Earlier HDFC Bank following the suit of State Bank of India (SBI) had reintroduced its teaser rate scheme and the last date was April 30. As SBI is getting good response for its teaser home loan scheme so it extended the up till June 30. Although HDFC did not said anything about the extension of the scheme but, now it has also extended its special home loan scheme till June 30.
Under this special scheme, HDFC will offer a fixed rate of 8.25% up to March 2011, 9% for the next one year and floating rate thereafter to all customers who avail at least part of the loan by June 30, an HDFC spokesperson told.
Earlier, when the Reserve Bank’s raised concern over such teaser schemes all banks, except SBI had stopped their teaser schemes or special home loan offers under which they offered loans at a cheaper rate to customers for a fixed period.
As HDFC has announced extension of the scheme it is believed more banks might also announce similar products to attract borrowers.
Friday, May 14, 2010
Tuesday, November 24, 2009
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.
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.
Friday, October 30, 2009
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.
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.
Friday, July 24, 2009
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.
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.
Friday, July 3, 2009
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.
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.
Wednesday, May 13, 2009
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.
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.
Tuesday, March 17, 2009
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.
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