Corporation Bank cuts interest on retail loans

As a customary festive offer practice, Mangalore based public lender, Corporation Bank has announced reduction in its retail loans for a three month period. In addition to it, the bank has also waived off the processing fees previously levied on these loans.

The bank has revised the rates in all three major retail loan segments - Home, Car, and Education. As per new scheme, car loans upto 5 years would be available at 11.25% while loans for upto 7 years would be available at 11.75%. Previously the bank charged 12% and 12.50% respectively

Rates on Corp Home Housing loans upto Rs. 50 lakh would be 10.50% (10.75%); while loans for upto Rs. 1 crore at 10.75% (11%) and for loans above Rs. 1 crore bank would charge 11% (11.25%).

The scheme will be active with effect from September 1 2012.

SBI announces gifts for home loan borrowers this season

The leading public sector bank and the largest home loan provider in the country, State Bank of India (SBI) has announced reducing processing charges on its home loans. Presently the bank charges 0.25% as a processing fees up to a maximum of Rs. 6,500 for loans upto Rs. 75 lakh and Rs. 10,000 above it. According to new rates, the bank would charge Rs. 1,000 flat irrespective of the loan amount.

Bank is also considering reducing the conversion fees, which is charged when an existing customer switches loan has also seen a reduction. Presently bank charges 1% of the outstanding amount if a borrower switches from a higher rate loan to the lower rate loan. For example if a customer borrowed Rs. 25 lakh and has paid Rs. 15 lakh and wants to switch, he/she will have to pay 1% of the remaining (Rs. 10 lakh) thaht is Rs. 10,000 as conversion fee.

The above schemes are only for a festive season, starting from September 1 2012 to September 30 2012. Earlier this month, the bank had reduced interest rates on home loans and auto loans.

HUDCO re-enters retail home loans arena

State owned housing finance company (HFC), Housing and Urban Development Company (HUDCO) has announced a re-entry into the retail lending segment. The company had retreated from the segment two years back.

The HFC will be giving home loans upto Rs. 25 lakh at 10.20% which is less than what market leader State Bank of India (SBI) is offering for loans upto Rs. 30 lakh.

The company's official statement said that, "this makes it the most competitive home loan product available for salaried individuals in the major capital cities of India." Other services offered would be free accidental insurance cover, no pre-sanction charges and pre-payment charge waiver.

The company will also not charge any processing fees unless the loan is sanctioned. It faces tough competition from HFCs like SBI and HDFC.

Benefits of teaser home loans

The National Housing Board (NHB) has announced that customers who have availed teaser home loans can now pre-pay their loans during the floating rates phase without any penalty. RBI has also asked the banks to stop charging penalty on dual rate home loans.

Teaser home loans or dual rate home loans are special loans, which provide a lower interest rates for the initial stages and revert to the existing interest rates after that period.

RBI had prohibited banks from charging prepenalty on floating rates home loans. Many banks were taking advantage of lack of clarity regarding dual rate loans, and considered such loans as fixed rate loans and charged penalties on prepayment.

Teaser loans were devised by former SBI chairman, Mr. OP Bhatt who innovated regular loans to allow bank deploy excess funds and also capture a large market share in vehicles and home loans segment.

Pressurize builders to make property prices more affordable : Chidambaram

Finance Minister P. Chidambaram has asked the banks to pressurize real eastate developers to bring down the price of the houses to give an impetus to the sluggish economic growth. In his meeting with the heads of public sector banks, Mr. Chidambaram said that the builders have large inventories of unsold residences, for which they do not have buyers at current level. Also they are not lowering the prices to raise demand.

He also told the banks that the situation has led to huge lock up of capital. He further added that builders have borrowed from the banks and the bank has also financed home loans for retail segment. At the end of the last fiscal, the banks had lent Rs. 2.5 lakh crore to retail customers while Rs. 1.2 lakh crore was disbursed to accounts of builders.

A senior banker also stated that the builders should review the market condition and make correction in prices rather than just expecting banks to reduce the interest rates on home loans. While representative of builders demanded a reform in regulations to allow them to reduce prices.

The union government is under a lot of pressure due to rising inflation, and sluggish growth rate, and this is one of the attempts to make residence more affordable and give a boost to the economy.

HDFC to keep the rates on auto loans unchanged

Second largest private bank in the country, HDFC Bank has decided to keep its interest rates on auto loans unchanged. Earlier this month SBI had reduced the interest rates on its home loan by 50 basis points, and many had thought that it would bring a similar reaction from the industry.

HDFC's senior VP and business head for auto loans Mr. Ashok Khanna stated that the bank is not looking for any concessions on auto loans in the near future. Further adding that the bank disburses Rs. 1,500 crore of auto loans, which is 22% of the total market, making them the leader in auto loans.

SBI had reduced the interest rates on loans after the RBI had announced one percent cut in statutory liquidity ratio (SLR). At present, SBI lends auto loans across all tenures at 10.75%, while HDFC Bank's auto loans range from 11% up to 16% for used car loans.

Loan rates lowered by SBI

Since RBI is stepping for 1% point cut on SLR (Statutory Liquidity Ratio), to compensate the advantage by this SBI has reduced loan rates on Home loans and Car loans.

A war can break out for rate cuts and attracting the retail customers among the banks as there has been decrease in the loans to the industry.

The interest rate on car loans by SBI has been reduced to 10.75 per cent as compared to 11.25 per cent earlier. If the EMI is designed for 7 years tenure, it is reduced to Rs. 1,699 per lakh instead of Rs. 1,725 earlier.

For home loans:-

Amount	New rate (%)	Old rate (%)
Up to 30 lakh	10.25	10.50
30 – 75 lakh	10.40	10.75
Beyond 75 lakh	10.40	11

The reduction on Home loans by India’s largest bank is 0.60% points and on car loans is 0.50 % points.