HDFC expect rates to increase by 25-50 bps in the first quarter of next fiscal

According to Housing Development Finance Corporation (HDFC), country’s largest mortgage company interest rates will probably increase by 25 to 50 basis points in the first quarter of the next fiscal. This was pointed out by HDFC joint managing director Renu Karnad, who informed reporters that HDFC is also expecting increase in loan disbursements of by 22 to 25% during the current fiscal.

While speaking on the sidelines of a function marking the launch of the Real Estate Sensitive Index (Ressex), Ms Karnad stated attention is being paid over the rise in the real estates prices which have increased sharply due to the recovery in capital markets.

In her speech, Ms Karnad said, “Even in today’s ‘affordable housing’ mantra days, the common man has to shell out more than an arm and a leg to buy his home. “In India, housing, if priced correctly, has an enormous demand. Given the acute housing shortage, it is unlikely that there will be any saturation in the market for a long time to come.”

Ms Karnad added, the real estate index, will be helpful for the customers and lender as they will be to take a view of the housing market. The index has been developed by a private consultancy firm Liases Foras.

“In the last year alone, which was one of the toughest periods in economic history, the real estate industry in India has managed to grow at over 16% YoY. As a contributor to GDP growth, current estimates place the real estate sector at 8.86% of GDP. At the same time, over Rs 230 billion is being proposed to be raised across 8-10 real estate IPOs within the next 6-12 months. The post-crisis events have shown us the importance of transparency, compliance and integrity in the business world,” she said.

“The housing industry in particular, which addresses the needs of millions of consumers, requires a greater degree of sophistication in its reporting of accessible and value-adding information,” she added.

CCI to investigate loan prepayment penalty charged by banks

The Competition Commission of India (CCI) is keeping an eye on few of private sector lenders including HDFC Bank, Deutsche Postbank Home Finance and LIC Housing Finance, as they are levying a penalty on consumers who are paying off their loans ahead of schedule.

According to a person closely watching the development in case the CCI found the practice anti-competition, then either the regulator or its appellate tribunal can put ban on this practice across the industry and can also penalize banks for charging the levy. The person informed the regulator is trying to gather information from these institutions. A senior CCI official refused to comment on this.

Replying to an e-mail sent by ET, HDFC, India’s largest mortgage lender said, “....the business of a bank/ financial institution involves borrowing and lending and in the process the lending institution tries to run a matched balance sheet of assets and liabilities. Prepayments are essentially accelerated payments before the schedule. Any prepayment will disturb the asset-liability match and in order to mitigate the negative impact of the prepayments the institutions/banks charge a prepayment charge. Every time when there is a prepayment from the borrowers it will not be feasible for the banks to prepay its lenders as its loan agreement with lenders may either not permit it or permit it only with certain charges, notice period and may be subject to other conditions.” HDFC is charging maximum prepayment levy of 2% of the amount prepaid.

When contacted Deutsche Postbank Home finance, it declined to discuss the issue, stating that the matter was sub judice, while HDFC Bank and LIC Housing Finance, refused to comment on this. Till now no directives have been issued to banks, by the banking regulator on a prepayment penalty. When newsperson contacted, RBI governor D Subbarao said in Mumbai, that complaints regarding levying a penalty will be discussed with the ombudsman.

However some of the lenders inflict prepayment charge only in the cases where customer decided to refinance the loan by borrowing at a lower interest from another institution. An HDFC spokesperson said, “The policies of HDFC have always favored customers prepaying loans from their own savings. For example, there are no prepayment charges on part prepayments up to 25% of the opening balance or if the customer prepays his entire loan after three years from his own savings.” In the last one year when banks began to lower interest rates and also agreed to refinance existing loans to gain market share, then only borrowers came to know about the charges relating to loan prepayment. Early this year State Bank of India, country’s largest lender, initiated with its 8% home loan.

The senior banker pointed out although prepayment levied on fixed interest rate is justified, but according to consumers it is not right to attach these charges with floating rate loans. Moreover, when interest rates come down, not many banks pass on the full benefits to their customers, but they are quick in increasing either the EMI (equated monthly installment) or the loan tenor when interest rates start rising.

Thus due to these levied charges, borrowers who had taken floating rate loans restrain from switching to another lender that is offering a lower rate loan.

On the other hand banks also restrain from giving benefits of lower rates to the existing borrowers, instead they offer cheaper loans to attract new customer. CCI is already looking into prepayment charges for auto, personal and other loans, but in case of home loans the issue seems to be significant which have tenors of as long as 15 to 20 years.

A person familiar with the CCI investigation stated, “Prepayment penalty comes in the way of a customer who wants to close a loan and avail of another loan from a bank that lends at a lower interest rate. It makes such migration economically unviable unless the interest rate differential between the banks is more than the quantum of penalty. Such exit load on loans is an entry-barrier for new products in the market and hence anti-competitive”.

The CCI, will also investigate whether the charging of levying prepayment penalty leads to collusive behavior.

HDFC Bank revised lending rate by 25 basis points

HDFC Bank country’s second largest bank among private sector lender announced cut in the benchmark lending rate by 25 basis points to 15.75 per cent.

According to information placed on HDFC bank website the revised benchmark prime lending rate of 15.75 per cent per annum has come into effect from July 20. With the cut in lending rates the fixed deposits rated have also been reduced effective from May 18.

In the past six months, the PLR has been revised by 75 basis points earlier bank had revised PLR in December 2008, when the rate was reduced by 50 basis points to 16 per cent.

The loans given by the private sector banks are mostly rated below PLR, but some of the corporate loans they relate to the benchmark rate.

As there is variation in PLR therefore to study the relevance of PLR in the changed scenario, last month the Reserve Bank formed a six-member working group to study the Benchmark Prime Lending Rate (BPLR) system and suggest a single method for pricing of floating rate loans, which will help in bringing more transparency in fixation of interest rates on housing loans by banks.

The working group is headed by the RBI Executive Director Deepak Mohanty includes J P Morgan India chief economist Jahangir Aziz and Indian Institute of Management (IIM) Ahmedabad Professor as its members.

In addition to them, other members of working group include RBI chief general manager P Vijaya Bhaskar and Janak Raj, advisor-in-charge in the monetary policy department of the central bank and RBI's monetary policy department director Himanshu Joshi, who is a member secretary.

According to RBI release, "The working group may co-opt any other members as special invitees and may consult with all stakeholders".

The group would be placing its report by end-August 2009. In the report the group will give some suggestions for a suitable benchmark for floating rate loans in the retail segment.

Also there will be some recommendation for an appropriate loan pricing system based on international best practices, the release stated. It said the reviewing is being done to make the credit pricing more transparent.

HDFC says demand for home loans is picking up

According to a banker who had attended the meeting of the Finance Minister and PSU bank chiefs said that the finance ministry as well as the Reserve Bank of India wanted a steep fall in lending and deposit rates because it is believed this will cover RBI interest rate curve, which is one of the reason for the absence of the strong pick-up in the credit demand.

The banker informed private and foreign banks have reduced lending as they have become cautious and risk reluctant, whereas the force of increasing the loans growth and meeting credit needs of the corporate sector is being endured by state-owned banks.

However the finance ministry and RBI officials have been advising the banking sector to pass on the benefits of lower interest rates to customers. After the meeting with Pranab Mukherjee, a few banks such as State Bank of India, Union Bank of India, ICICI Bank, IDBI Bank and HDFC Bank reduced their deposit and loan rates.

Housing Development Finance Corporation (HDFC), India’s leading housing finance lender, too had slashed its deposit rates by 25 basis points (0.25%) after the FM-bankers meet but has not taken any decision on reducing lending rates in the near future. Earlier the housing finance lender had reduced its lending rates on May 7 by 0.25% after bringing it down by 0.50% in March. At present the institution is waiting for directions on interest rates from Budget 2009-10 as well as Reserve Bank of India's credit policy review will be presented in July before moving on loan rates.

Recently Deepak Parekh, chairman, HDFC, informed that interest rates will be reviewed only after decline in cost of funds. Currently HDFC is charging 9.25% for loans up to Rs 30 lakh, 9.75 for loans between Rs 30 lakh and Rs 1 crore and 10% for loans above Rs 1 crore.

Sources at HDFC told UTVi that recently demand for housing is picking up substantially as against to what was seen in the last quarter of 2008. There has been increase in loan approvals in June which have exceeded the May numbers of the institution, as per the information provided by sources. The leader in housing finance is also likely to maintain growth in net profit for the current financial year at 20%. In the previous financial year, HDFC had registered a profit of Rs 2,268 crore, up 24% in comparison to the previous fiscal. The lender had approved around Rs 49,166 crore while disbursals amounted to Rs 39,650 crore in 2008-09.

HDFC Bank awarded ‘Best Retail Bank in India’

HDFC Bank has won award for offering best retail banking services. On Tuesday bank released a statement in which it stated it has won The Asian Banker's Best Retail Bank in India award for the year 2008. In the statement it also said that bank has won the award for the third year in a row.

The Asian Banker magazine reported that HDFC Bank has been awarded the Best Retail Bank in India because for its robust core funding, superior financial performance, sustainability and effective distribution channels amidst a highly-challenging environment.

Strict finance terms for Nano finance scheme

Tata Motors is giving final touches to the launch of Nano car. The company is having final talks with the State Bank of India (SBI) India’s largest bank, regarding finance scheme for the Nano car. Company has tied-up with SBI for the finance scheme for Nano, under which the bank will be financing 70 per cent of the price of the car at an interest rate of 14 to 14.75 per cent for a tenure of up to 5 years.

Last week meetings were held between General Managers of SBI branches across the country with the senior Tata Motors executives to decide the branches through which the finance will be offered and the method of rolling out the loan scheme across the country, especially in rural locations and small towns.

The strict terms have been made for the Nano finance scheme in comparison to those offered by both government-owned and private sector banks for comparable tenures. Currently government-owned banks are charging between 11.5 and 12 per cent, while SBI before 31 May is charging a concessional 10 per cent for car loans for the first year as part of a special scheme.

Private Banks like HDFC Bank are charging interest of 12 to 12.5 per cent and ICICI Bank 14.5 per cent. Most banks offer finance up to 85 per cent of the price of the car.

As per information provided by sources, the company has already received over 40 million queries on the Nano on its websites. According to dealers the cost of the opening level model will be Rs 1 lakh (excluding freight and value-added tax ) and consumers will have to pay Rs 25,000 to Rs 30,000 more for the air-conditioned model, though the dealers have still not been given the final pricing.

Regarding finance scheme a Tata Motors spokesperson told, “The booking process and other details will be announced on March 23, 2009. In any case, we have said on February 26, 2009, that Tata Motors is making arrangements for the widest possible network to book the car, so that prospective customers can conveniently avail of booking facilities at their locations, across the length and breadth of India. Your information on interest rates etc is purely speculative.” However no reply to an email query was given by the SBI spokesperson.

The sources closely related to the process say that the company will be roll out limited number of cars from assembly lines in Pune (Maharashtra) and Pant Nagar (Uttarakhand), until a makeshift arrangement the main plant in Gujarat starts operations in October. While, the company’ aims to roll out around 100,000 cars in the first 12 months.

HDFC Standard Life in tie-up with Manipal introduced certificate program

HDFC Standard Life a private sector insurer in collaboration with Manipal Education has started a three-month certificate program in Insurance and Management.

HDFC Standard Life released a statement which stated the program has been started with an aim to search for the talent, provide them training and groom talent from across the country to ready pool of insurance-trained sales professionals for the company.

It also stated the program has been designed to cater those individuals (MBAs, experienced and fresh graduates) who want to take up insurance as their career.

HDFC Bank launched a unique scholarship scheme for school children

HDFC Bank leading private bank in India has launched a scheme “HDFC Bank Meritus scholarship”. The scheme is first of its kind related to education program. The aim of the scheme is to cover students of class 4 to 9 across the country and to shortlist the best 5000 students for an educational scholarships amounting to Rs 1.5 crore per year using various academic and non- curricular criteria. Bank has launched this program in alliance with Horlicks.

The HDFC Bank Meritus Scholarship programme is a motivating program, which look for rewarding all-round excellence among students and help add to their overall development. The awardees from all over the country would receive a scholarship ranging from Rs.2, 500 to Rs.10 Lakh.

Publicizing this first of its kind scholarship program, Group Head, HDFC Bank Rahul Bhagat, notified, “This initiative emphasizes the values our Bank stands for. It is a small contribution we are making towards the nation by facilitating young India in its quest for excellence. We are confident we’ll play the role of mentors to these bright children for years to come, and help them create an India that is better, more educated, and, more prosperous.”

Parents have to fill in the registration form available in respective schools to get their wards registered in the scheme. Otherwise, one can also register online by visiting the bank website www.hdfcbank.com/meritus. The last date is February 22, 2009 for submitting the registration form. One can see all the details of the program on the bank website.

To be eligible for the scholarship, registered students have to undertake four rounds of tests - two telephonic and two written, over a period of 16 weeks. To certain the full involvement of the parents in the overall progress of their child, the first two participation rounds will be conducted via telephone through an Interactive Voice Recording (IVR) system. Parents can help their children while taking the IVR test and help them get to the final rounds and in the final round the student has to give a written test. The questions prepared will be largely picked from the existing curriculum so that this program helps them in preparing for their school exams too.

Bank will select the final 5000 awardees on the bases of the final round scores, extra-curricular achievements and academics. To make the selection of scholarship awardees completely fair, an independent panel of qualified judges will select the scholarship awardees.

HDFC Bank launched a unique scholarship scheme for school children

HDFC Bank leading private bank in India has launched a scheme “HDFC Bank Meritus scholarship”. The scheme is first of its kind related to education program. The aim of the scheme is to cover students of class 4 to 9 across the country and to shortlist the best 5000 students for an educational scholarships amounting to Rs 1.5 crore per year using various academic and non- curricular criteria. Bank has launched this program in alliance with Horlicks.

The HDFC Bank Meritus Scholarship programme is a motivating program, which look for rewarding all-round excellence among students and help add to their overall development. The awardees from all over the country would receive a scholarship ranging from Rs.2, 500 to Rs.10 Lakh.

Publicizing this first of its kind scholarship program, Group Head, HDFC Bank Rahul Bhagat, notified, “This initiative emphasizes the values our Bank stands for. It is a small contribution we are making towards the nation by facilitating young India in its quest for excellence. We are confident we’ll play the role of mentors to these bright children for years to come, and help them create an India that is better, more educated, and, more prosperous.”

Parents have to fill in the registration form available in respective schools to get their wards registered in the scheme. Otherwise, one can also register online by visiting the bank website www.hdfcbank.com/meritus. The last date is February 22, 2009 for submitting the registration form. One can see all the details of the program on the bank website.

To be eligible for the scholarship, registered students have to undertake four rounds of tests - two telephonic and two written, over a period of 16 weeks. To certain the full involvement of the parents in the overall progress of their child, the first two participation rounds will be conducted via telephone through an Interactive Voice Recording (IVR) system. Parents can help their children while taking the IVR test and help them get to the final rounds and in the final round the student has to give a written test. The questions prepared will be largely picked from the existing curriculum so that this program helps them in preparing for their school exams too.

Bank will select the final 5000 awardees on the bases of the final round scores, extra-curricular achievements and academics. To make the selection of scholarship awardees completely fair, an independent panel of qualified judges will select the scholarship awardees.

HDFC bank from India the biggest gainer among top 500 financial brands

Indian banks have positioned itself amongst the world’s top 500 financial brands amidst the tight financial crisis. Around 19 Indian banks have positioned themselves especially at the time when global financial brands staggered due to tight financial crisis. In terms of brand value the top 500 banks lost around $218.1 billion (about Rs10.8 trillion) which means a 32 percent drop over the past year, while their market capitalization slumped by 51 percent to $3.9 trillion.

In comparison to the previous year's list around 209 banks have been out positioned as they became victim of the recession in U.S., Europe and Japan. From India HDFC Bank had turned out to be the biggest gainer. According to the Economic Times HDFC bank brand value rose by $243 million from 2007 to $611 million in 2008, and it positioned to 151 in the league table in 2008 from 236 in 2007. "Emerging market brands have significantly outperformed world brands in 2008. Many of the best known developed world banks have died in 2008. Some are walking dead awaiting a silver bullet before they finally go. Governments hold the gun," said David Haigh, CEO of Brand Finance. Axis Bank has positioned itself at the 267 position while Kotak Mahindra Bank occupied 278 positions. However, State Bank of India (SBI) has been ranked 69 in the latest survey; it has come down from 60 a year earlier, with a brand value of $1.44 billion, down from $2.852 billion. SBI slipped down because its market capitalization fell to $9.83 billion from $12 billion.

Besides them 13 new public sector banks from have made entry including Punjab National Bank, Bank of India, Canara Bank, Bank of Baroda, Union Bank of India, Indian Overseas Bank, Indian Bank, Power Finance Corporation, Oriental Bank of Commerce and Syndicate Bank. The list also includes the three associate banks of SBI viz. State Bank of Hyderabad, State Bank of Patiala and State Bank of Bikaner & Jaipur. While in the previous year, only six Indian banks could make in Brand Finance's list.

The rankings were provided by the Brand Finance along with The Banker magazine. The rankings were used through a discounted cash flow (DCF) technique to discount estimated future royalties, at an appropriate discount rate, to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value.

Man behind HDFC Bank incredible growth- HDFC’s Aditya Puri

The Indian Inc had go through very tough time in the year 2008 with major economies in recession. The inflation was at peak and Sensex had dipped, for many it made difficult to sustain. Only few were able to keep up with situation.

HDFC Bank was the only bank to be able to show steady growth, while some of its competitors got trapped in the sub prime mess. The bank continued its climb high.

In the third quarter the bank demonstrated a 45 per cent jump in its profits, incredible when banks around the world were thawing out.

The credit for this great growth story goes to one man who is CNN-IBN Indian of the Year – Business, Aditya Puri, and the Managing Director of HDFC Bank.

Under his guidance, HDFC bank has developed into one of the biggest private banks with over 1.2 million customers.

HDFC Bank is having the largest branch network of over 1,400 among all private sector banks - thanks to the smooth acquirement of Centurion Bank of Punjab.

Aditya Puri while in process of making his bank into world class one, carefully managed risks even though being called a conservative sometimes.

His insight is being praised today with the global economy in chaos. Amid 2009 is also expected to be a difficult year for businesses worldwide, the industry will be looking at Puri for leadership.

HDFC bank tie-up with Movie Mart offers up to 50% discount to credit card holders

HDFC Bank credit card holders get to enjoy up to 50 per cent discounts on Movie Mart’s subscription plans. The offer is being given by online DVD rental portal Movie Mart which has tied-up with the HDFC bank.

Under this offer all HDFC card holders will be able to enjoy 10% off on monthly, 20% on quarterly, 30% on half yearly and 50% discount on yearly subscriptions.

MovieMart CEO Rahul Mansharmani notified, "We are happy to be associated with HDFC and their loyal customers, I can assure that all the card holders would be very pleased by what MovieMart is offering them. I would also like to add here that partnering with HDFC would give many more movie lovers an opportunity to try our services and experience the difference."

The offer is available on Movie Mart’s websites and the HDFC members can log on the site and select from plans that range between Rs 279 - 1199. Under this offer security deposits have also been removed from all membership plans therefore the customer will be able to keep the DVDs for a longer period without the late fee charges.

HDFC Bank cut rates on personal & commercial vehicles

HDFC country’s second largest private lender has announced a cut in interest rates on personal and commercial vehicles which has come as a big relief for the auto-loan seekers. Bank has slashed interest rates by up to 150 basis points.

Besides bank has also announced cut in interest rates on corporate loans and wholesale credit. With the slash in rates on these loans is going to benefit small and medium enterprises and large companies.

HDFC Bank Head (Retail assets and credit cards) Pralay Mondal pointed out that car loans will get cheaper by 125 basis points, whereas interest on two-wheeler loans has been slashed by 150 basis points.

Simultaneously, the bank will be reducing interest rate on personal loan by 75-100 basis points, from existing 17-17.5 per cent.

He added, "We have been able to pass on such a massive reduction to customer as cost of fund has eased and it is slated to come down further in the coming months".

He further added the bank is taking this measure as a precaution which in turn will stimulate the lull auto sales in particular and the SME and manufacturing sector in general.

For the past two months the auto sector has been facing slowdown in sales. In December, the overall domestic auto sales came down by 18.2 per cent as the sales of commercial vehicles and two-wheeler crashed heavily.

Transversely the announcement of massive rate cut by the bank has come in less than 20 days after the reduction in its prime lending rate by half a percentage point.

The bank, largest financier of retail loan, is at present offering car loan at 13.5-14 per cent, commercial vehicle loans at 14.5-15 per cent, while credit for two wheelers draw interest rate at 24-24.5 per cent.

Besides this, HDFC Bank is determining to slash rates on loan against properties and securities by as much as 200 basis points.

Mondal remarked that the interest rate on loans against properties will be reduced by 150-200 basis points, while for credit against securities the cut will be one per cent.

While the exiting rates for such credit differ between 13.75 per cent and 15.25 per cent.

On the other hand, the bank is providing retail loan to its existing account holders at a discount, which differs between 50 and 100 basis points on the card rate. The discount depends on credit profile of the customers.

In the previous week, the bank's promoter HDFC Ltd launched a special housing loan scheme under which it is offering 9.75 per cent for new loans up to Rs 30 lakh.

Before the special offer, HDFC was taking 10.25 per cent for loans up to Rs 20 lakh and 11.25 per cent for bigger loans. The bank sells home loan products of its promoter.

It may be taken into consideration that across various maturities HDFC Bank last month has reduced deposit rate in the range of 50 to 225 basis points.

Therefore fixed deposit rates have been cut down across four maturities and the highest point of deposit rate of the bank has come down to about 10 per cent.

The government and the RBI with an aim to increase demand have taken several measures to bring down interest rates.

As part of its strategy government has permitted public sector banks to offer line of credit to NBFCs on new purchases, with an aim to boost demand.

HDFC Bank plan to cut down auto loan in some States

Mr V.S. Ashok Khanna, HDFC bank’s Executive Vice-President and Business Head, Car and Two Wheeler Loans in an interview told Business Line that bank might lower its auto loan exposure in markets such as Delhi, Kerala and Uttar Pradesh following the State governments’ stand on repossession of vehicles in these regions.

“The Delhi police have issued directives asking customers having any complaints against recovery agents or collection agencies to call them on a toll free number. We are talking to the individual state governments; in case there is no change in policy, we will have to control our exposure in places like Delhi, Kerala and Uttar Pradesh,” Mr Khanna said.

The strict recovery norms and the strict clause on collection procedures have made the job of banks very difficult. He said there is fear among financiers which has made them cautious of lending.

In this year there has been a slowdown or even negative growth in the vehicle finance industry. He pointed out that these measures can lead to a further slowdown in the industry.

“There has been a slight increase in delinquency but it is not a cause of concern for banks. But what is more worrying is that such policies can turn customers paying their installments on time into willful defaulters. I anticipate further slowdown in the vehicle finance industry in 2009-2010,” he said.

As per the recent approximation by Crisil, the vehicle finance industry is approximately to register a negative growth of around 15 per cent in 2008-09, as against recorded Compounded Annual Growth Rate of 18 per cent between 2002-03 and 2007-08.

HDFC Bank plan to cut down auto loan in some States

Mr V.S. Ashok Khanna, HDFC bank’s Executive Vice-President and Business Head, Car and Two Wheeler Loans in an interview told Business Line that bank might lower its auto loan exposure in markets such as Delhi, Kerala and Uttar Pradesh following the State governments’ stand on repossession of vehicles in these regions.

“The Delhi police have issued directives asking customers having any complaints against recovery agents or collection agencies to call them on a toll free number. We are talking to the individual state governments; in case there is no change in policy, we will have to control our exposure in places like Delhi, Kerala and Uttar Pradesh,” Mr Khanna said.

The strict recovery norms and the strict clause on collection procedures have made the job of banks very difficult. He said there is fear among financiers which has made them cautious of lending.

In this year there has been a slowdown or even negative growth in the vehicle finance industry. He pointed out that these measures can lead to a further slowdown in the industry.

“There has been a slight increase in delinquency but it is not a cause of concern for banks. But what is more worrying is that such policies can turn customers paying their installments on time into willful defaulters. I anticipate further slowdown in the vehicle finance industry in 2009-2010,” he said.

As per the recent approximation by Crisil, the vehicle finance industry is approximately to register a negative growth of around 15 per cent in 2008-09, as against recorded Compounded Annual Growth Rate of 18 per cent between 2002-03 and 2007-08.