to the bank. So opting for lesser loan amount will save money and will secure the loan. It is always advisable to the customer to opt for Home Loan Linked Life Insurance which covers the loan amount in case of death of the applicant and waves the remaining EMI’s by releasing the property from the bank. Banks fund for these insurances along with home loan and it is a onetime premium which will secure both the home loan and applicant’s loan burden.

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