Loan status India

Importance of a home loan agreement

2011-11-15T23:05:00.000-08:00

All the terms and conditions related to a home loan are listed in a home loan agreement and that has to be signed by the borrower, which means that the borrower has agreed to mentioned conditions. Despite being of such immense importance, it is taken just as a formality by most of the borrowers.

The main reason behind this neglect is the bulky size and the language that is used is the document, it prompts the borrower to sign it quickly and conclude the loan formalities as soon as possible but this can not be an excuse because doing so can cause a harm to the borrower in many ways.

As there are a lot of lenders available in the market, it has fueled the competition among them to lure customer. For the reason they come up with new schemes and only the highlights are made available to the customers, however there are a lot of terms and conditions applicable with it about which the customer is oblivion.

A lot of people approach the lender and intoxicated by the advertisements they want to borrow the scheme as soon as possible without making any further enquiry and in the mean time they also sign the loan agreement as well which makes the lender the ultimate authority; by the time the borrower gets to know what blunder he has made it is already too late.

Nothing like this would have happened if the borrower would have read the document carefully. For instance, if a person has borrowed a loan under fixed rate scheme which promises him loan at minimum possible rates. Most of the lenders now mention a clause in the agreement which allows them to revise the rates after a certain period of time, about which the lender obviously will be unaware about if he has not read the document carefully.

Not only these but there are a lot of other details about the defaults and various clauses related to the home loan which makes it really important to read the loan agreement carefully.

Get your home loan insured

2011-09-21T04:46:00.001-07:00

Home loan insurance is as important as a home loan itself, most of the people are concerned about the home loan and once they succeed in borrowing they get relaxed and their home loan is what they bother about but a home loan insurance is also an essential part of a home loan.

In case of demise of the borrower of a home loan it becomes the responsibility of the family to repay the loan and in most of the cases the families are found jostling because of the double whammy, basically the family members are left to face the consequences and most of the times they have to face foreclosure.

Home loan insurance provides the security from the threats posed by any such situation, if a person has got his home loan insured then the insurer is responsible to repay the remaining home loan amount in case of beneficiary’s demise.

There are few variants available of home loan insurance schemes out of which a person can choose from, most of the lenders repays the pending loan amount but a scheme offered by ICICI Lombard covers a certain amount and when required the insurer pays the pending loan amount and the remaining amount is paid to the family.

Apart from security that this security provides the beneficiary can avail tax benefits as it is categorized under life insurance and under section 80C income tax deductions can be claimed; but this facility lapses in case the borrower has clubbed both Insurance Premium with the monthly installments.

How you can customize your home loan?

2011-09-15T04:41:00.000-07:00

One of the fruits that the evolution in the housing loan sector has yielded for the borrowers is choice. A person has a fairly good amount of options available for the home loans from which he can choose. Several other sub categories have also come into existence like the home improvement loans and reverse mortgage loans.

The situation and the requirement of the borrowers can very form each other in infinite ways and so it was obvious that only one particular loan scheme can never serve the purpose for each one of them, hence a lot of changes were brought around the home loans and have actually proved to be efficient to lure more customers.

Now a person has a choice to tailor his loan scheme in the way he wishes to, there are of course some restrictions but still it is a fair enough deal. A person knows his situation the best and he should be the one to make a decision on the features of the loan and so by considering the future prospects and his requirements.

After one has borrowed the loan, the most critical part repayment still remains and in this category there are a lot of options available. Like for a person in the initial stage of career can opt for a scheme in which the amount of the monthly installments is lower in the early part of the career and as the career of the borrower improves the amount increases eventually.

Also for the older people that are nearing their retiring age they can make high payments in the initial loan period, so that they do not have to bother much about the repayments in the later stage of the loan where they would also be left with a few years at their workplace.

Each lender has something new to offer and a borrower just need to search for the right palace where he can get what he is looking for.

Tax benefits on your home loan

2011-08-29T04:54:00.000-07:00

A person who belongs to service class is always terrorized by the by the income tax that he has to pay, as quite a huge part of what he earns, he has to pay it is a income tax and which is mandatory. So, people are always looking for ways in which they can minimize the amount they require to pay as income tax.

People who are planning to borrow a home loan may also be worried about would they be able to cope up with both income tax as well as home loan that they are planning to borrow. So, here is good news for such people. A person who has borrowed home loans is entitled to avail tax benefits on the interest paid up to Rs. 1, 50,000 for a financial year.

If a home loan is jointly borrowed then both the borrowers are entitled to avail separate tax benefits, resulting in an increase in the amount of tax deductions but the deductions can be availed only when the payment was made, if a borrower was unable to make payment then he can not avail tax benefits on the same.

In case the home loan was borrowed jointly then the tax benefits are to be shared in the same proportion as they share the in home loan. The tax benefits are still applicable if the borrower refinances his loan for the first time but if the borrower wants to borrow another loan to repay his loan for the third time then he is not eligible to enjoy tax benefits.

In order to claim the tax benefits the borrower requires to present the certificate clearly showing split between the principal and the interest rate in the EMIs paid during the year issued by the housing loan company.

What makes home loan expensive?

2011-08-25T04:24:00.000-07:00

People borrowing a home loan are always looking for a cheap home loan scheme, without exactly having an idea about what really makes home loan expensive or cheap, so before starting with any things it is important for a borrower to understand more about the factors that can have an impact on the total cost of a loan and what are the necessary expenses which are needed to be taken care of.

When a person applies for a home loan he is required to pay processing fees, which is non-refundable, its extent can vary from bank to bank but most of the bank levies 0.50% of the total loan amount as processing fees. There are various other charges also which a borrower will require to pay but the processing fee is the heftiest one out of them.

The most significant thing in a home loan which affects the cost of home loan most is the interest rate applicable on it. The interest rate offered by the banks can differ as there are a lot of schemes that they offer and out of them they can choose the loan scheme with minimum interest rate or if he has some specific requirements then he must look to get interest rate as low as possible in that category.

However, sometimes a lender can differentiate among various applicants and can offer different interest rates on the same loan scheme. An applicant who fits in well in the eligibility criteria of a lender and most importantly if he possesses a good credit score can avail best interest rate on his loan as compared to others. So, in order to have a lower cost of a loan, it is necessary for the applicant to have a high credit score.

How to prepare platform to borrow home loan?

2011-08-25T04:18:00.000-07:00

Home loans are well-known for their complex nature, most of the people who want to borrow a home loan are afraid to do so possibly due to the rumors that float around about the home loans. Not all are rumors, a home loan alone is enough to keep a person occupied and sometimes this things leaves a person baffled as there is so much that can come up all at once.

The thing is that most of the people do not think much while borrowing about which loan scheme would be good for them and how much should they borrow and most importantly are they in a state of borrowing? This is the main reason why some are exploited more as compared to other because the ones who have done the groundwork properly stand best chance with their home loan scheme.

It is very important for a person to be sure about a few things which can really be helpful for the borrower to avoid things that possess potential to turn out ugly. The ground work is really very important for the purpose, which includes a borrower to educate himself about the basics of a home loan; so that he can have a better idea of what is he going to be involved with?

A person must then gather information about the loan schemes available in the market and must underline their basic features and the defects that he realizes and then according to that he must proceed with other things, while categorizing the schemes special consideration must be given to the interest rate offered by the bank.

While doing this he must also get an idea of how much he can borrow and what his requirement is? This is very important aspect pertaining to a home loan as an oversized loan can make the things really very difficult. Also, he must start saving some money to meet the expenses that will be incurred while undergoing the loan procedure and also it can be utilized to meet emergency requirements in the future.

Use your land to pay down payment

2011-08-23T04:50:00.001-07:00

A person who finds it difficult to arrange for money to pay the down payment for his home loan can use land to sort things out. It is very much possible to use the land to pay the down payment but there are a few important things that an applicant needs to consider and the most vital out of them is the valuation of the piece of land.

In order to get the real value of the land, the borrower can rely in a builder, they can provide a very precise estimate of the land, also, the applicant needs to provide original title deed in order to authenticate his possession over that land and which is very important.

Sometimes, when both the parties are not able to arrive at a decision regarding the valuation of the land, the lender might ask for some extra amount to be paid in cash. It is also important for a borrower to know that a piece of land where some construction work has already been done is bound to fetch more valuation than the one where nothing like that has been done.

Apart from that, the borrower is required to pay all the expenses related to the loan including the closing costs. So, a person who wants to utilize his land to pay the down payment must consider all these facts first.

Accelerated repayment for home loan can serve the purpose

2011-08-08T03:56:00.000-07:00

The hike in the lending rates does not seem to slow down anytime soon and the people who have borrowed home loan under floating interest rate category are the one who are affected the most out of this interest rate hike, despite being aware of the present market situation a few people might want to borrow a loan, but if they want to minimize the impact of hike then they must be very cautious about everything that they do.

A person who has already borrowed a loan must keep an eye on the fluctuation of the interest rates as the lenders are very quick to increase the lending rates bit they do not show this much readiness when it comes to decreasing the loan rates, so is a borrower is aware of such developments then he can immediately ask his lender to decrease the lending rates.

There are a few other things that can be done to tackle the hike in the lending rates, first is that the lender can increase the loan tenure, as a result of it the amount that the borrower has to pay as the monthly installment to his loan will decrease and it would likely come under a limit that where a borrower can find it easy to make monthly payments.

This might assuage the pressure of rate hike to a great extent but the only disadvantage to this option is that as the time duration of the loan would increase the borrower would end up paying more interest on his loan and this can make the loan to cost a little more than it was expected to cost.

The other thing that can be done here is that the borrower can try to repay his loan as soon as possible and hence he can save considerable amount but this option is not open to all the people as it can be difficult for most of them to arrange for a huge sum of amount to pay as installment every month, but it is definitely a better option than increasing the loan tenure.

Enjoy more tax benefits through joint home loan

2011-08-04T04:23:00.000-07:00

People belonging service class are always worried about Income tax and any way by which they can save some money is more than they would want. For a moment crossing over to home loans, home loans are hefty; it implies that the borrower has to pay a huge sum of money out of his monthly earning as installments if he has borrowed a loan. It adds on the pressure on the borrower but people must know that they can earn income tax benefits ion home loans.

A borrower can enjoy tax benefits on the interest component as well as on the principal component but the benefit could be maximum on joint home loan, where more than two people have borrowed the loan are responsible for repaying the loan.

Each of the borrowers can claim a tax rebate of up to 1 lakh for principal repayment and 1.5 lakh for interest payment and more importantly the tax benefits will be dived amongst the co-borrowers in the same proportion as they own the property.

The most essential thing here is that co-owners have jointly borrowed the loan and they need to repay the loan amount in the same proportion in which they own the property. Also it is necessary that the repayment of the loan is made through a joint account owned by the co-borrowers and if it is not possible then it needs to be ensured that the others are also contributing their share.

So, in order to avail maximum tax benefits joint home loan must be preferred.

How to rebuild your credit score?

2011-08-01T05:29:00.001-07:00

The credit score of a person hold significant importance particularly when the person requires borrowing loan. There are a lot of factors that the lenders consider and that have the potential to influence the decision of the lender of whether to lend or not but the one that stands out is the credit score of the person.

Credit report of the applicant enables the lender to establish his credit worthiness; it indeed has become a very vital part of the verification process. A person with a good credit score might not have to face a lot of difficulties in availing the loan as compared to a person who does not hold a very good credit score.

People with a bad credit score need to worry become it is very much possible to improve the credit ratings but for that a borrower requires to be much disciplined. The first thing that a person must do is to get his credit report from the credit agency, by doing this a borrower can get the details of the defaults he has made.

The second step should be try to repay all the pending payments as soon as possible, but it is also very important for him to make it sure that while clearing his defaults he does not miss any of his payments for the loans that he has borrowed, so a borrower needs to maintain a proper equilibrium between both of them and plan his finances accordingly.

While process is on, any further borrowing must be avoided, t must be done only when he has attained a comfortable status and he feels that he would be able to manage all his loans, but even one missed payment can ruin all the hard work done.

Are you sure about opting for fixed rate home loan scheme?

2011-07-25T05:07:00.000-07:00

When it is comes to choosing between interest rate schemes a borrower has broadly two options to choose from- Fixed or Floating interest rate schemes, however it can sometimes be a bit difficult for a borrower to decide for the home loan scheme he must go for, as both of them have their own limitations, advantages and disadvantages.

As the name suggests that the interest rate under a fixed rate scheme is not variable, that means the interest rate will remain the same for the whole loan tenure no matter how disturbed the market rates be, he will have to keep paying according to the fixed rate.

The above mentioned is the basic contour of a loan borrowed under a fixed interest rate scheme but there are a lot many things that are encapsulated inside and that are very essential for a applicant to know before they have borrowed a loan.

The advantage with a fixed rate loan scheme is that the interest rate is fixed and such a scheme can prove to be a very useful one under the present market situation when the interest rates are constantly soaring. A borrower can then plan his loan very well as then he does not have to take any other factors into consideration and can keep making the repayments at the same rate.

As the interest rates have gone north, a number of modifications had been made applicable that makes it slightly more complicated from what it may look like. The first thing is that the interest rate that the lenders offer is way higher then the market rates as they have to keep it fixed and to make sure that they make considerable profit out of the deal they keep the interest rate pretty high.

Apart from that now most of the lenders have now started to hike even the fixed interest rate after a fixed interval of time that has made such loan scheme far too much expensive. The other disadvantage to this scheme is that it does not allow the borrower to enjoy the benefits of fall in the lending rates.

The borrower gets trapped inside the a bracket of interest rate and thus even when the lending rates are low, he will have to keep paying according to the higher rate applicable on his scheme. So, it is better if a person opts for floating interest rate scheme.

How much loan can you borrow?

2011-07-21T04:34:00.000-07:00

A few people might wonder about the how does a lender decide the eligibility of a person, whether he can borrow or not and how much, these things are like puzzles for a majority of the people. Along with the lenders it is also very important for the borrowers to know about their loan eligibility.

The few things that the lenders are most concerned about is the credit report and the total fund inflow and the age of the applicant; with these factors they estimate the amount of loan that they can lend to him or actually whether they should lend loan to him or not.

To decide the loan eligibility of the applicant the lenders deduct his monthly expenses and then from the remaining amount it considers 40-50% that the lender can use to repay his loan and then on the basis of the years remaining before his retirement they decide the upper limit for the loan.

After that it is the credit history that is taken into consideration, a high credit score is evident if the credit-worthiness of the applicant and hence the lender can be bit optimistic about repayment of his lend amount in time by the borrower. If the credit score is not that good then it could also affect the chances for a borrower to receive the loan.

Few things to make prepayments more beneficial

2011-07-06T04:51:00.000-07:00

A home loan is very much dependent on the interest rate applicable on it and as due to the continuous surge in the lending rates it has become one of the most prominent problems that the home loan borrowers are facing. In the present situation home loan prepayment can be of great use.

Under the prepayment facility a borrower can pay an additional sum of amount to bring the amount of monthly installments to be paid under control and by reducing the principal amount remaining. A borrower can make partial of full prepayments but a borrower needs to know that the lender can charge penalty if the amount of prepayment exceeds a certain fraction.

The good thing is that the according to the guidelines of The Reserve Bank of India, if a person id prepaying form his own sources, then a lender can not charge any thing extra from the borrower not even if he prepays the entire loan amount.

Generally when a borrower refinances his loan to another lender under such a condition his present lender can charge prepayment penalty. Prepayment penalty is implied on the loan amount due and can vary from lender to lender; generally it is high for the private sector lenders as compared to the public sector ones.

While making prepayments a borrower needs to be aware of a few things, the first thing is that he must try to negotiate as much as possible on the prepayments charges as generally they are not fixed and the other thing is that a borrower must calculate the sum of amount that he would be saving by making prepayment, that would include all the expenses associated with the loan as only then the calculation can yield some results that would help a borrower to opt for the most appropriate option.

If a person has borrower a few loans and if he wants to prepay the loan then he must go for the loans that is more expensive or that attracts high rate of interest.

Better borrow a loan than to pay rent

2011-06-20T05:07:00.000-07:00

Home loan is a very beneficial service that all the lenders provide, a person a get his own dwelling place and a thing for which most of the people keeps jostling throughout their lives. Under home loan scheme a person can borrow money form a lender to pay a home and then he can repay the loan through monthly installments, as property rates are very high these days so more and more and more people are availing this facility.

People especially in metro cities stay in rented apartments whose rent is also very high, a person will keep paying the rent and in the end he will have nothing to say of his own, in one sense he has wasted his money that he paid as rent. Borrowing a home loan would have been a far more intelligent decision as compared to paying high rent.

Home loans require a lot of diligence, they are a subject that needs to be handled very carefully, a past experience always gives an edge to the borrower but if one does not have that then he can leverage the experience of brokers. It can be of great help to a first time borrower.

Whatever may be the case is but a borrower must have a basic knowledge about home loans, for that internet can be of great help. A borrower must educate himself about the facts of a home loan; it is a very important part as it is the borrower who will have to make a choice, he can take help from a broker but even than he must be very sure about he is getting into. It would further help him a lot in managing his home loan.

There are various things that come under the paraphernalia of a home loan, it is not possible to master all the aspects but there are a few things that he must take special care of, like the penalties. Penalties are applicable when a borrower violates terms and conditions associated with a loan scheme, most of the times a borrower skips the part of loan that states about it and this can make a home loan really expensive. So, one must be aware of at least these aspects of a loan.

Understand your loan better with “loan agreement”

2011-06-13T04:56:00.001-07:00

A home loan is no longer a straight forward thing, it has gone significantly complex and hence one really needs to capitalize all his diligence to get a good home loan. What make it more difficult to understand a home loan are the esoteric terms that are used in a home loan. There are lots and lots of things associated with a home loan but the terms and conditions for a loan is a cast that moulds a loan scheme into a particular shape and hence all its properties are dependent on these terms and conditions.

When the lender gets satisfied with the customer and is ready to sanction the loan at that time to make an understanding the lender asks the customer to sign a document known as loan agreement. In the loan document all the minutest of details implacable on the loan are mentioned.

It is the most important document that a borrower needs to read very carefully but most of the borrowers do not even bother to read have a look at that and that is where they get trapped. A borrower has the freedom to tailor his loan scheme according to his convenience and the lenders also agrees to that but the application of terms and conditions takes away all the charm.

To avoid all the confusion a person can seek help of a broker, he can explain every thing in detail that will make it easier for him to know his loan better and how would it react under different situations. In case he finds out that it was not was he has been looking for then he can ask his lender to amend them or he can look for any other lender.

Whatever the case would be, a bower will be able to understand his loan well and then he can plan his actions accordingly in the future to tackle the complication of loan.

When unable to repay the loan

2011-06-09T04:52:00.000-07:00

There can be times when a borrower finds it hard to repay his home loan, such a condition is very devastating because under such circumstances it is very much possible that a borrower will loose his dwelling place so that the lender can sell that property to recover pending loan amount.

This generally happens when the borrower avoids sharing the problem with his lender, a borrower must understand that it is his lender that can help him out of the situation. The option of selling the property to recover the loan amount is the last option for the lenders; they themselves avoid going for the option.

A borrower can seek advice from his lender, explain his financial condition and ask for some relaxation in the terms and conditions of his loan scheme. He can also seek foreclosure assistance from his lender; the lender will study carefully the income and expense pattern of the borrower and would suggest measures to stabilize his financial condition, so that he can pay back his loan.

Pre-approved loans is a thing to stay

2011-06-08T05:37:00.001-07:00

As a conventional approach to the home loans, customers have already finalized the property that they want to own before they approach a lender to borrow a home loan, it is the usual way how customers tackle the home loans but sometimes a borrower can have to face certain setbacks that can have an adverse effect on the borrowing plans of a customer.

A few naïve customer that does not have mush knowledge about the home loans are the ones that are the primary sufferers, as a precautionary move a borrower must evaluate himself before he sets off for the hunt of a lender as the lenders lend according to the borrowing capacity of the customer and if a customer decides to buy a property whose value exceeds his borrowing capacity then the lenders tend to reject the loan application at once.

Sometimes it also happens that by the time borrower gets the loan he discovers that the property that he want to buy has already been sold to some other person, such a situation can be very heart-breaking for a borrower. The answer to such setbacks is Pre-approved loans.

Under Pre-approved home loans a borrower can get a loan sanctioned in advance and then he can start looking for property with loan already approved. The loan is sanctioned according to the borrowing capacity of the borrower; the procedure is almost the same as for a regular home loan but with an extra advantage.

Such loans are generally valid for a period of six months, however the tenure can differ. If the borrower is jot able to select a property within a fixed time frame than he will have to go through the entire process once again. Apart from that there are various attractive features about Pre-approved loans that have the potential to lure customers.

A customer that has applied for Pre-approved loan can be a lot more sure about his purchase, as he has a proper idea about what he can afford and what not, it also reduces a lot of time, as soon as the borrower has zeroed a property he is only left with its verification by the lender, that shortens the time lag between finalizing and then availing benefits of the property that in regular home loans is quite considerable.

Another add-on feature to such loans is that most of the lenders do not charge processing fees for such loans, actually as soon as the borrower has selected the property the lender refunds the processing fees. So, it makes sense to go for Pre-approved loans.

To counterbalance hike in lending rates

2011-05-27T03:38:00.000-07:00

The soaring lending rates has been keeping the borrowers really busy, since last two years the lending rates have gone up by 200 basis points, the figures themselves describes the pain that the borrowers have gone through.

Due to the fluctuation in the lending rates the borrower now has to make continuous moves to counterbalance the effect of the hike in the lending rates, the borrowers that have opted for floating interest rates are the one that have been the worst hit. The same has created an urgency to manage the home loan according to the market situation so that the loan never has an upper hand on the borrower.

The best option to minimize the effect of hike is prepayment; not full but partial. A .person can also go for full prepayment if any other lender is ready to lend at considerably lower rates or if the borrower is not satisfied with the loan scheme or the lender, but that is another case.

The best thing about partial prepayment is that is does not attract any penalty, the amount prepaid is deducted from the principal amount that results in substantial decrease in the amount on which the interest is to be charged.

As a person necessarily can not have multiple sources of income from where he can arrange funds to prepay his loan, so he can leverage the benefits of Fixed Deposits and Recurring Deposits, through which he can earn interest rates that can be very helpful for a borrower to prepay a loan.

If a person does not have ample savings to prepay then he can ask his lender to increase the loan tenure, most of the times the lenders readily do that, as for the lender the long the loan tenure the more it will earn from the funds that it has lent to the borrower; but again there is no certainty about it as this option is only for the borrower that are not nearing the retirement age.

Another way by which one can manage his Loan is through step-up loan scheme. if a person in initial stage of his career or if is expecting considerable hike in his income in near future then he can opt for this facility. Borrower has to pay less EMIs in the beginning and as the fund inflow increases borrower can start paying more.

Plan your home loan through home loan calculators

2011-05-25T04:47:00.001-07:00

A person can get a whole lot of information while sitting at one place through internet, it has evolved as an information hub over the years and now a person can find even the minutest of the details about any topic. A person who wants to borrow home loan must also make use of the information available on the internet to get what he wants from his loan and to get details about it.

Apart form details about a home loan scheme a customer can even calculate the total amount that the loan will cost him and hence can compare various loan scheme offered by various lenders and can pick the one that he finds the best. This can be done through home loan calculators.

As the total loan amount is dependent on the interest rate charges and the time duration for which the loan has been borrowed so these two factors cats as the driving force in a loan and so a borrower can get an idea of what a loan scheme would cost him under various circumstances.

If a person is planning to borrow a home loan in future then he can use home loan calculators to get an estimate of the amount that the loan will cost him every month, he can then start planning funds accordingly that will ultimately help him when he would actually borrow the loan and during the loan tenure.

There are various web sites where one can find the home loan calculators. To be precise a person can make use of the calculators on different web sites.

How to select best deal out of the pile

2011-05-17T04:34:00.000-07:00

There are a lot of home loan providers available in the market that might be willing to borrow a home loan to a person. The might even try to lure the customer with their irresistible home dwelling loan schemes but it is up to the borrower that which scheme does he wants to go for, it is solely his call.

A smart customer always knows the importance of his home loan, as the home loans are for a long duration so it becomes very essential to be get every hidden detail about the loan and to be sure that home loan does not create any undesirable an unexpected hurdle in the future. So it becomes very essential fro a borrower to evaluate him as well as the loan scheme before he actually applies for it.

At first a borrower must get his credit details and start working on removing the faults in the list. It s not a small procedure and might take some time so the instant he realizes the need of a home loan in the future he must start working on this aspect right away.

In the meanwhile he can look after the other aspects that also need to be taken care of, like self evaluation. He can try to get an idea of his loan eligibility as in how much he can borrow; according to that he must start his hunt for the property. Such a thing can protect him for inconvenience on the future. In order to maximize the chances of getting his loan approved he can try to pay back all his previous debts and to fulfill all his previous commitments, it will definitely enhance his borrowing capacity.

After all this he must start looking for the lenders that can lend him at the least possible rates, for that he can compare the interest rates offered by various lenders and that is how he can form a pool of probable lenders.

It is also necessary to evaluate the home loan scheme as a whole as sometimes a lender can offer a loan scheme on a lower rate of interest but the extra costs on the scheme might make it far more expensive from the other schemes ,in the long run. There are home loan calculators available on various web sites through which a person can calculate the total amount of the loan that it will cost in by the end.

These are the basic things that a person must take care of before applying for a loan to make sure that he gets the best home loan scheme.

Need to borrow more?

2011-05-16T05:06:00.000-07:00

There is abundance of home loan lenders in the market but still a borrower can sometimes find it difficult to find a lender that is willing to finance the required amount because the loan amount that he requires exceeds his loan eligibility.

Lenders follow very stringent procedure while lending loan to the borrower and that includes careful and precise evaluation of the borrower in terms of his financial state, lenders prefers a borrower with good credit history as there is much less involved in lending to such a customer as compared to a defaulter; and since the lending rates have increased the lenders tend to lend to the applicants that they are sure about.

Sometimes even if a borrower has a decent credit history, borrowers won’t lend to such a borrower due top his loan eligibility. The loan eligibility of a borrower is determined by the total inflow of funds and his total commitments. But there are several ways by which a lender can improve his loan eligibility and can borrower loan from the lender his wants to.

The first thing that a borrower can do is to pay all the loans and other commitments as then the amount that he can pay as monthly installment will increase and hence the amount that he can avail as home loan.

The most effective option is to club income with relative. The applicant can club his income with his wife, spouse, mother, and father. The bank will then decide the loan eligibility of the borrowing by clubbing both the incomes. This is the most convenient option that a borrower can go for.

Other option includes increasing the loan tenure, if a person opts for it then the amount of EMI that he needs to pay will decrease and hence the capacity of paying installments will increase resulting in an increase in his loan eligibility.

If a person is in his initial stage of his career and expects increase in the fund inflow in near future than step-up loan is a very suitable option for him. Under this loan scheme, initially the borrower has to pay lower EMIs but the amount of EMIs increases with the time period, it also helps in enhancing the borrowing capacity of a borrower.

Do your homework well

2011-05-16T05:00:00.000-07:00

For a first time buyer it can be really very difficult to select the best possible deal amid the home loan products available to him. The demands and requirements for the loan can differ from person to person, that is why a loan scheme that suits one borrower does not implies that it will be worthy for all the other borrowers also and hence home loans must be chosen diligently.

Home loan brokers can be of great help for the first time borrowers as then a borrower can leverage on the knowledge and experience that the broker possesses. The chance that a borrower will fall in the trap of the lenders reduces drastically.

Internet can also be of great help here, before actually looking for a lender, the borrower can start researching on the various websites about the loan schemes of a particular lender. It is also good to get the basic idea about the loan procedure as the lenders follows very stringent loan procedure and any kind of mistake at any point of time even while applying, can cause unnecessary trouble.

To get an estimate of how much would a particular loan scheme will cost, a borrower can use the home loan calculators available on various web sites. They can be very beneficial at times as then a borrower will have a better idea about the feasibility of a loan.

As dwelling loans are very hefty and for a long period of time, so it is becomes very necessary for a borrower to get every thing cleared about the loan scheme form the lender and for that evaluation of the loan scheme is very necessary and besides that it is also important to have a clear cut idea about the requirements as then the borrower can negotiate on concrete grounds and will be able to extract more and more out of the deal.

Secured loans, another good option

2011-05-03T04:51:00.000-07:00

Due to the drastic hike in the property rates over past few years, it has almost become impossible for a person to own a house from his savings. Home loan is a very good option for such people, but getting a loan is not a very easy task as one might think.

Fro getting a loan, it is very necessary for a person to have a good credit score. Good credit score establishes credit worthiness of a person and lenders prefer to lend to such customers as the risk involved is lesser as compared to a person with bad credit score.

To have reputed employer also helps, as it ensures job security and it is amongst the basic criteria that the lenders tend to check before they sanction the loan. a person with good credit score can even avail add-on benefits on his loan.

If the capital requirement of a person is not very high and he wants to avail loan at comparatively lower interest rate then he can opt for secured loans where he can borrow money from the lender providing his property of value comparable to the loan amount.

You got to know your loan better

2011-04-28T05:26:00.000-07:00

With the abundance of the home loan lenders in the market the borrowers can sometimes get baffles as to which lender should they go with and which one out of the numerous home loan schemes will suit them the best.

For an abecedarian it is very difficult to consider all the aspects of home loan, such customers must research and must get basic knowledge about it so that while finalizing a deal he is better able to understand the terms and conditions that are applicable.

It is better to start planning for a loan before one actually approaches a lender as in the meantime he can gather all the information about the lender and the loan scheme. First of all a borrower must have a clear cut idea about the loan amount that he requires and whether he is eligible to avail that.

To increase his loan eligibility a customer can club his income with his wife or with one of his relatives. Proper evaluation is also necessary as the banks charges processing fees from the borrower as he applies fro the loan, which is non refundable. If at any stage the lender realizes that the borrower does not satisfy any criteria set by them then they will cancel the loan application resulting in loss of funds for the applicant as processing charges.

For home renovation Home Improvement Loan is the best solution

2011-04-27T03:54:00.000-07:00

Loans are for all occasions, even if a person has his own and he wants to renovate he can avail for home improvement loan. Home Improvement Loans are the best way through which one can give best looks to his home. These are a category of home loans but of unsecured nature.

Here also finding the most competitive lender is the key. As Home Improvement Loans are unsecured in nature and that is why such loans attracts extra interest rate. The amount of loan that can be sanctioned to a borrower depends on the income on the borrower and his commitments and also the credit score of the borrower.

There are a lot of lenders in the market that provide Home Improvement Loans and, in order to get the best shot a borrower should do proper research about the lean schemes available. Also, a borrower must have a clear cut idea about his total financial requirement and along with it his loan eligibility.

Market research essential before taking a home loan

2011-04-19T04:02:00.000-07:00

A lot of Housing Finance Companies have surfaced over the last few years, primarily due to the increase in the demand of home loans; offering a lot of choices to the home loan borrowers. It is a good thing to have a lot of options to choose from but sometimes a customer can find him in baffled state.

Different lenders have different lending schemes that offers loan at different interest rates, so a borrower must reckon well before finalizing a loan. Interest rate is the major factor that decides the EMI to be paid by the borrower that is why proper market research is very essential.

Generally HFC’s finance maximum of 80 percent of the total cost of the house and so the borrower has to arrange the remaining amount all by himself and hence the home loans are generally hefty, so it can effect the future needs of a borrower and hence a borrower must plan the loan very well, keeping all the future prospects in mind.

The loan agreement is a very important document that contains all the terms and conditions and all the loan related documents, so a borrower must and understand the norms mentioned in that very well before signing the document. Apart from the interest rate, there are a lot of hidden costs that the lenders generally don’t mentions in the advertisement all these things are listed in the loan agreement.

During the loan tenure depending on the monetary condition of the borrower, he can accelerate or de-accelerate the EMI amount and can choose from various re-payment options available. A borrower can also pre-pay his loan before the time period, but for that the lender will levy charges on the borrower.

How to initiate loan hunt?

2011-04-07T04:06:00.000-07:00

After a customer is done wit the identification of property, the second most important decision that he needs to take is about home loan. There are a lot of lenders and a lot of home loan schemes that are available in the market for a borrower to choose from but sometimes a borrower might find himself in dilemma about which scheme and lender should he opt for.

However sticking to the basics can be really useful in such a situation. First of all before initiating the loan process a borrower must go through the terms and conditions applicable very carefully. Doing this can help a borrower a lot because through this a borrower can analyze the loan scheme well and if he disagrees with certain condition then he is always left with the option of backing out.

Different banks have their different loan calculator through which the lender decides the EMI that a borrower as to pay. So a borrower should always check the EMI calculator used by the lender.

There are a lot of factors that governs the loan amount that a bank sanctions tat includes the age of the applicant, his fund inflows, number ,of dependents etc. so a applicant must always keep these things ,in mind while applying for the loan. The other most important thing is the loan repayment period as it decides the amount of EMI for the borrower. It generally depends on the age of the applicant.

Proper planning can reduce loan burden

2011-04-05T05:29:00.000-07:00

Home loans are a very convenient option for a customer to have a home of his own but sometimes if the loans are not managed well they might be cause of worry for the borrower. That generally happens due to lack of planning. So, a borrower should plan the loan well before he goes for it.

A borrower should start saving funds before he apply for a home loan as a borrower is required to pay 20% of the actual price of the property for loan above Rs. 20 lac as down payment.

A borrower must track his fund inflow and his expense pattern so that he can get a idea of how much will he be able to repay as EMI. Ideally a borrower must restrict his monthly EMI to 40-45% of his total income and considering the present scenario a borrower must always be ready to handle higher EMI due to hike in interest rate.

Before a borrower applies for a loan with a bank he must get his basics right, a borrower must always look for a lender offering lowest possible rates and also he should get an idea about the terms and conditions for loan.

Borrowers also have option to go for maximum possible tenure to reduce the EMI burden but in that case a borrower will have to shell out extra amount as interest.

Contact bank before applying for property

2011-03-31T05:18:00.000-07:00

Home loan provides very convenient option to have a home of your own. Burt there are a lot of things that needs to be taken care of. If a customer neglects even one aspect or condition he might find himself by a lot of complications.

One our of those things that a customer need to take care of is that he must collect all the possible details about the property and before applying for the property he must contact the bank for the loan as afterwards a customer might find it difficult to get a home loan. In that case the borrower is forced to settle for high interest rates.

There are certain criteria’s that a bank uses to decide the borrowing capacity of a customer. A customer must also be aware of his borrowing capacity.

The executive director and chief financial officer of IDBI Bank R K Bansal said "The criteria for deciding the home loan are primarily the cash flow and expenses of the borrower.”

Generally the banks assumes that a customer needs around 45-50 percent of his monthly income to meet his personal expenses and takes consider 40 percent of the monthly income that a customer can pay as EMI’s for the loans that he has taken.

Home improvement loans for low income group

2011-03-30T00:26:00.000-07:00

MicroBulid India Fund, an initiative led by Habitat for Humanity International and Habitat for Humanity India that aims to support more than 6,000 low income families by providing home loans so that they can improve their homes.

For the purpose Habitat for Humanity International and Habitat for Humanity India has entered in to an agreement with ASK group. In order to reach the masses efficiently the fund will invest in reputable, local microfinance institutions which, in turn, will allow them to offer affordable home improvement loans to low-income families.

A person who is a client of the partner microfinance institution and has maintained a good track record will be eligible to get the loan. The loan amount is expected to stay around Rs. 45,000.

“We know that many low-income families in India face obstacles when trying to secure loans to improve or repair their homes, thanks to support from ASK Group, we are able to unveil the MicroBuild India Fund to give more people access to the financial support they need. This move takes us one step closer to our goal of eliminating substandard housing,” said Rick Hathaway, vice president of Habitat for Humanity International’s Asia-Pacific office.

The ASK Group is delighted to be able to help Habitat for Humanity put the MicroBuild India Fund into operation. It is an innovative program that fills a gap in the microfinance marketplace that desperately needed to be filled. Thousands of people in the future will benefit from the investment Habitat for Humanity is making now,” said the Founder and Chairman of ASK Group Asit Koticha.

Lending rates expected to stand still for a while

2011-03-29T04:41:00.000-07:00

Borrowers are going through a very difficult phase due to the soaring interest rates. During the Fiscal year-11 the banks raised their lending rates by 150-200 basis points. During the same time Central Bank raised the rates seven times, it inspired the banks to raise their lending rates too.

This might bring a lot of relief to the borrowers as for this year many experts believes that there are very scanty chances of banks hiking the lending rates during the first half of the new financial year.

Head of financial research team in Macquarie Securities Mr. Suresh Ganapathy said “I don’t think the lending rates will see a hike for the next six months. Post-September possibly, a 50 basis point hike can be expected.”

Due to the regular hike in the interest rates the home loans segment is experiencing a dip, any further hike can retard the growth in the home loan sector to a great extent.

Dhanlaxmi Bank hikes Base Rate

2011-03-10T03:59:00.000-08:00

Leading private sector lender, Dhanlaxmi Bank has hiked its Base Rate. The bank has hiked the Base Rate by 50 basis points or 0.50 percent to 8.75 percent.

Base Rate is the rate of interest below which no bank can lend. So the hike will make will make all the new loans dearer by 50 basis points. The BPLR( Benchmark Prime Lending Rate ) offered by the bank is 17.25 percent, and the it has kept that stable.

After the third quarterly review, RBI hiked key lending rates by 25 basis points reacting to the situation; banks have been raising their interest rates.

The revised rates are effective from today itself.

SBT and Allahabad Bank hikes lending rates

2011-02-22T03:34:00.000-08:00

State Bank of Travancore and Allahabad Bank has also announced a hike in the lending rates after most of the leading lenders in the country have already hiked their lending rates.

The State Bank of Travancore has raised the base rates by 50 basis points to 9 percent and the Benchmark Prime Lending rates by 25 basis point to 13.75 percent.

The new lending rates will be effective from 16^th February.

Allahabad Bank has also raised the Benchmark Prime Lending rates by 25 basis points to 13.75 percent. the rates will be applicable from 24^th February.

SBBJ hikes deposit and lending rates

2011-02-21T03:46:00.000-08:00

Associate Bank of SBI, State Bank of Bikaner and Jaipur has announced a hike in the deposit rates and the lending rates.

The bank has hiked the deposit rates up by maximum of 75 basis points or 0.75 percent across various maturities and the base rate by 25 basis points or 0.25 percent to 8.75 percent .

The bank has also hiked the benchmark Prime lending rates by 0.25 percent from 13.50 percent to 13.75 percent .

The new rates will be effective from 21st February.

Indian Bank inks deal with TVS Motors

2011-02-17T08:31:00.000-08:00

India Bank has signed a Memorandum of Understanding (MoU) with TVS Motors, a leading vehicle manufacturer in the country. According to the agreement, Indian Bank will be the preferred bank to finance the TVS vehicles.

On the occasion the Chairman of Indian Bank T M Bhasin said "The MoU will help to bring three wheeler drivers into structured banking and enhance Bank's collateral free lending."
The bank will provide this service from all the branches present in the country.

The Vice-President (Sales and Service) Three Wheeler division of Tvs Motors, Srinivasan said "Besides Indian Bank we are having tie-up with other public sector undertaking bank .. But this will highly benefit the borrower as they (Indian Bank) offer them to pay about 15 per cent on the on-road price of the vehicle which is comparatively lower."

IDBI and DCB hikes lending rates

2011-02-08T03:38:00.000-08:00

IDBI Bank and Development Credit Bank (DCB) have announced a hike in their lending rates. Since, The Reserve Bank of India has announced a hike in the key rates, several lenders including Union Bank , Indian Overseas Bank ,Syndicate Bank and several others have already announced a raise in their lending rates and more banks are expected to hike their lending rates very soon.

IDBI Bank hiked Base Rate by 50 basis points or 0.50 percent to 9.50 percent and BPLR by 0.25 percent to 14 percent whereas DCB hiked both Base Rate and BPLR by 50 basis points to 9 percent and 16.25 percent respectively.

Public sector lender IDBI Bank has also announced a hike in the fixed deposit rates across various maturities.

Loans from HDFC Bank to go expensive very soon

2011-01-31T08:13:00.000-08:00

The second largest private lender in the country HDFC Bank has announced to raise the lending rates soon. The announcement was made a couple of days after the Central Bank raised the repo and Reverse Repo Rates by 25 basis points.

Executive Director of the bank Mr Paresh Sukthankar said "There will be an increase in lending rate, both in retail and corporate side. Most retail products, including auto loans, will see an increase in the next few days."

After the increment the Repo Rate is 6.5 percent and the Reverse Repo Rate is 5.5 percent.
Mr Sukthankar further said "Higher ticket loans will attract higher EMIs as lending rate increase. This will lower retail demand for higher level loans."

Earlier the bank also raised the deposit rates across various maturities, effective from January 1,2011.

State Bank of Mysore raises BPLR rate by 25 points

2011-01-06T00:47:00.000-08:00

State Bank of Mysore has announced to raise the Benchmark Prime Lending Rate of the bank by 25 basis points to 13.50 percent. The new rates will come into effect from today itself. State Bank of Mysore is subsidiary bank of State Bank of India.

The BPLR is used for determining interest rates on loans and advances sanctioned up to June 30, 2010. For the loans that were sanctioned after 30^th June , base rate is applicable.

Recently several other banks like ICICI , State Bank of Travancore , Kotak Mahindra Bank and Dhanlakshmi bank raised their BPLR rates .

Loans to go 1% more expensive this year

2011-01-03T03:16:00.000-08:00

The Indian economy is currently expanding at the rate of 9 percent per annum but still the liquidity condition remains tight. It is expected that banks can increase their lending rates by at least 1 percent in the year 2011.

Chairman and Managing Director of Canara Bank, Mr S. Raman said, “Interest rates have not yet peaked, Rates may go up if liquidity remains tight and demand for loans increases.”

During the last year the credit growth was much faster than that of deposit rate. RBI was expecting a growth of 20 percent in the credit during the Year but it grew with 23.7 percent while the deposit showed only 14.7 percent growth.

On Friday, ICICI bank and State Bank of India raised their lending rates. Almost all the banks have raised their lending rates to 9 percent in the recent weeks.

Mr K R Kamath CMD of Punjab National Bank said “So long as there is pressure on liquidity, pressure on margins will continue,Also, there will be resistance among borrowers to absorb a hike in lending rates, but if deposits do not grow in turn with credit growth, banks will need to attract depositors by offering higher rates keeping inflation in mind.”

Inflation showed signs of rest for a few months, but it is again on a high. The food prices are increasing at record rate.

Hemant Mishra, head of global markets Standard Chartered said, “RBI is likely to continue with (its) tight liquidity stand to ensure efficient transmission of monetary policy. However, we do expect liquidity deficit level to come off to Rs 50,000-60,000 crore once demand and supply gap normalises”.

Loan beyond 80% of home value, not possible!!!

2010-12-24T03:46:00.000-08:00

Reserve bank of India (RBI) has introduced new guidelines for home loans. The central bank has made it tougher for property loan valuing more than 75 lac.

The RBI has said that the banks can provide loan only 80 percent of the cost of property, rest 20 percent has to be necessarily arranged by the borrower. These new guidelines are introduced by the bank, considering the excessive flow of money from the banks in real estate sector.

According to a notification issued by RBI "In order to prevent excessive leveraging, the LTV (Loan to Value) ratio in respect of housing loan hereafter should not exceed 80 per cent," however the central bank said that the banks can provide upto 90 pecent loan to small housing loan upto 20 lacs.

Reacting to the revised policy, some banks like ICICI and HDFC have already withdrawn their teaser rate scheme while SBI will follow the renewed guidelines from next month.

LICHF says all loan approval norms duly followed

2010-11-24T22:43:00.001-08:00

Central Bureau of Investigation arrested many top officials of financial services firms as well as public sector banks yesterday in pertanance to the housing finance scam. Amongst them was CEO of LIC housing finance (LICHF), Ramachandran Nair .

"All procedures and due diligence consistent with board approved guidelines have been adhered to in approving the loans, as has been followed in the past, by the competent authority," LIC Housing Finance said clarifying its stand.

Other than Nair, the arrested officials include Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India, Venkoba Gujjal and Deputy General Manager of Punjab National Bank (Delhi).

CBI also said that it has arrested Rajesh Sharma, CMD of Mumbai-based firm Money Matters Ltd and two of its employees -- Suresh Gattani and Sanjay Sharma.

LIC Housing Finance said, "All the loans are secured by the underlying assets to the full satisfaction of the approving authority. All the loans have been approved with relevant regulatory norms."

"As on date all the loans in question are performing assets," added LICHF.

CBI spokesperson R K Gaur commented on the issue saying that, "Officers of top management and middle management of various public sector banks and financial institutions viz. BoI, Central Bank of India, PNB, LIC and LICHF were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions."

"They were also gathering confidential business information from financial institutions," added Gaur.

IDBI Bank and State Bank of Mysore raised lending rates

2010-11-09T03:30:00.001-08:00

IDBI Bank and State Bank of Mysore have raised lending interest rates.

IDBI Bank is the first bank to raise its interest rates after the Reserve Bank of India (RBI) raised key policy rates by 25 basis points. The bank has raised its term deposit rates by 10-50 basis points across maturities to attract customers.

Bank has also revised its benchmark prime lending rate by 25 basis points to 13.5%. The new rates are effective from November 4.

IDBI Bank Chairman and Managing Director R M Malla said RBI has pointed to the issue of negative returns on deposits. He added, bank is willing to give better returns to small depositors.

State Bank of Mysore has raised its base rate by 25 basis points to 8%. According to bank statement, the revised rate has come into effect from November 1.

Central Bank to provide loan to rickshaw pullers

2010-11-08T03:19:00.000-08:00

Central Bank of India will be providing finance for rickshaw pullers. Bank CMD S Sridhar will launch a rickshaw finance program in Uttar Pradesh capital on November 9.

Through this program the aegis of Rickshaw Federation plans to provide loans to rickshaw pullers to own their rickshaw units and thereby bringing them under the formal banking system. Sridhar will meet the state government officials regarding this.

Corporation Bank launches three new loan products in Mangalore

2010-10-28T04:46:00.000-07:00

Corporation Bank has launched three products in Mangalore - Corp Shubha Vivah (loan scheme to meet expenses related to marriage), Corp Ghar Shobha (loan scheme for house renovation/extension/furnishing) and Corp SB Smile (flexi savings deposit scheme for micro traders). The products were launched by P Shivshankar, chief executive officer, zila panchayat.

Narendra Singh, executive director of the Bank said, “Corporation Bank has always been responsive to the social realities and needs. We understand the financial difficulties faced by parents at the time of marriage of their children, especially daughters Corp Shubha Vivah is specially designed to take care of the entire marriage expenses”.

While explaining about the Corp SB Smile Scheme he said, “Hawkers and street vendors are an important link in the overall supply chain in our marketing system. But, they are not formally integrated into the system. Their banking needs are limited. Owing to the limited exposure to education, they are not comfortable with the banking system and hence they try to fulfill their banking needs outside the system with a daily collection account or sometimes a term deposit. The Bank has come up with a novel scheme Corp SB Smile, especially focused to cater to the needs of this segment.”

Narendra Singh said, “Corp Ghar Shobha is designed as a complete housing solution, providing financial assistance for repair, renovation, extension, improvement, and furnishing of house.”

Products

Corp Shubha Vivah loan has been designed specially to take care of the expenses related to marriage. The loan will cover the entire expenses related to marriage such as shamiana, hall booking, food and catering, purchase of jewelry, clothes, etc. The loan repayment period is 7 to 15 years and at present bank is offering loan at an interest rate of 12% (4.25% above the base rate).

Corp Ghar Shobha is a loan designed to provide complete housing solution. The loan covers cost of repairs/renovation/extension/improvement/furnishing of house/flat. This loan also covers consumer durables like refrigerator, television, washing machine, laptops, digital cameras etc. In the metro centers the maximum loan amount is Rs 10 lac. The loan can be repaid in the form of EMI in maximum period of 10 years. At present the rate of interest is 10% (2.25% above the base rate).

The third product Corp S B Smile is a loan specially designed Flexi Savings Deposit with Sweep facility for Micro Traders. Under this scheme an account can be opened with an initial deposit of Rs 200. When in Corp SB Smile account balance touches to Rs 6000 the system will automatically transfer in units of Rs 5000 in the SB account

Govt proposes to include loan products in financial inclusion program

2010-10-19T07:37:00.001-07:00

The government and Reserve Bank of India has been pushing public sector banks to adopt financial inclusion program in order to reach out to the unbanked segments in the country. Earlier under financial inclusion program banks were to provide basic banking facilities like opening accounts, issuing smart cards for transactions, now government is planning to include loan products. This was stated by Department of Financial Services Secretary R Gopalan. Around 10 PSU banks in the South including Indian Bank, Andhra Bank, Corporation Bank, Canara Bank, Indian Overseas Bank, Syndicate Bank, Vijaya Bank, State Bank of Mysore, State Bank of Tranvancore and State Bank of Hyderabad are carrying out financial inclusion program which was reviewed by Gopalan.

He said, “Corporation Bank is already undertaking such initiatives by opening credit lines to unbanked segment customers to start small businesses like saloon and cycle shops by granting small value loans of Rs 10,000 to Rs 15,000. This can be replicated by all banks after the ministry approves it at the national scale. It works somewhat like a kisan card.”

He said as per the finance ministry’s budget proposal to reach out to 72,300 habitats having population of 2,000 people, up till now the review of FIP implementation in Western and Eastern region has been done. He added in south, approximately 30,000 habitat locations were identified for FIP implementation.

“We are focusing on providing facilities including deposits, withdrawals, remittances, micro-pension, micro-insurance in the identified FIP pockets.”

He told the projected regulatory framework on microfinance institutions is in final stage and the department has getting feedback from public and other stakeholders. However, he said, regulation will not include interest rates as in the Indian financial markets the interest rates are deregulated.

He said, the banking sector is prepared for huge HR challenge as about 3-4 lakh staff is expected to retire in the next three to four years. He added, “New age banking workers has to reorient themselves for new situation. In the modern day banking, more work will be handled at the back offices with conventional banking adopting Business Process Re-engineering at the front-end to stay relevant. We need people with indepth skills in areas like Risk Management, Forex management, Treasury Management, Credit appraisal, etc to meet the demands of the modern era banking."

APGVB ‘Suvidha Vikas’ boon for poor borrowers

2010-10-13T03:07:00.000-07:00

Andhra Pradesh Grameena Vikas Bank (APGVB), a government owned bank has a debt swapping scheme called ‘Suvidha Vikas’ for poor people in Warangal. But poor borrowers do not have awareness about the scheme due to which it has remained under utilized by these borrowers who go to private micro-finance institutions (MFIs) for help.

Although loan borrowers go to MFIs for help, the borrowers of Warangal unit of APGVB are in safe hands.

Suvidha Vikas’ loan book show loan of up to Rs 5 lakh given to self-help groups (SHG) (without any security) and monthly installment repayment, as against the weekly installment system followed by private MFIs.

Except for Chennaraopet, Gudur, Tadwai, Dornakal and Cheriyal mandals, the scheme is doing well in rest of the 45 mandals of Warangal.

Moreover, besides Warangal, the APGVB scheme is running in four other Telangana districts of Medak, Mahbubnagar, Nalgonda and Khammam and three more districts in Andhra.

The sources informed, APGVB Warangal is providing services to members of 14,590 SHGs under Suvidha Vikas, each group having an average 12 members. M. Balathimma Reddy, manager (advances), APGVB, Warangal, who looks after Suvidha Vikas said, “In the last two months, we have seen a sudden rise with 192 new SHGs, who constitute the majority of loan borrowers from private MFIs, being added in Warangal.”

Although APGVB officials are not able to market their loans efficiently as the agents employed by private MFIs do through sweet-talk, but APGVB charge low interest on loans as compared to what is charged by private MFIs.

Mr Reddy said, “As against the high rate of interest charged by MFIs, we charge only 14 per cent interest rate. Of this, the state government pays on 5 per cent interest rate as subsidy under Pavala Vaddi scheme to the poor borrowers.”

According to sources, there is a major drawback with Suvidha Vikas scheme, that it does not completely takeover loans of borrowers from private MFIs instead it only provided the SHG another loan to pay-off the first loan.

A. Vinayak Reddy, professor of Economics, Kakatiya University said, “As of now, Reserve Bank of India has not given permission to public sector banks (PSUs) to take over loans from MFIs.” Mr Reddy further said as the state government provides support for the setting up of SHGs, so it becomes the primary responsibility of the government to provide them loans when they require.

Loans to get costlier as banks hike base rate

2010-10-01T04:04:00.000-07:00

Some banks have raised their base rates during quarterly review. The banks that have raised lending rates include Punjab National Bank, IDBI Bank, Allahabad Bank and Axis Bank. The rates have been raised due to increase in borrowing costs.

This year in July all the banks shifted to base rate system since then this is the first time banks are changing the benchmark. Few banks have raised their deposit rates – SBI, PNB and IDBI Bank.

SS Ranjan, CFO, State Bank of India told bank might revise base rate after mid-November. He said, “While the cost of deposits has gone up we can absorb the cost for some more time.”

MV Nair, CMD, Union Bank of India said, “We will review our base rate towards the end of October based on our funding cost.”

Bank of India’s asset and liability committee will be meeting on October 4 to decide on a base rate hike. The commercial banks like PNB, IDBI Bank and Allahabad Bank have hiked their base rate by 50 basis points to 8.5%.

Axis Bank has raised its base rate by 25 basis points to 7.75%. Few weeks back the Reserve Bank of India (RBI) had raised its key lending, the repo rate, by a quarter percentage point and the borrowing rate by half a percentage point to rein in rising inflation. However there will be no immediate impact on the existing loan borrowers with the hike in base rate as about 70% of the borrowers loans are linked to the BPLR. SBI has not revised its base rate, it is unchanged at 7.5%.

Earlier, on July 27, 2010 RBI had hiked its key policy rates as a result SBI and ICICI Bank raised their benchmark prime lending rates (BPLR) by 50 basis points each. PNB had hiked its BPLR by 75 basis points.

However, the revised benchmark PLR of SBI is 12.25% while that for ICICI Bank is 16.25%. to bring more transparency and effective transmission of policy rates RBI directed all banks to introduced base rate system and from July 1, 2010.

The two big commercial banks PNB and SBI have raised their deposit rates across maturities by 25 to 75 basis point and 25 to 50 basis points across maturity, respectively. IDBI Bank has raised its deposit rates by 15 to 50 basis points.

Meanwhile, SBI has extended its teaser home loan scheme till December 31, 2010, hence the new home loan seekers can avail the opportunity.

RPCB charges higher interest from loan borrowers who consume tobacco

2010-09-27T04:20:00.000-07:00

Rajkot People's Cooperative Bank has derived an innovative idea to motivate people to say no to tobacco. It is the sole bank to take a lead in ‘No tobacco’ campaign from the banking sector. In Gujarat it is the first bank to enforce such a policy that discourages tobacco usage at all levels of operations.

Founder Chairman of Rajkot People's Cooperative Bank (RPCB) Shamji Khut told PTI, "As a policy, we charge one per cent higher interest from loan seekers who happen to be tobacco chewers."

He said, "The bank's board had passed a resolution to this effect around two and a half years ago, and since then it’s in force."

Khut said, "Till now only one customer has refused to take loan from us stating that I cannot quit tobacco chewing even if you charge me two per cent higher interest."

It has been over a decade the bank started operations in Rajkot district of Gujarat, RPCB since its set up has implemented a clause that empowers the management to terminate the services of employees who have a habit of taking tobacco. Khut said, "The bank does not recruit any persons who have any kind of tobacco addiction. We at present have strength of 74 employees."

Khut added, "As a rule we can terminate the service of an employee if he is found consuming tobacco in any form. Even a board of director has to submit his resignation if found consuming tobacco."

Corporation Bank launches Grand Festival Offer on loan and deposit products

2010-09-23T00:07:00.000-07:00

Corporation Bank has launched Grand Festival Offer on loan and deposit products. Mr. Murugesh R Nirani, Honble Minister for Large and Medium Scale Industries, Government of Karnataka launched the Festival Bonanza offer in Bangalore.

On the occasion Mr. Ramnath Pradeep Chairman & Managing Director of the Bank, Mr. Asit Pal and Mr. Narendra Singh, Executive Directors, Mr. U B Bhat, Chief General Manager, Mr. C G Pinto & Mr. S M Swathi, General Managers, Other General Managers and Executives of the Bank were also present.

Under this festive offer bank is offering special interest rate on Home and Vehicle loans - Corp Home Smart and Corp Vehicle Smart. This special scheme will be for a limited period from 21st September 2010 to 31st December 2010.

Under Corp Home Smart Scheme, for loans up to Rs30 lakhs for the floating tenor, the bank is offering 7.75% interest for the first year and for the next two years the rate of interest will be 8.25% p.a. Processing charges have been fully waived.

Under Corp Vehicle Smart Scheme, for the first year the interest rate is 8% p.a. and 50% of the processing charges have been waived.

In the deposits segment bank is offering a new short-term deposit scheme called "Corp Diamond” for a period of 275 days. The interest rate of 7% (simple interest) per annum is being offered.

This interest rate will be applicable for a minimum deposit of Rs 500/- in case of Rural & Semi Urban Branches, in case of Urban, Port Town & Metro Branches the minimum amount is Rs 1000/- and has been restricted to less than Rs 5crore. This new offer will be effective from 21-09-2010 and will be applicable for a limited period of 3 months. The senior citizens will get an additional interest rate of 0.50%.

The bank is also offering a unique hi-tech, hassle-free Savings Bank account – Corp Classic under the festive bonanza. This unique scheme combines the high liquidity of a savings account and the flexibility of a term deposit.

In this account bank has reduced the minimum balance from Rs. 25,000/- to Rs. 15,000/-. The surplus over and above the minimum balance of Rs15,000/- will be converted into Term Deposits in units of Rs 1,000/- each.

PSU banks introduce festive offers for loan borrowers

2010-09-13T05:04:00.000-07:00

A month’s time is left for festival season to start and banks have started introducing new schemes to attract more customers. Punjab National Bank (PNB), Allahabad Bank, Uco Bank and Bank of India have launched festival offers, such as loans at concessional rates and waiver of processing and documentation charges. These offers will be available till December end.

In its festive offer PNB is offering home loan at 8.5% - a teaser rate to attract new customers. Under this scheme the concessional rate of 8.5% will offered for three years for housing loans up to Rs50 lakh. Currently, lender is offering 9.25% for loans up to Rs30 lakh with a repayment period of 5 years, and for loans above Rs30 lakh bank is offering interest rate of 10% for similar maturity. For new car loan borrowers also bank is offering a rebate of 0.5 per cent under the fixed option.

Another public sector bank UCO has waived the processing and documentation charges. Bank will offer new car loans at 10.5% for the first three years, with an additional concession of 0.5% in cases where full collateral coverage or salary tie-ups were available, and for doctors and medical practitioners.

S . Srinivasan, general manager, finance, UCO Bank said, "Festive season is a good time to attract new customers as people buy new houses and vehicles."

Allahabad Bank is offering an interest concession of up to 1% on loans under its festive offer. The interest concession offered on housing loans under the floating rate scheme will vary from 0.25% to 1%, but for fixed rate scheme the new borrowers will get a concession of 0.50% to 1.75% for a limited period.

Bank of Indian has introduced a different offer – a deduction of Rs7per gram of gold coin and most probably waive off processing charges.

Policyholders can avail loan against ULIPs

2010-09-10T03:23:00.000-07:00

The Insurance Regulatory and Development Authority (IRDA) has allowed life insurance companies to give loans against unit-linked insurance plans (ULIP), this will help those policy holders who are in need of short-term funds. However some companies have started offering this feature along with their new products. Before this, insurers used to sanction loans only against traditional plans, barring term insurance policies.

I Sambasivarao, appointed actuary, Star Union Dai-ichi Life Insurance told, “Earlier, policyholders were allowed to make partial withdrawals from their ULIPs after three years. Now, the lock-in period has gone up to five years, which means that policyholders who are in need of short-term funds will not have access to their money till then. Therefore, a need to offer the loan facility was felt. ” On Thursday Life Insurance launched its two new ULIP products with this option. Under these plans, policyholders can avail loan after completion of three policy years at an interest rate of 10% per annum, with half-yearly compounding. The loan repayment can be done during the policy term, but partial withdrawal from ULIP is not allowed unless the loan is closed.

Meanwhile LIC is providing loans against its traditional policies at 9% and the repayment of loan is to be done on a half-yearly basis. This year, in June the insurance regulator had issued a circular in which it had introduced sweeping changes in the ULIP charge structure, the insurance regulator had also specified the norms for sanctioning the loan. The maximum loan amount was set at 40% of the net asset value in ULIPs where equity accounted for over 60% of the total portfolio. In case of policies the limit was set at 50% where debt instruments accounted for more than 60%.

P Nandagopal, CEO of IndiaFirst Life Insurance said, “The rationale behind permitting the loan facility is to prevent policyholders in need of short-term funds from surrendering the policy. They can take a loan against the policy instead and stay with it through the original tenure.”

IndiaFirst Life Insurance Company will give loan against its ULIP products before the completion of five years. The interest rate on loan is benchmarked to the SBI’s Base Rate + 7%.

Both the companies do not give loans after five years, as the policyholder can avail the partial withdrawal facility then, in case there are any outstanding dues, are cleared.

Change in base rate won’t affect customers having fixed loan rate contract

2010-08-25T04:47:00.000-07:00

The Reserve Bank of India (RBI) has clarified that banks will have to honor a fixed rate contract, even though the interest rates are raised in future. Some banks had doubts over introduction of fixed rate home loans.

Even customers of some banks also had doubts in case lender’s base rate rose above the contracted fixed rate, the bank might raise loan rates as per RBI guidelines no bank can lend below the new benchmark rate.

Some of the big commercial banks like Punjab National Bank (PNB), State Bank of India (SBI) and ICICI bank are offering special home loans scheme on fixed rate, so customers of these banks are worried that they might have to pay higher rate of interest in case lenders raised base rate as no bank is allowed to lend below the base rate.

RBI has also clarified that at the time of signing a fix rate loan contract if the lending rate (under the special scheme) is higher than the base rate, banks should not charge higher rate even if they raise their base rate in future.

For instance, PNB is offering a fixed rate loan of 8.5% on home loan for the first three years. At present bank base rate is 8-9% after a year, if bank raises its base rate, in such case RBI has said that bank cannot charge customers (who have opted for 8.5% three-year fixed rate scheme) interest rate more than 8.5% in the first three years.

The country’s largest lender SBI is offering 8% for the first year and 9% for the second and third year under its special scheme. SBI scheme is upto September, PNB’s scheme is till December 10.

However, RBI has instructed banks that if they hiked or lower base rate, that increase or cut in rates should be passed on to the new customers under the special home loan scheme. So, in case PNB raises its base rate, to suppose 9% in October, the customers who have availed the loan at a fix rate of 8.5% before October, need not have to pay more but for the new customers who avail fix rate home loan from October, the bank will charge a revised rate and cannot continue to offer 8.5% rate.

PNB has recently launched its festive loan offer and is keen to offer a fix rate scheme therefore, the lender asked for a clarification from RBI on this issue. Under the special scheme PNB is offering fix rate offer on loans up to Rs 50 lakh and from the fourth year onwards, the bank will charge home loan rate that is prevailing at that point of time for all its customers.

State Bank of Indore has raised its BPLR by 50 bps

2010-08-19T04:55:00.000-07:00

State Bank of Indore has raised its BPLR by 50 basis points which will be 13.25 per cent. Thus home, auto and corporate loans will become expensive for the existing borrowers.

Earlier the parent bank State Bank of India (SBI) had raised its BPLR by 50 basis points to 12.25 per cent. Its new rates came into effect from August 17.

SBI has informed that the merger process of State Bank of Indore with SBI will start from August 26. Therefore the entire undertaking of State Bank of Indore will be transferred to and vested in State Bank of India from August 26.

On July 28, 2010, the government had issued the 'Acquisition of State Bank of Indore order 2010'. It said, as per the order the process of amalgamation will begin from the 30th day from the date of order that is August 26.

The SBI board had given its approval last year following this Centre also given an in-principle approval. SBI will have a 98 per cent stake in State Bank of Indore.

SBI has already made an announcement of swap ratio of 34:100 for the merger, thus SBI will be giving 34 shares for every 100 shares of State Bank of Indore held by minority shareholders.

Hence SBI will issue up to over 1.16 lakh shares of face value of Rs 10 each to minority shareholders of State Bank of Indore.

After this merger, there will be only five associate banks of SBI-- State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. Among these, the State Banks of Bikaner and Jaipur, Mysore and Travancore are listed companies.

How to increase loan eligibility

2010-08-09T05:21:00.000-07:00

While sanctioning loan to a borrower, banks check the income statement of the person in order to assess the repaying capacity of the individual and also reduce chances of risk.

There are some points which are taken into consideration for loan eligibility:

People with steady jobs and constant income are mostly preferred rather than people who frequently change jobs. To people whose retirement is close bank don’t prefer to give long tenure loans. However banks prefer young borrowers but applicant who have default history, credit score is poor, then there chance of getting loan minimizes. To some extent education also have bearing on loan eligibility. In case loan borrower is a senior citizen with sound financial position then banks take into consideration this factor while sanctioning loan.

The eligibility for loan can be enhanced by clubbing your income with that of your spouse, father, mother or son. If husband and wife apply for a joint loan, their combine income the eligibility will become double. Moreover co-owners will be eligible for tax benefits separately on the home loan repayments in proportion to their shares in loan liability.

Managing finances is also one of the factors to increase loan eligibility. If you have cleared previous debts then you will have funds for the repayment of the new loan you plan to take or have taken. Clearing of credit card payments, loan repayments will make you eligible for a greater loan amount.

In case of home loan you can increase the eligibility by opting for long tenure as this will reduce the monthly EMI burden.

Borrowers still have to decided whether to switch to new base rate system

2010-08-06T04:29:00.000-07:00

Some of the banks have increased their benchmark prime lending rate (PLR) floating rate, on which they used to lend prior July 1, therefore the borrowers say they have to yet think on whether they should shift the loans to the new base rate system.

According to bankers the borrowers, who find that the rates offered under the base rate system are favorable and less volatile, would not think to move over to the new base rate system.

KR Kamath, CMD of Punjab National Bank, said, “Previous loans that are linked to PLR will get costlier. Hence, borrowers who feel that the hike in the rate will adversely impact them can shift to the base rate system”.

Recently PNB, IDBI Bank and Union Bank of India have raised their PLR rates they offered to their prime borrowers, thus the rates linked to rate will be more expensive.

PNB has raised its PLR to 11.75 per cent from 11 per cent, while Union Bank has increased it to 12.25 per cent from 11.75 per cent. IDBI Bank raised its PLR by 50 basis points. These banks have set their base rate at 8%.

The PLR rates are the rates offered by the bank to its best borrowers where loans can be offered at rates lower than benchmark rate, while the base rate system is rigid as banks cannot give loans below the base rate.

All floating rate loans will be affected by the raise in PLR but the borrowers of home loans will get impacted the most. PNB is offering home loan at 8.75 per cent for a 5 year tenure, 9 per cent for loans of 5-10 years, 9.25 per cent for 10-20 years and 9.5 per cent for above 20 years for Rs 20 lakh linked to its base rate.

Union Bank has set its floating rate loans up to Rs 30 lakh at 8.5 per cent for a 5-year loan (base rate plus 0.5 per cent), it is 8.75 per cent for loans of 5-15 years and 9 per cent for 15-20 years. IDBI Bank under the new regime is offering floating rate loan of up to Rs 20 lakhs at 8.5 per cent, Rs 20-30 lakhs 8.75 per cent, Rs 30-50 lakhs 9 per cent and above Rs 50 lakhs is 9.25 per cent.

CS Jain, head, personal banking, IDBI Bank said, customers should decide whether they want to move their loans to the base rate system, especially as it is more stable.

Jain said, “Customers would now have to decide whether to exercise the option provided by the RBI. This system is theoretically less prone to fluctuations when compared to the PLR system where banks keep adjusting rates frequently.”

Kamath added PNB will review its base rate quarterly. He said, “Our base rate would be reviewed after every quarter. One of the inputs towards this will be our cost of deposits. We have also raised our deposit rates by matching amount to give our customers a fair deal.”

According to Ashish Jindal, regional director (north), Knight Frank India for home loan borrower’s base rate is more beneficial.

He said, “I feel that borrowers would be better off under a more transparent base rate system. The previous system was anything but transparent where the benefits were often not passed on to the borrowers.”

Banks asked to speed up financing of over 59,000 projects under PMEGP

2010-08-05T04:23:00.000-07:00

Banks have been asked to speed up the disbursal of loans under the Prime Minister's Employment Generation Programme (PMEGP). The government said banks should ensure that they meet the set target of financing over 59,000 projects in the current fiscal.

Minister of State for Micro, Small and Medium Enterprises Dinsha Patel said, "I request all the CMDs of banks to issue policy circulars to the financing branches to ensure fulfillment of the targets allocated."

At National Workshop on the Prime Minister's Employment Generation Programme Patel said, for the current fiscal, the ministry has set a target of implementing 59,714 projects under the PMEGP with margin money assistance of Rs 836 crore which will generate employment for 5.97 lakh persons.

The minister informed that up till now only 10 per cent of the loan amount has been disbursed for this financial year. He said, it is important to bring Khadi and Village Industries Commission (KVIC) to every village.

Under the scheme, from the total amount of loan to be disbursed, 15% has been sanctioned for scheduled castes, while 7.5 per cent will be for scheduled tribes, 27 per cent for other backward classes, 5 per cent for minorities and 30 per cent for women.

The scheme was launched in 2008, since then around one lakh projects have been sanctioned and about 10 lakh people have been provided jobs.

However under PMEGP scheme urban and rural entrepreneurs in the general category have also been provided a subsidy of 15% and 25% on the project cost while the urban and rural businessmen of the weaker sections of society have been provided a 25 per cent and 35 per cent subsidy.

The KVIC is the nodal agency responsible for the implementation of PMEGP, set the targets for its field officers and the Khadi and Village industries boards of various states.

At the workshop an agreement was signed between Union Bank of India and KVC for a 'one bank, one nodal branch' concept, under this agreement bank will be coordinating the operations of its branches across the country through a single nodal branch.

Southern states to seek direct sanction of loans to tenant farmers and no collateral security on loans

2010-07-19T04:49:00.000-07:00

The southern states want the bank loans to the tenant farmers should be directly sanctioned and no collateral security should be taken from small and micro enterprises in the state for giving loan. The southern states finance ministers conference is going to be held on July 20 and the Chief Minister K Rosaiah told that the state will taking up this agenda, to arrange for sanction of loans directly to the tenant farmers with suitable guidelines so that they can get loans at 7 per cent interest and other benefits including crop insurance, with Union finance minister Pranab Mukherjee, who will be attending the meet.

The chief ministers or finance ministers of the southern states including Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Union Territories of Pondicherry, Andaman and Nicobar Islands and Lakshadweep will be attending the meet.

All the CEOs, CMDs of public sector banks and financial institutions, Reserve Bank of India deputy governor and NABARD chairman will also attend the meeting.

Rosaish reviewed the arrangements and issues with the chief secretary S V Prasad, special chief secretary (finance) G Sudhir and other officials, to be taken up in the meeting.

The chief minister told that his main focus will be on getting loans without collateral security for micro, small and medium enterprises (MSMEs). He told a certain percentage of bank loans be given to MSME sector under the Credit Guarantee Trust.

Rosaiah added that he will ask for 2% interest subvention for the loans that were rescheduled due to floods and drought in the state also for waiver of the service charge, being collected on SMART cards of NREGS beneficiaries.

In a press release, the CMO stated in the meeting the financial issues confronting the states and the will also be taken up, also the CMDs of public sector banks and Union finance minister will respond to their queries and problems.

The other issues to be taken up in the meeting include state wise flow of credit and credit related parameters like agriculture credit, MSME credit, housing and education loans, credit to weaker sections and minority communities and CD ratio etc.

Also, the progress of Centrally sponsored schemes like Swarnajayanti Gram Swarogar Yojana (SGSY), Swarna Jayanti Shahari Rozgar Yojana (SJSRY), Prime Minister's Employment Generation Programme (PMEGP), revival package for short term cooperative credit structure, implementation of Aam Admi Bima Yojana and implementation of co contributory pension scheme by the states for unorganized sector under the Swavalamban Pension Scheme of the Government of India will be part of the agenda in the meeting.

SBH extended special home and car loans rates

2010-07-08T04:11:00.000-07:00

After the two big lenders the State Bank of India and HDFC bank, State Bank of Hyderabad has extended its special interest rates for home and car loans.

The bank said the interest rates of home loans for first year will remain at 8.5% (fixed) and for the second and third years for loan up to Rs 50 lakh it would be offering 9.25% (floating) further for the second and third years for loans above Rs 50 lakh it is offering 9.5% (floating).

The bank will link the rate to base rate from the fourth year onwards which will be 9.75% for loans up to Rs 50 lakh and for loans above Rs 50 lakh the rate will be 10.75%.

SBH has set its base rate at 7.75%.

On car loans bank is offering interest rate of 8.5% (fixed) for new cars for the first year and for second and third years it is offering floating rate at 10.5%. Thereafter from fourth year onwards, bank will link the rate to base rate which will be 11.5% for loans up to Rs 5 lakh and for loans above Rs 5 lakh the rate will be 11.25%.

LIC Housing Finance introduced three loan products with special rates

2010-07-02T04:18:00.000-07:00

With the introduction of base rate system for loans change in market home loan market is expected. Anticipating the change in home loan market LIC Housing Finance Ltd. has announced three different products offering various options to the customers.

1. Floating Rate: New home loan borrowers who prefer Floating rates ab-initio for them the company is offering special rates of 8.75% for loans up to Rs 1.50 crore. Before this special rates were offered at 9.75% for loans above Rs 75 lakhs up to Rs 1.50 crores.

2. New Fix-O-Floaty: Home loan borrowers who want to go for short term fixed rate, company is offering the new Fix-O-Floaty loans at competitive rate of 8.90% for loans up to Rs 1.50 crores. Up to 31.03.2012 fixed rate will be offered and thereafter the rate will be floating. Earlier the rate of interest offered for loans above Rs 75 lakhs up to Rs 1.50crores was 9.90%.

3. Advantage 5: In today’s scenario it is not possible to predict the movement of interest and many borrowers might opt for fixed lending rate for a considerable long period. To meet the borrowers need LICHFL has introduced a unique product called ‘Advantage 5’ under which the lending rates are fixed at 9.25% for 5 years and thereafter on floating basis.

The new rates will be effective from 1st July 2010.

Borrower should check credit report before applying for loan says bankers

2010-06-29T06:04:00.000-07:00

Many people have faced this situation when their loan applications have been rejected because their in front of your credit report it is written defaulted in repayment of loan or credit cards. To avoid rejection of loan one should check his/her credit report with Credit Information Bureau of India (Cibil) before starting negotiations for the loan.

According to bankers if the borrowers have the prior knowledge of their credit report it might help many from facing the situation of loan rejection due to an adverse report on credit history, especially loans to be taken for purchases such as buying a house.

The State Bank of India official handling retail banking said, “It is advisable that borrowers who have had past loans or have had credit cards should check out their credit score with Cibil before scouting for the best loan deal available. If the report has some adverse remarks, the person should try and get the issue resolved with the concerned bank which had reported the adverse credit history.”

According to officials to know about the credit report is very important for people who want to apply for a housing loan. The SBI official added, “Buying a house is often a once-in-a-lifetime purchase. Being denied a loan could be traumatic for the person who has identified the property.”

C S Jain, head of personal banking, IDBI Bank points out that people who might have any past disputes with lender or have some doubt that there might be some adverse remarks from Cibil due to default in repayment must try to gain prior knowledge of their credit history. Jain said, “If a person has a doubt that some past defaults might find a place in the Cibil report, he or she should approach Cibil for the details. However, it might not be required for persons who are sure about their past banking history.”

Cibil has the database of borrowers of 175 lending institutions which include banks, housing finance companies, financial institutions and non-banking finance companies, among others. These lending institutions can access the database which helps them to assess the history of those who have applied for loan, to avoid defaults, frauds and minimize non-performing loans. If there is any adverse remark from Cibil in a person credit report can endanger the chances of getting loans.

Recently Financial Chronicle has reported that, in many such instances it has been noticed that borrowers loan application are rejected by the lenders due to adverse credit report from Cibil showing past defaults or credit card transactions of which the borrowers are not aware.

Cibil’s managing director, Arun Thukral, told FC that borrowers can avail the Cibil window that provides individuals access to their credit history. Thukral said, “We provide the individual the details of their credit history on payment of a nominal fee.”

He said that the credit report provided to the individual will have the exact detail of the transaction on which the default is understood to have happened in the past.

But the credit history that is shared with lenders does not show the names of the institutions with which the individual has been in default. Thukral said, “If there is any dispute over the defaults, the individual can approach us or the bank in question to get the issue sorted out before taking a loan.”

Cibil’s credit information report (CIR) can be obtained by sending an email along with documents such as providing an identity proof, address proof and the requisite fees.

SBI offering loan up to Rs 2 lakh to ex-Servicemen under Jai Jawan Scheme

2010-06-17T04:05:00.000-07:00

The State Bank of India (SBI), largest public sector lender has launched a special loan scheme Jai Jawan Scheme for ex-Servicemen.

B M Sangrolli, president of Dharwad unit of National Ex-Servicemen Co-ordination Committee, in a convention of ex-Servicemen said that ex-Servicemen who have completed 50 year of age can avail loan of up to Rs 2 lakh under Jai Jawan Scheme of SBI.

He also apprised the ex-Servicemen about the various schemes introduced by the central and state governments for them. The convention was attended by more than 300 ex-Servicemen.

Vidya Sahakari bank offers three new loan schemes on its 36th anniversary

2010-06-16T04:59:00.000-07:00

Vidya Sahakari Bank has launched three new loan schemes called ‘Hafta Band Karz Yojana’, ‘Pramanik Karz Yojana’ and ‘Sone Kharidi Karz Yojana’ on the occasion of its 36th anniversary celebration.

According to a bank press release, “It has been observed that the salaried customers face acute financial crisis during the months of October and November because of the increase in expenses on the occasion of Dussehra. So we have come with “Hafta Band Karz Yojana” wherein during such months the respective customers will be given a break from the payment of installments.”

The release added, in ''Pramanik Karz Yojana” bank will give 1% rebate in the interest rate on takeover of the loan for customers who have paid loan installments regularly for three years with previous bank. Under ''Sone Kharidi Karz Yojana” customers will be given loan for purchase of gold. The customer can take loan of any amount but bank will charge 25% margin money without any identity proof or any guarantor, as the gold will be kept as security with the bank itself. The customers will have freedom to sell the gold when the price rises and earn profits. If the customer takes loan of one lakh or less, it can avail early installment scheme.

HDFC re-launches its ‘Loan against Property’ scheme

2010-06-09T03:29:00.000-07:00

The resident Indians who have a property of their own get good opportunity with HDFC bank re-launching its product ‘Loan against Property’ (LAP). People who own property can take loan from bank against their property to meet business requirements, marriage in the family or for emergencies in the form of a medical crisis or any such needs. Under this product customers can leverage their equity in the property without disposing it off.

However the existing home loan customers of HDFC bank can avail 60% of the market value including the present loan outstanding, whereas all other customers are eligible for 50% of the market value of the property. But in both cases, the loan amount is subject to their loan eligibility. In this scheme bank offers attractive interest rates of 11.25% pa for loans up to Rs. 1 crore and 11.00% pa for loans above Rs. 1 crore. The loan tenure period can be set up to 15 years for both residential properties and non-residential properties.

As Renu Sud Karnad, Managing Director, HDFC Ltd. explains, “One may not always be able to plan for a lot of things in life as both, opportunities and emergencies can be unexpected and could be equally important to be ignored. HDFC’s ‘Loan Against Property’ helps customers take advantage of such opportunities or attend to emergencies by making available one of the important ingredients required in both cases, which is funds. If you own a property, it can probably serve as the best possible avenue to generate a decent amount of funds within a short period of time while you continue to comfortably live in the house. Availing a personal loan from a lending institution may also be an option. However the advantage of LAP is that not only is the interest rate lower than a personal loan, but the tenure of the loan is also much longer. This enables a person to take a larger loan as compared to a personal loan where the period is very short which has a huge impact on the cash flow and thus the repaying capacity”.

SBI has hiked short-term corporate loan rates

2010-05-27T00:33:00.000-07:00

The country's largest lender State Bank of India (SBI) has not taken any final decision about continuing its home loan teaser rates but it has hiked short-term corporate loan rates by 0.25-50 basis points.

SBI chairman OP Bhatt, said, “With surplus liquidity gradually disappearing from the system, we have re-priced certain segments of our short-term corporate loans by 0.25-0.50 bps upwards.” He added at present bank has no plans of hiking its deposit rates and agreed that liquidity will remain in the system. SBI said the public sector units will be giving out close to Rs 18,000 crore for 3G auctions.

“We have got requests and demands for that kind of money. At the maximum we will lend Rs 18,000 crore. Having said that, we are still having a surplus liquidity of Rs 26,000,” Bhatt said. On an average there is still a fair amount of liquidity in the system. If you see, the 10-year government security bond is close to 7.40%. There is not much pressure on the liquidity at the moment. It is too early to say if the impact on liquidity will have a temporary or a permanent impact on the liquidity condition,

Meanwhile, Union Bank of India CMD MV Nair said the bank would be giving out Rs 2,000 crore for 3 G auctions. “Liquidity will not be impacted with the money flowing out as we already sitting on adequate liquidity,” he said. Regarding bad loans, Bhatt said in the last few quarters NPAs have decreased and that the worst is over. Talking about recent credit growth numbers, Bhatt agreed there is no improvement in credit growth and it can be due to the drooping season.

He added, “Usually in April there is always a negative growth. So it is too early to say if it is because of the slack season or if there is more to it”.

NHB launches reverse mortgage loan-enabled annuity scheme for senior citizens

2010-05-26T03:08:00.000-07:00

The reverse mortgage loan (RML) scheme has been specially designed to help senior citizens to get finances to meet their expenses without depending on others. National Housing Bank (NHB) has restructured its reverse mortgage loan. With its new reverse mortgage loan – enabled annuity scheme ensures to offer senior citizens assured lifetime payments instead of the earlier cap of 20 years, thus NHB is expecting there will be more takers of the product. With a view to expand its pool of RML facilitators NHB is having talks with banks and insurance companies.

In just first four and half months since the launch of reverse mortgage loan-enabled annuity scheme (RMLeA) scheme NHB has been able to sanction 40 loans estimating to Rs 100 crore. However in the beginning RML received very low response in India, thus NHB believes that new offering is more attractive to borrowers in terms of higher payments and better risk mitigation.

RV Verma, executive director, NHB explained, “Annuity link provides comfort to participants. The original RML format has seen fairly good response. However, senior citizens were apprehensive about the scheme because of the cap on 20 years on payments. We should see a much bigger offtake in the coming days.”

The lenders pointed out that in the original RML scheme has some limitations which includes the cap of 20 years on payments to senior citizens as well as low quantum of payments. Also, higher the interest rate, lower was the payment. To counter this, NHB launched annuity linked plan in which lifetime payment is made even after the completion of the fixed term of 20 years and also promises nearly 1.5 times higher annuity as compared with the earlier one.

The Central Bank of India in collaboration with Star Union Dai-ichi Life Insurance Co. has launched RML annuity scheme. Verma said the talks are being undertaken to bring major banks and insurance players into the scheme.

He also said that NHB is trying to get tax exemption for annuities offered to senior citizens under its RMLeA scheme with the Central Board of Direct Taxes. To provide information about RML in India, NHB has set up counseling centers in various cities including Delhi, Mumbai, Bangalore, Chennai and Hyderabad.

Banks planning to expand loan against gold segment to boost their lending biz

2010-05-13T02:09:00.000-07:00

Giving loan against gold has boosted lending business of banks, thus many banks and non-banking finance companies are planning to expand this business. In the past few months monetization of the yellow metal has increased in the country. Previously loan against gold was limited to south Indian states where NBFCs like Mannapuram General Finance and Muthoot Finance have strong hold and are aggressively expanding their base in this segment.

According to Ajay Mitra, managing director- India, Middle East & Turkey, and World Gold Council, the monetization of yellow metal will open new sector and increase the circulation of roughly 18,000 tones (worth approximately Rs 30 lakh crore at current prices) back into the economy.

Mitra further said, “Acceptance of gold for loans by banks and financial institutions is an important development that will infuse greater confidence in gold as an asset class. With banks entering gold bar business, availability of infrastructure for storage, and with medallions being accepted for securitization purposes, the role of gold is surely bound to change from a commodity to a monetized asset that would encourage consumers to invest more in gold, a time-tested secure and now a monetized asset class.”

The banks like State Bank of India (SBI), Andhra Bank and HDFC Bank have already entered into this segment with big boom.

Up till now the total anticipated market size of loans against gold is marked at Rs 1,20,000 crore in which 50% of market share is of organized sector like banks and financial institutions. And rest of gold is being deposited with NBFCs and small players like money lenders. SBI has a loan portfolio of Rs 300 crore against gold.

Biju Pillai, executive vice-president & business head, gold loans, HDFC Bank, told, “The bank’s portfolio has been growing at over 60% year-on-year for the last two years. With the opportunity being vast, we will continue to look to grow this portfolio. We plan to increase the number of branches offering gold loans from 150 to 600 over the course of next year.”

Pillai said, there is variation in interest rates which lies between 12% and 15.25%, depending on the tenure of the loan and borrowers’ relationship with the bank.

Andhra Bank, a state-owned bank in just eight-month has witness growth in the segment thus it has ambitious plans to offer loans against gold through all its branches within a couple of month.

M Anjaneya Prasad, general manager (Mumbai zone) of Andhra Bank, said, “We have projected the target to achieve Rs 50-crore loan disbursement as against Rs 10 crore in 2009-10.’’ At present gold loan is being provided at 60 branches of the bank

“We are planning to involve all the branches of the bank for the business by June.’’ Generally Andhra Bank gives 75% of value of gold pledged as loan and is planning to have one value per branch for the appraisal of gold while finalizing loans.

Prasad told the customers will have to bore the fee to be charged by the value.

An anonymous senior official of Mannapuram General Finance, the traditional player of the segment said, the company is targeting to achieve a business growth of Rs 4,500 crore under the segment as against Rs 2,550 crore in 2009-10.

The official added, “Thus, we are looking at a business growth of 50-100% under the segment during the current financial year.”

NBFC offer rate of interest between 12% and 21% depending on the value of the gold pledged.

The rate of interest for the NBFC varies between 12% and 21% depending on the value of the gold pleged.

Though the repayment period can be stretched to one year, in most of cases, Mannapuram gets its loans repaid by customers over a period of 100 days, said the official.

Banks witness dip in deposits & loan demand; park funds in mutual fund schemes

2010-05-06T02:08:00.000-07:00

By the end of fortnight on April 23 banks have witnessed reduction in loan demand and deposits. According to RBI's latest data the deposits have dipped by Rs 23,328 crore during the fortnight ending April 23 to Rs 4,506,747 crore. Both demand deposits and term deposits have dipped by Rs 20,834 crore and Rs 2,494 crore, respectively, during the fortnight.

During the fortnight as on April 23 the loans have dipped to 1,437,363 crore from Rs 26,483 crore. On the other hand both food credit- loans given to the government for food procurement and non-food credit- loans to individuals and businesses, have dipped by Rs 170 crore and Rs 26,313 crore, respectively. While investments in government and other approved securities have dipped by Rs 17,169 crore to Rs 1,437,363 crore during the fortnight.

Generally in the beginning of the fiscal banks do not focus much on business as they are busy in previous year’s accounts. The Indian economy is almost back on the track and industry is also reviving, thus banks are expecting loan demand to increase so the focus will be on increasing the deposits to fund the loan demand. DL Rawal, chairman and managing director of Dena Bank, said, this year credit demand will increase as corporates will be taking the loan amount which was sanctioned last year. He told his bank’s loan book is growing by 22% this year.

S Sridhar, CMD of Central Bank of India also said his bank is witnessing strong demand for loans (25%) and added, the bank will be focusing on raising low-cost certificate of deposits to raise resources to meet the growing loan demand.

However RBI in its annual monetary policy statement has given indication about loan growth at 20% for FY11, way above 16.9% loan growth achieved in FY10.

As banks are not seeing any increase in the loan demand banks are parking their funds in mutual funds. Although latest figures are not available but, approximately the banks have collectively parked more than Rs 100,000 crore in various mutual fund schemes.

Muthoot Finance plans to start gold loan biz in UK

2010-05-05T05:34:00.000-07:00

Muthoot Finance has plans to start gold loans business in UK. For this the company has approached banking regulators in the UK, officials of Muthoot Group said.

It is a major non-banking finance player in India having more than 1,700 branches and 60 tonne of gold in its custody. Muthoot Group managing director George Alexander Muthoot informed, “There is a large NRI population in the UK and we see potential in Europe for gold loans even from foreigners. We have opened an office in London and will start operations as soon as we get approval."

The group is offering remittance services in US and Dubai. Recently in Dubai, group has launched a new company, Muthoot Exchange, has been launched to handle the service. He added, "We are handling one lakh units worth Rs 250 crore of remittance annually and expect it to increase substantially with the US operation."

Firm 90% of revenue comes from gold loans, and it is aiming to do business of Rs 14,800 crore from gold loans and Rs 5,100 crore from gold bonds this fiscal. During 2009 fiscal company achieved a recorded growth of 119% through distribution of gold loans. During the fiscal company achieved revenue of Rs 7,401 crore by lending gold and earned Rs 3,102 crore from gold bonds. The firm is planning to open 1,075 new branches this fiscal out of which 575 will be opened in South India and 500 in the North. The group also has interests in financial and commodity broking, IT, power generation, media, healthcare, education, infrastructure, plantations and hospitality.

Banks speed up sanctioning of loans, companies picking up cautiously

2010-05-05T05:24:00.000-07:00

Although banks have speed up sanctioning of loans but they are crying out as companies are not picking up even half the money. According to SS Ranjan, deputy managing director and CFO, State Bank of India, the nation’s largest lender, “Our sanctions grew by around Rs 60,000 crores in the last financial year. Of that undisbursed loans stand at about Rs 45,000 crores.” Thus bank has not started getting interest on three-fourths of the loans it had sanctioned last year.

Suresh Ganapathy, head of Macquarie Securities Group’s financial research team said, “Corporates are very cautious about capacity expansion due to which there is a lag in sanctions and disbursements.”

Bank of India is facing the similar problem, it had sanctioned loan of around Rs 48,000 crore by the end of March 31 this year.

M Narendra, executive director of India’s No. 4 lender said, “Our undisbursed sanctions are about Rs 25,000 crore. Projects are taking time to get implemented.” “We charged an average interest of 10% on what we disbursed.”

Even the private sector and smaller banks are facing the same problem.

Jaideep Iyer, president, financial management at Yes Bank informed that in the last financial year bank had sanctioned Rs 22,000 crore, which was 73% more than in fiscal 2009, but from this two-third or around Rs 15,000 crore, is still undisbursed.

Since in the last fiscal the credit growth was slow, net interest income (the difference between interests earned and interest paid) of banks had slowed down, informed Vaibhav Agrawal, vice-president-research, Angel Broking.

Last year loans sanctioned by banks, around third were for infrastructure projects, stated Indranil Sen Gupta and Dick Li, analysts with Bank of America-Merrill Lynch, in a report on March 25. For this year, they predict 35% rise in infrastructure loans. According to RBI data there has been growth of 42.3% in infrastructure loans between April 1, 2009, and February 26, 2010.

N Sivaraman, executive vice president (financial services), Larsen & Toubro pointed out, “In the first 12 months post sanction, only 20% to 30% of a loan gets disbursed because projects get caught up in various approvals. Usually a major part of disbursements happen after 18 to 30 months of sanction.”

According to E Sudhir Reddy, chairman & managing director, IVRCL Infrastructures & Projects, one of India’s biggest road builders it’s the nature of the beast. “If you take up NHAI (National Highways Authority of India) projects, they take a lot of time (to execute),” he explained.

Reddy quickly adds that it’s not because of poor execution. “Project executions have been fine,” he said.

At present IVRCL is working on three development projects, three road projects and one desalination plant.

Pradeep Singh, vice-chairman and managing director, IDFC Projects, another lender, have the same view. “There is usually a time lag and because there has been a significant increase in sanctions the gap is more pronounced this time,” Singh said.

IDFC Projects is currently developing a 1050 mw power project in Chhattisgarh, Madhya Pradesh.

According to some in the last quarter of last fiscal the banks speed up sanctioning of loans is a clear attempt to bulk up their loan book - called ‘window-dressing’.

“Most banks were showing loan growth of around 16%. But to ratchet this up, they went on a sanctions binge in the last quarter of the last fiscal. Not all of these were disbursed by the time the year ended,” said Abizer Diwanji, executive director and head of financial services at KPMG, the audit firm.

“Credit growth will gather pace primarily driven by infrastructure this year too,” Diwanji said.

As Indian economy is expected to grow at around 8%, therefore Reserve Bank of India has predicted a growth of around 20% in loans by the end of the current fiscal on March 31, 2011.

On the other hand analysts are expecting rise in non-infrastructure loan after September.

“Retail loans are already leading the turnaround in credit demand in a repeat of 2003-05. Anecdotes suggest the urban consumer is returning to borrow - especially, for housing - as confidence improves with better job prospects,” Sen Gupta and Li said in another note last week.

“We expect corporate loan demand to pick up in second half. Industrial credit had shown a lag even in the last upturn. Most banks have already reported an increase in loan sanctions. These should translate into higher disbursals as corporates gain better growth visibility,” they said.

Loan tenure and EMI are linked to each other

2010-03-10T03:07:00.000-08:00

In a loan EMI and tenure of loan are linked to each other. The EMI and tenure of loan should be decided very carefully calculating all you’re spending, and any other costs which can add to your expenditure in the future.

The loan amount is sanctioned for a particular duration that is known as tenure of a loan. A loan sanctioned for a period of 3-4 years is known as short tenure loan. If a loan is sanctioned for 15-years it is known as long tenure loan.

The outflow of EMI will be in accordance to loan tenure. If a loan of Rs 10 lakh is sanctioned at a 10 per cent rate of interest then for tenure of four years, the EMI outflow will be Rs 25,300.

In case of longer tenure of 20 years, the EMI outflow will be around Rs 9,600. If it is difficult for a borrower to make high EMI repayments, then he should increase the loan tenure. The longer the loan tenure the EMI repayment amount will be less.

But the interest rate of the loan will be low in case of short tenure loans.

In case you have any other source of income or expect to add to your income in few months then it is better to opt for a short tenure loan. Because if considering your present income you decide for long tenure loans and later on your income increases and want to pay back your EMIs faster then bank will charge prepayment penalties for this.

In case your retirement is near then go for short tenure loan. After retirement there will not be a regular income due to which you can face difficulty in repaying the loan.

If you have just taken up a job then you can take a long tenure loan but you will not be able to change a job easily.

Generally a borrower opts for longer tenure if he has taken a huge loan amount and this is better option, otherwise repayment of EMI will be huge which is difficult to manage.

Loans against FDs may lose sheen after the proposed Base Rate scheme

2010-02-26T03:07:00.000-08:00

From April 1, banks will decide their actual lending rates on loans and advances on the bases of Base Rate system. Thus bankers are saying after the proposed Base Rate scheme comes into effect the loans against fixed deposits (FDs) are going to lose sheen.

At present commercial banks are giving loans against FDs at 1% over the FD rate which means if a depositor he/she is investing money for two-year time period (at 6.5 per cent interest) with a bank, then he/she can get loan up to 90% of the deposit amount at 7.5 per cent.

According to bankers from April 1, as per regulator’s draft circular the fresh loans cannot be given below Base Rate, which can range from 8to 9.5 per cent, in turn increasing the rates on loans against FDs.

A senior public sector bank official pointed out, “People generally avail themselves of loans against FDs in case of an emergency. The advantage of such loans is that even as they meet urgent funds requirement, the collateral (i.e., FDs) continues to earn interest. Therefore, there is always demand for such loans. We hope the RBI makes an exception for such loans”.

On February 10 RBI had issued the draft circular that Base Rate system will replace the existing benchmark prime lending rate system, in order to make credit pricing more transparent.

The base rate will include, cost of deposits, overhead costs, and adjustment for negative carry on cash reserve ratio and statutory liquidity ratio.

Besides loans against FDs, RBI in the circular has not given any clear specification on loans given by banks to their staff. The banker said, “Some banks grant interest-free/concessional loans as part of staff welfare. The RBI circular is silent on whether such loans will also have to be moved to the Base Rate regime.”

Commenting on the flaws in the methodology for computation of base rate, a senior banker said, “One of the main inputs for the computation is the cost of funds. One of the features of cost of funds is the average residual tenor of all the liabilities. Thus, if the residual tenor for any bank is higher, then, there is the likelihood of cost of funds being more.”

As the base rate is not tenor specific therefore, the average remaining tenor of deposits can be around two years.

Thus, rate calculated for a tenor of around two years might not be applicable for loans below that period, say one year.

The banker pointed out, thus it was necessary to lend below the BPLR, which can adjust for the negative tenor.

Vehicles purchased on loan can be sold without defaulters consent

2010-02-23T03:35:00.000-08:00

The National Consumer Disputes Redressal in its ruling said the finance company can sell off the vehicles purchased on hire-purchase schemes with out taking consent from loan defaulters, to recover the price amount.

The commission gave the ruling in view of a petition filed by a Tamil Nadu resident who had alleged that her vehicle’s financing firm had sold off her vehicle without issuing any notice.

The Commission, comprising Justices R C Jain and Anupam Dasgupta, said, "The complainant has not been able to demonstrate to us what prejudice was caused to her by the finance company on account of the latter selling the vehicle without issuing any notice to her, when she had failed to remit the due installments of the loan for several months."

Complainant Parameswari had filed the case before Commission, challenging Tamil Nadu State Consumer Commission order of dismissal of her complaint relating to deficiency of service by the Tata Finance Limited in 2005.

The Commission stated that Chennai-based Tata Finance Limited took this step in accordance to the terms of the Hire Purchase Agreement.

It added the finance company had the right to sell the vehicle without taking complainants consent as the vehicle was still in the firm’s name and was done to recover the loan amount when Parameswari failed to pay the installments.

The finance company sold the vehicle to a third party as Parameswari had purchased it under the agreement on loan and failed to remit the installments of the loan amount.

Senior citizens want reverse mortgage loans to become more attractive

2010-02-19T03:12:00.000-08:00

India senior citizens are gradually looking at reverse mortgage loan scheme for their financial needs. But according to some senior citizen banks are not offering good value of their property.

One of the senior citizen, retired professor M.R. Santhanam (74) a year ago had decided to avail a reverse mortgage loan but with held his decision. He said, “The loan offered by the bank was low. My house is worth Rs.1 crore. But they offered 15 per cent of the value as the reverse mortgage loan. This is far below my expectation.”

He added, “I do find reverse mortgage fairly attractive. But I am looking forward to some more favorable terms”.

There are some banks that are offering mortgage loan up to 20 per cent of the value of the house. Another citizen V. Kannan said, “Increase in the loan component will attract more people like me.”

Bank officials said some of the senior citizens choose to mortgage their property at a higher rate of interest when they are not able to get the required loan amount under the reverse mortgage scheme. They said in some of the aspects further modification is required such as the age difference of the couple that seek the loan.

Most of the banks which are offering the reverse mortgage loan have reported decline in the number of reverse mortgage loans disburse in the past one year. A public sector bank official said, last year in the city, reverse mortgage loans were given to only seven senior citizens.

C.A. Jaya Senan (81), who applied for a reverse mortgage loan last year, did not get it. “This is a good scheme. But officials of a bank did not give me an answer. I was not able to get the loan.”

K. Krishnan, another customer who could not avail the loan said, “Banks officials show reluctance to speak to us.”

Bank officials stated many senior citizens who want to take reverse mortgage loans do not understand that the scheme has been introduced as a social security measure and to help people in need. An official of a public sector bank pointed out that many people want to take reverse mortgage to rebuild their old house. The official added, many senior citizens did not fulfill conditions such as self-acquired property, self-occupied and a registered will in favor of the bank.

According to State Bank of India officials, the bank has been encouraging reverse mortgage loans to help senior citizens.

In Chennai, in the current fiscal loan of Rs.5.83 crore has been sanctioned to only 59 borrowers. Since the launch of the scheme in Chennai bank has sanctioned 509 reverse mortgage loans amounting to Rs.50.31 crore.

The main aim of the scheme is to help senior citizens who normally invest their bulk of savings in a house or property. The loan helps them raise money without selling or vacating their house during their lifetime.

The ways are being searched to make reverse mortgage loan more appealing. Insurance companies and banks are having talks to offer an annuity cover with reverse mortgage.

Recently one of the insurance companies has tied up with Central Bank of India and is having discussions with other banks and housing finance companies.

Mr. Santhanam said, “We have waited for a year. We are waiting for things to get more attractive.”