According to sources report the government is thinking of waiving off the entire loans of farmers hit by natural calamities for three consecutive years. The government is working out the proposal which is likely to be a part of the package on farm loan relief.
The government has proposal for those farmers who are hit by calamities for two consecutive years, to waive off the entire interest amount and a third of the outstanding loan amount. According to this any farmer, whose crop has suffered owing natural calamities like drought or flood for three consecutive years, will have his entire agriculture loan liabilities absorbed.
In order to minimize the affect on the lenders, the government is intending to start a fund called the National Agriculture Stabilization Fund with equity participation and annual contribution from the nationalized banks, Nabard and the Reserve Bank of India from their profits. It is also thinking over to levy an annual cess from each loanee farmers for the purpose.
Moreover, the entire loan liability will not be bored by this fund, government sources said.
This proposal has come up at a time when various regions around the country are reporting farmer suicides due to high debts. This also forms a part of the ruling UPA government’s plans to get the support from the agriculture populations, which is over 60% of the country’s total population.
“We have seen that conversion and rescheduling or loans have not worked effectively for the farmers if natural calamities occur consecutively. There should be ways to absorb his loan burden,” said an official.
While the implementation of this move is going to put a huge burden on the banks as the total agriculture loan liabilities of public sector, regional rural banks and cooperatives was at around Rs 1, 75,000 crore at the end of 2006-07. The government expects the banks to give out an additional Rs 50,000 crore as agriculture loans in 2007-08 to take the total loan amount to Rs 25,000 crore.
Saturday, February 23, 2008
Friday, February 22, 2008
The Chandigarh Child and Women Development Corporation enhanced the loan limit for EWS women
The loan amount for the women belonging to economically weaker section (EWS) of the society has been increased from Rs. 10,000 to Rs. 40,000 by The Chandigarh Child and Women Development Corporation.
UT Home Secretary, Krishna Mohan in a statement made public said that the loan would be given at a nominal interest ranging from 4 per cent to 6 per cent per annum.
He said that with the increase of the loan limit, it is expected that there will be increase in the number of beneficiaries and would also be a great help to those beneficiaries who wanted to start their own work and needed more finances but were finding the limit of Rs. 10,000 quite less.
Home Secretary also revealed that the corporation has formulated a policy of one time settlement by waiving off 100 per cent penal interest to those beneficiaries who are interested to settle their account finally under one time settlement scheme.
Mohan also stated that this decision has been taken after doing the research, found that the bankers were sanctioning 50 per cent of the total loan cases sponsored by the corporation in a year resultantly the prospective applicants had to face difficulty in starting their economic activity.
UT Home Secretary, Krishna Mohan in a statement made public said that the loan would be given at a nominal interest ranging from 4 per cent to 6 per cent per annum.
He said that with the increase of the loan limit, it is expected that there will be increase in the number of beneficiaries and would also be a great help to those beneficiaries who wanted to start their own work and needed more finances but were finding the limit of Rs. 10,000 quite less.
Home Secretary also revealed that the corporation has formulated a policy of one time settlement by waiving off 100 per cent penal interest to those beneficiaries who are interested to settle their account finally under one time settlement scheme.
Mohan also stated that this decision has been taken after doing the research, found that the bankers were sanctioning 50 per cent of the total loan cases sponsored by the corporation in a year resultantly the prospective applicants had to face difficulty in starting their economic activity.
Thursday, February 21, 2008
Banks follow FM suggestions slashes loan rates
Finance Minister P Chidambaram in a meeting with the chiefs of the banks had asked banks to boost loans to consumers for home and consumer durable purchases at an “affordable cost”. The major public-sector banks, led by state-owned State Bank of India, have slashed lending rates across the board. This one pre-budget move of the banks can bring cheers to the consumers.
Four public sector banks, led by SBI, have cut their prime lending rates (PLR) by 0.25-0.50 per cent. This will have a descending impact on all categories of borrowers, from corporates to individuals, as the base for all loans is set according to PLR. The decrease in rate is likely to bring down the net purchase cost (including interest charges) for everything from a house to cars and TVs.
“There is a feeling that adequate credit is not being provided to the housing sector and the consumer durables sector,” Chidambaram had told bank chiefs last week.
He asked banks to "pay attention" to provide sufficient credit to these two sectors as they are "drivers of the economy".
Although banking regulator Reserve Bank of India had abstained from any further moves to cut rates on fears of increase in inflation, banks themselves find themselves saturated with funds.
Thanks to a unpredictable stock market, and the tailwind provided by the 2-2.5 per cent interest rate hike last year, which had also led to corresponding increases in interests banks paid on fixed deposits, there is no shortage of funds -- liquidity in banker speak -- in the system.
According to data released by the Indian Banks Association, on a year-on-year basis, there has been growth in by 29.5 per cent till January 25, as against the 23.5 per cent last year. At the same time, credit off take grew at a fragment over 22 per cent, compared to the near-30 per cent growth the previous year.
From SBI side this is the second cut in less than 10 days. The bank had announced a quarter per cent cut on February 11, which kicked in on February 16.
"The benchmark PLR is revised downward by 0.25 percentage point from 12.50 per cent to 12.25 per cent with effect from February 27," SBI informed the BSE in its notification.
Along with SBI, Bank of India and Union Bank also announced cut their prime rates by 0.5 percentage points to 12.75 per cent on Wednesday. Bangalore-based Canara Bank also slashed its rate by 0.25 percentage points to 12.75 per cent.
In home loan category major HDFC having already reduced its prime rate by 0.25 percentage points effective February 1, and PNB Housing Finance slashed rates by 0.5 per cent, flagging real estate and automobile sectors are set to witness a growth in demand.
Four public sector banks, led by SBI, have cut their prime lending rates (PLR) by 0.25-0.50 per cent. This will have a descending impact on all categories of borrowers, from corporates to individuals, as the base for all loans is set according to PLR. The decrease in rate is likely to bring down the net purchase cost (including interest charges) for everything from a house to cars and TVs.
“There is a feeling that adequate credit is not being provided to the housing sector and the consumer durables sector,” Chidambaram had told bank chiefs last week.
He asked banks to "pay attention" to provide sufficient credit to these two sectors as they are "drivers of the economy".
Although banking regulator Reserve Bank of India had abstained from any further moves to cut rates on fears of increase in inflation, banks themselves find themselves saturated with funds.
Thanks to a unpredictable stock market, and the tailwind provided by the 2-2.5 per cent interest rate hike last year, which had also led to corresponding increases in interests banks paid on fixed deposits, there is no shortage of funds -- liquidity in banker speak -- in the system.
According to data released by the Indian Banks Association, on a year-on-year basis, there has been growth in by 29.5 per cent till January 25, as against the 23.5 per cent last year. At the same time, credit off take grew at a fragment over 22 per cent, compared to the near-30 per cent growth the previous year.
From SBI side this is the second cut in less than 10 days. The bank had announced a quarter per cent cut on February 11, which kicked in on February 16.
"The benchmark PLR is revised downward by 0.25 percentage point from 12.50 per cent to 12.25 per cent with effect from February 27," SBI informed the BSE in its notification.
Along with SBI, Bank of India and Union Bank also announced cut their prime rates by 0.5 percentage points to 12.75 per cent on Wednesday. Bangalore-based Canara Bank also slashed its rate by 0.25 percentage points to 12.75 per cent.
In home loan category major HDFC having already reduced its prime rate by 0.25 percentage points effective February 1, and PNB Housing Finance slashed rates by 0.5 per cent, flagging real estate and automobile sectors are set to witness a growth in demand.
Wednesday, February 20, 2008
RBI issues notification to banks to reschedule loans to poultry units
The poultry farming has been hit by bird flu due to which many poultry farmers have come under debts in view of loss of income and downfall in the demand of the poultry products and their prices. In order to provide relief to the ailing poultry industry hit by bird flu in certain parts of the country, the Reserve Bank on Tuesday issued a notification to the banks to reschedule payment of loans availed by the poultry units.
The central bank in a notification asked the banks to convert into term loans, the principal and interest on working capital loans.
Also, it has asked to convert the installments and interest on term loans into term loans.
The notification for the conversion is with reference to the loans which were to be repaid after the onset of bird flu, as on December 31, 2007.
The Reserve Bank further directed banks to recover converted loans in installments based on projected future inflows of the poultry units over a period of three years with an initial moratorium of one year.
The first year of repayment may be fixed after the expiry of the moratorium period, RBI said.
The apex bank instructed the banks to reschedule the remaining portion of term loans in a similar fashion with a moratorium period of one year depending upon the cash flow generating capacity of the unit.
The RBI added that the rescheduling of loan repayment should be completed on or before April 30 this year. The rescheduled loans will be treated as current dues after which the borrower will be eligible for fresh loans.
West Bengal has been particularly hit by the bird flu and preventive measures are also being carried out in the neighboring states of Bihar, Jharkhand, Assam and Orissa.
Agriculture Minister Sharad Pawar has said that two packages will be announced to help the poultry industry and farmers.
The central bank in a notification asked the banks to convert into term loans, the principal and interest on working capital loans.
Also, it has asked to convert the installments and interest on term loans into term loans.
The notification for the conversion is with reference to the loans which were to be repaid after the onset of bird flu, as on December 31, 2007.
The Reserve Bank further directed banks to recover converted loans in installments based on projected future inflows of the poultry units over a period of three years with an initial moratorium of one year.
The first year of repayment may be fixed after the expiry of the moratorium period, RBI said.
The apex bank instructed the banks to reschedule the remaining portion of term loans in a similar fashion with a moratorium period of one year depending upon the cash flow generating capacity of the unit.
The RBI added that the rescheduling of loan repayment should be completed on or before April 30 this year. The rescheduled loans will be treated as current dues after which the borrower will be eligible for fresh loans.
West Bengal has been particularly hit by the bird flu and preventive measures are also being carried out in the neighboring states of Bihar, Jharkhand, Assam and Orissa.
Agriculture Minister Sharad Pawar has said that two packages will be announced to help the poultry industry and farmers.
Tuesday, February 19, 2008
Punjab National Bank signed MoU with Fitch Ratings India for bank loan ratings
A Memorandum of Understanding was signed between Public sector lending Punjab National Bank and Fitch Ratings India for bank loan ratings.
According to the agreement the rating agency will assign ratings to the bank's loans and its other contacts will be extended to both its existing and potential borrowers.
Fitch released a statement in which it said as per the standardized approach of RBI's new Capital Adequacy Framework for Basel II, loan ratings would allow the bank to assign the new risk weights applicable to its borrowers.
The risk weights would be linked to the various rating categories and would be in line with Basel II guidelines.
Fitch Ratings is having similar agreement with other nationalized banks, including State Bank of India, Allahabad Bank, Bank of Maharashtra, Corporation Bank, Dena Bank and Indian Bank.
According to the agreement the rating agency will assign ratings to the bank's loans and its other contacts will be extended to both its existing and potential borrowers.
Fitch released a statement in which it said as per the standardized approach of RBI's new Capital Adequacy Framework for Basel II, loan ratings would allow the bank to assign the new risk weights applicable to its borrowers.
The risk weights would be linked to the various rating categories and would be in line with Basel II guidelines.
Fitch Ratings is having similar agreement with other nationalized banks, including State Bank of India, Allahabad Bank, Bank of Maharashtra, Corporation Bank, Dena Bank and Indian Bank.
Monday, February 11, 2008
Make resolutions to spend judiciously and manage your finances better
This might have been your story last year. You got a hefty bonus for your good performance, so you went on that dream vacation, bought latest gadgets for your children, and your investments in shares kept rising for the fifth year in a row. So, all in all, you were happy guy—but how did you feel at the end of it? It is only the second month of 2008 and you might be running around making investments to save income tax. You might be having outstanding credit card bills to pay and loan repayments from last year. So you just might end up managing on a shoe-string budget in February and March, and this is the same story every year. Want to make a smooth and easy transition to the new financial year then here are five ways:
The stock markets might have helped you double your investments in 2007. May be your colleague have dabbled in stocks of small companies, invested less, and still managed to make much more than you. This year, you resolve not to feel left out of the party. Karthik Jhaveri, a Mumbai-based financial planner, says that no matter how much time he spends comforting clients that the money they made is good and that they have taken aggressive steps to meet their financial goals, they still feel that others have done better than them.
Whether it’s a white-collared techie or simply a beginner, people tend to think that the grass is greener on the other side. There used to be a time when planners such as Jhaveri find difficulty in convincing clients that it was important to exercise caution in exposure to equity markets, that there were risks associated with buying stocks aggressively. Few weeks back there was a steep market fall which has changed that. “People who were overconfident about making money have realized that the party doesn’t continue forever,” says Jhaveri.
Another financial planner Gaurav Mashruwala, a Mumbai-based financial planner, is helping a young couples to overcome the stress caused by credit card bills. Between them, they earn more than Rs30 lakh per annum. Last Diwali, they had gifted each other Rolex watches worth Rs12 lakh. Everything was going well until a few months later, when the credit card statement showed a huge outstanding, and it had become difficult for them to manage the repayment.
According to Mashruwala there has been increase in the trend of taking a loan to feed lifestyle. ‘Buy now, pay later’ seems to energize a consumer mentality where plastic is the preferred mode of payment. Althought Personal loans are not bad in theory, but the end use should be monitored. One must ask itself why you need the loan—to fulfil a need or a desire? One should remember that a personal loan taken for spending doesn’t create an asset, unlike a home loan.
Must keep a stock of all your investments across shares and mutual funds and your various bank accounts regularly. Though Automated teller machines (ATMs) have indeed made banking easier. But do you really have to wait to go to the ATM to check your bank balance? Mashruwala noticed that some of his clients do not get their bank passbook updated for several months. In case you are managing your investment portfolio on your own, then also maintain a record of your demat account or mutual fund statements.
Never get tempted by the great bargain and exchange offers if you don’t really need them. Make sure that the expenditure is accounted for in your monthly budget. Try to stick to what your financial planner has drawn out for you. Buying groceries on your credit card at the end of the month can be avoided if you stick to the budget.
Make sure not to spend too much, not to indulge in sudden spending, and this is not such a difficult task. List out your deteminations and post them on your desktop, refrigerator, and even on your mirror. Tell your family, friends and relatives about it—they may help in remembering your resolutions.
The stock markets might have helped you double your investments in 2007. May be your colleague have dabbled in stocks of small companies, invested less, and still managed to make much more than you. This year, you resolve not to feel left out of the party. Karthik Jhaveri, a Mumbai-based financial planner, says that no matter how much time he spends comforting clients that the money they made is good and that they have taken aggressive steps to meet their financial goals, they still feel that others have done better than them.
Whether it’s a white-collared techie or simply a beginner, people tend to think that the grass is greener on the other side. There used to be a time when planners such as Jhaveri find difficulty in convincing clients that it was important to exercise caution in exposure to equity markets, that there were risks associated with buying stocks aggressively. Few weeks back there was a steep market fall which has changed that. “People who were overconfident about making money have realized that the party doesn’t continue forever,” says Jhaveri.
Another financial planner Gaurav Mashruwala, a Mumbai-based financial planner, is helping a young couples to overcome the stress caused by credit card bills. Between them, they earn more than Rs30 lakh per annum. Last Diwali, they had gifted each other Rolex watches worth Rs12 lakh. Everything was going well until a few months later, when the credit card statement showed a huge outstanding, and it had become difficult for them to manage the repayment.
According to Mashruwala there has been increase in the trend of taking a loan to feed lifestyle. ‘Buy now, pay later’ seems to energize a consumer mentality where plastic is the preferred mode of payment. Althought Personal loans are not bad in theory, but the end use should be monitored. One must ask itself why you need the loan—to fulfil a need or a desire? One should remember that a personal loan taken for spending doesn’t create an asset, unlike a home loan.
Must keep a stock of all your investments across shares and mutual funds and your various bank accounts regularly. Though Automated teller machines (ATMs) have indeed made banking easier. But do you really have to wait to go to the ATM to check your bank balance? Mashruwala noticed that some of his clients do not get their bank passbook updated for several months. In case you are managing your investment portfolio on your own, then also maintain a record of your demat account or mutual fund statements.
Never get tempted by the great bargain and exchange offers if you don’t really need them. Make sure that the expenditure is accounted for in your monthly budget. Try to stick to what your financial planner has drawn out for you. Buying groceries on your credit card at the end of the month can be avoided if you stick to the budget.
Make sure not to spend too much, not to indulge in sudden spending, and this is not such a difficult task. List out your deteminations and post them on your desktop, refrigerator, and even on your mirror. Tell your family, friends and relatives about it—they may help in remembering your resolutions.
Friday, February 8, 2008
Banks not following RBI guidelines borrowers are not informed about changes in interest rates
The loan consumers must be informed about the change in loan rates by the bank.
The ombudsman official agrees: "A Reserve Bank of India circular says in case of an increase (in interest rates), the customer must be informed, so if he is not interested, he may be given a chance to repay or shift to another bank which offers a lower rate of interest. In case the bank is at fault (by not informing the customer), it has to take a sympathetic view as this is not in keeping in line with the instructions."
The banking codes and standards board of India's code of bank's commitment to customers clearly mentions, "We will inform you when we change interest rates on our products." If there is any change in rates it will adversely affect the account holder, he must be apprised about it individually-preferably in writing-via letter or email.
A source in the Reserve Bank of India says, "But if the customer accepts oral communication, we have no objection to it".
But oral communication leaves a consumer with little proof in a dispute.
Mumbai based floating-rate home loan consumer last week, received a strange letter from his lender, a new-age private sector bank. The letter stated that a cheque issued by the consumer in July, had bounced.
It added that the cheque was drawn to pay the difference in the EMI (equated monthly installment) amount to factor in an interest rate hike. The consumer was thus asked to pay the amount, plus Rs 200 as cheque return charges and 2% service tax.
Consumer said, "Firstly," says the consumer, "I did not issue any cheque for July as I was told the hike was effective from August. And why did the bank suddenly realize that some cheque had bounced six months after it happened?" The bank has since apologized for the goof-up.
A written statement sent to TOI said, "The customer has month on month been paying the differential part of the EMI through a cheque. Since he has been paying the differential amount on a monthly basis, payment of July month's amount has been missed out".
Notably, the consumer insists, no written intimation was sent to him about the interest rate hike. All communication in the matter, he says, was oral. While the bank, on its part, said the consumer had been sent a mail detailing the increase.
"The customer has been sent the reset letter dated April 1, 2007, on April 12, 2007, intimating the increase in ROI (rate of interest) and resultant increase in EMI." However Consumer organizations, say disputes over communication lapses are not unheard of. They are known to go up to the banking omubudsman's office too.
"In such cases, we normally ask for proof of delivery (from the courier)," says a senior omubudsman official.
Such lapses occur due to staff inefficiency or system error. A Delhi personal loan consumer since March 2007, points out Sanjeev Talwar of Delhi's National Consumer Helpline, hasn't received even his account statement. Some time ago, in Mumbai again, another floating-rate loan consumer discovered that his EMI amount, sourced directly from his account via the electronic clearing system (ECS), had increased without any intimation about a rate hike.
V M Oza, honourary director, complaints, at Ahmedabad's Consumer Education and Research Centre (CERC) says “There is a provision that rate change cannot be made unilaterally. The bank should inform the customer about it without any hindrance."
The ombudsman official agrees: "A Reserve Bank of India circular says in case of an increase (in interest rates), the customer must be informed, so if he is not interested, he may be given a chance to repay or shift to another bank which offers a lower rate of interest. In case the bank is at fault (by not informing the customer), it has to take a sympathetic view as this is not in keeping in line with the instructions."
The banking codes and standards board of India's code of bank's commitment to customers clearly mentions, "We will inform you when we change interest rates on our products." If there is any change in rates it will adversely affect the account holder, he must be apprised about it individually-preferably in writing-via letter or email.
A source in the Reserve Bank of India says, "But if the customer accepts oral communication, we have no objection to it".
But oral communication leaves a consumer with little proof in a dispute.
Mumbai based floating-rate home loan consumer last week, received a strange letter from his lender, a new-age private sector bank. The letter stated that a cheque issued by the consumer in July, had bounced.
It added that the cheque was drawn to pay the difference in the EMI (equated monthly installment) amount to factor in an interest rate hike. The consumer was thus asked to pay the amount, plus Rs 200 as cheque return charges and 2% service tax.
Consumer said, "Firstly," says the consumer, "I did not issue any cheque for July as I was told the hike was effective from August. And why did the bank suddenly realize that some cheque had bounced six months after it happened?" The bank has since apologized for the goof-up.
A written statement sent to TOI said, "The customer has month on month been paying the differential part of the EMI through a cheque. Since he has been paying the differential amount on a monthly basis, payment of July month's amount has been missed out".
Notably, the consumer insists, no written intimation was sent to him about the interest rate hike. All communication in the matter, he says, was oral. While the bank, on its part, said the consumer had been sent a mail detailing the increase.
"The customer has been sent the reset letter dated April 1, 2007, on April 12, 2007, intimating the increase in ROI (rate of interest) and resultant increase in EMI." However Consumer organizations, say disputes over communication lapses are not unheard of. They are known to go up to the banking omubudsman's office too.
"In such cases, we normally ask for proof of delivery (from the courier)," says a senior omubudsman official.
Such lapses occur due to staff inefficiency or system error. A Delhi personal loan consumer since March 2007, points out Sanjeev Talwar of Delhi's National Consumer Helpline, hasn't received even his account statement. Some time ago, in Mumbai again, another floating-rate loan consumer discovered that his EMI amount, sourced directly from his account via the electronic clearing system (ECS), had increased without any intimation about a rate hike.
V M Oza, honourary director, complaints, at Ahmedabad's Consumer Education and Research Centre (CERC) says “There is a provision that rate change cannot be made unilaterally. The bank should inform the customer about it without any hindrance."
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