In the coming Budget UPA is likely to give a new look to the consumption loans for the farming community, as part of a intensive bid to give a fresh direction to farm credit, against the conditions in which several hundred farmers did suicide which has rattled the government politically. The slab for such loans can be moved up much higher than Rs 50,000.
More troublesome are the virtually-static figures of farmers who have taken loans from the formal credit system during the year. In the year 2005-06 the actual achievement was at Rs 1.80 lakh crore where as the farm credit target for 2006-07, stood low at Rs 1.75 lakh crore. Though, a high credit level of Rs 2.03 lakh crore was achieved in 2006-07.
In 2007-08, the achievement up to October was Rs 1.20 lakh crore as against a target of Rs 2.25 lakh crore. In the year 2006-07 the number of farmers who took loan were around 84 lakh farmers as compared to only 79 lakh in 2005-06. Whereas, compared to mid-January this year, the level has gone much lower than during the same time in 2006-07. According to highly-placed officials sources this can be credited to several payment defaulting farmers, increasing the ranks of those ineligible for fresh loans.
“Cooperative banks have given out more in terms of quantum of loan amount but to far fewer farmers, and they are key institutions of farm loans in rural areas,” they emphasized. “Farmers are the only community that do not get special terms for consumption credit,” sources maintained, adding, “There is urgent need to make a distinction between investment credit and consumption credit for the farmer. Credit over Rs 2 lakh is by and large investment credit. We have to resolve this definitely now.”
In principle, farmers are eligible for consumption loans like every other section of the society. In reality though, banks have shown a well-established disinclination towards relaxing of collateral and margins similar to crop loan terms even for smaller loans aimed at consumption needs.
Budget is likely to have suggestion for softer terms and conditions for smaller investment loans in the farm sector such those needed for pumpsets etc. Radically, the government is doubtful to consider demands from farm lobbies for an interest rate cut to 4% this year, particularly in the face of the Rs 60,000-crore farm relief package which is planned for farmers in interest payment waivers and NPA writeoffs. It is understood that in its place, the overall focus is going to be on getting more farmers into the formal credit network.
In 2007-08, banks have been advised to relax margins/collateral security/third party guarantee requirements from farmers for loans up to Rs 50,000. A 2% financial assistance on interest was also be given for loans up to Rs 3 lakh but those measures did not worked well enough on the ground. Currently, crop loans — officially, at least — charge a 7% interest rate and some states even underwrite this further, bringing down interest rate to 6%.
Less than 40% of the country’s farmers are able to get access to formal credit institutions. According to NSSO out of those that do get, a substantial third of the all farm credit in rural India are short term loans of which most of these are taken by small and marginal farmers for personal reasons.
Wednesday, January 30, 2008
Thursday, January 24, 2008
Punjab govt plans to float a state loan of Rs. 456.101 crore
The Punjab Government abreast with the Reserve Bank of India in order to raise part of the borrowings through auction system has planned to float a state loan of Rs. 456.101 crore.
A spokesman of the government on Tuesday unveiled this. He said that the consent of the Central Government has been obtained to the floatation of this loan required under Article 293 (3) of the constitution of India.
The stocks will be of 10 years tenure and the tenure of the stock would start on January 25, 2008. He added the loan would be repaid at par on January 25, 2018. However, the interest would be paid every half yearly on July 25 and January 25.
A spokesman of the government on Tuesday unveiled this. He said that the consent of the Central Government has been obtained to the floatation of this loan required under Article 293 (3) of the constitution of India.
The stocks will be of 10 years tenure and the tenure of the stock would start on January 25, 2008. He added the loan would be repaid at par on January 25, 2018. However, the interest would be paid every half yearly on July 25 and January 25.
Banks taking demand loan from RBI coincides with Rel Power IPO
Banks took demand loans from the Reserve Bank of India for the week ended January 18. This move of the banks has corresponded with the opening of the Rel Power IPO.
According to sources, this happens very rarely as most of the requirements of the banks are first met through call market borrowings and after that if there is any requirement then through the repo window of RBI . Under the repo, banks borrow funds from RBI by guaranteeing government securities.
CALL FOR LOAN
· Under the repo, banks borrow funds from RBI by pledging government securities. Thereafter in cases of extreme crisis or need for funds, the route for demand loans is sought, which is usually at a higher rate compared to the repo rate of 7.75 per cent
· Call rate is the interest rate for lending and borrowing of funds by the banks for daily fund requirements
· Since the week coincides with the opening of the IPO of Reliance Power with an issue size of around Rs 12,000 crore, it is believed that most of the banks have borrowed in excess for on-lending to retail and institutional investors to participate in the IPO
Then in case of extreme crisis or need for funds, the route for demand loans is searched, usually in which the rate is high as compared to the repo rate of 7.75 per cent .
Call rate is defined as the interest rate for lending and borrowing of funds by the banks for daily fund requirements.
Sources keeping a close eye on the developments said that the borrowings made by 15-odd banks through the demand loan route has observed an increase of Rs 4128 crore week over week. Sources said mostly the balance remains smooth at around Rs 100-150 crore.
Since the week has coincided with the opening of the initial public offer of Reliance Power with an issue size of around Rs 12,000 crore , it is being thought that most of the banks have borrowed in excess for on-lending to retail as well as institutional investors to participate in the IPO.
Under section 17 of the RBI act there is a provision for the borrowing as demand loans from RBI.
However IPO has resulted in a temporary and artificial shortage of funds in the market which is keeping the interest rates rather high at 7.5/8 per cent. Dealers are of view that the call rates will ease from Thursday onwards when the refunds start coming in.
Also, last week the call rates had gone up to a high of 60 per cent when real time gross settlement got swamped with settlement orders and the system stopped settlements for an hour.
As per market sources, the settlement needs to be done for each market — call, government securities and foreign exchange — more than once in order to avoid such delays.
Besides this the functioning of the RTGS have major effect on monetary policy as any delay in payment and clearing sends confusing signals to the market.
According to sources, this happens very rarely as most of the requirements of the banks are first met through call market borrowings and after that if there is any requirement then through the repo window of RBI . Under the repo, banks borrow funds from RBI by guaranteeing government securities.
CALL FOR LOAN
· Under the repo, banks borrow funds from RBI by pledging government securities. Thereafter in cases of extreme crisis or need for funds, the route for demand loans is sought, which is usually at a higher rate compared to the repo rate of 7.75 per cent
· Call rate is the interest rate for lending and borrowing of funds by the banks for daily fund requirements
· Since the week coincides with the opening of the IPO of Reliance Power with an issue size of around Rs 12,000 crore, it is believed that most of the banks have borrowed in excess for on-lending to retail and institutional investors to participate in the IPO
Then in case of extreme crisis or need for funds, the route for demand loans is searched, usually in which the rate is high as compared to the repo rate of 7.75 per cent .
Call rate is defined as the interest rate for lending and borrowing of funds by the banks for daily fund requirements.
Sources keeping a close eye on the developments said that the borrowings made by 15-odd banks through the demand loan route has observed an increase of Rs 4128 crore week over week. Sources said mostly the balance remains smooth at around Rs 100-150 crore.
Since the week has coincided with the opening of the initial public offer of Reliance Power with an issue size of around Rs 12,000 crore , it is being thought that most of the banks have borrowed in excess for on-lending to retail as well as institutional investors to participate in the IPO.
Under section 17 of the RBI act there is a provision for the borrowing as demand loans from RBI.
However IPO has resulted in a temporary and artificial shortage of funds in the market which is keeping the interest rates rather high at 7.5/8 per cent. Dealers are of view that the call rates will ease from Thursday onwards when the refunds start coming in.
Also, last week the call rates had gone up to a high of 60 per cent when real time gross settlement got swamped with settlement orders and the system stopped settlements for an hour.
As per market sources, the settlement needs to be done for each market — call, government securities and foreign exchange — more than once in order to avoid such delays.
Besides this the functioning of the RTGS have major effect on monetary policy as any delay in payment and clearing sends confusing signals to the market.
Wednesday, January 23, 2008
Proposal for waiver of unpaid loans in the coming budget
According to the sources in Agriculture Ministry the Union government has plans to release a debt relief package for farmers.
Under the scheme government is thinking of waiving off the unpaid loans of the small and marginal farmers and to give a big relief for the big farmers over four years.
Approximately 30 million farmers had left the institutional credit system as they were unable to pay back dues.
On Monday, a discussion was held between Union Agriculture Minister Sharad Pawar and Finance Minister P. Chidambaram in which they agreed on the broad contours of the policy, which would be finalized at the Prime Minister’s level.
“We had a meeting. We discussed the package. It involves a huge investment but in principle we have agreed. Now we will meet the Prime Minister,” Mr. Pawar told The Hindu here.
At the Prime Minister’s level the decision on raising of funds will be taken. The funds needed should be taken by levying a “farmers’ rehabilitation cess or surcharge” or through a budgetary provision by diverting resources. The total amount for over four years is expected to be about Rs. 70,000 crore.
The Agriculture Ministry has planned imposition of a one per cent cess on direct taxes and two per cent on indirect taxes. This is expected to capitulate about Rs. 8,500 crore per annum.
There is also a proposal of setting up of a credit risk fund, called the National Agriculture Stabilization Fund, to cover the risk of future default due to reasons beyond the farmers’ control.
Under the package to be announced in the budget proposals, the Ministry have plans of giving big relief to the small and marginal farmers owning land up to two hectares, by waiving off the entire over dues, an outgo of about Rs. 25,000 crore.
Around seventy per cent of the farmers come under this category who had availed themselves of loans.
For the rest of the farmers, there will be separate one-time settlement (OTS) scheme. It will be shared among the government, farmers and banks over four years. The farmers who have been given debt relief will be eligible for fresh credit.
The total overdue in the case of direct agriculture advances has been estimated to be of Rs. 91,200 crore.
From this, the Non-Performing Assets have been estimated at Rs. 31,200 crore, the overdue above one year at about Rs. 30,000 crore and the less-than-one-year overdue at Rs. 30,000 crore.
The Ministry is also planning to give a three percent interest grant to those who are paying back their loans regularly, such as bringing down the rate of interest from seven to four per cent.
This will be done with the recommendation of the National Commission on Farmers.
Under the scheme government is thinking of waiving off the unpaid loans of the small and marginal farmers and to give a big relief for the big farmers over four years.
Approximately 30 million farmers had left the institutional credit system as they were unable to pay back dues.
On Monday, a discussion was held between Union Agriculture Minister Sharad Pawar and Finance Minister P. Chidambaram in which they agreed on the broad contours of the policy, which would be finalized at the Prime Minister’s level.
“We had a meeting. We discussed the package. It involves a huge investment but in principle we have agreed. Now we will meet the Prime Minister,” Mr. Pawar told The Hindu here.
At the Prime Minister’s level the decision on raising of funds will be taken. The funds needed should be taken by levying a “farmers’ rehabilitation cess or surcharge” or through a budgetary provision by diverting resources. The total amount for over four years is expected to be about Rs. 70,000 crore.
The Agriculture Ministry has planned imposition of a one per cent cess on direct taxes and two per cent on indirect taxes. This is expected to capitulate about Rs. 8,500 crore per annum.
There is also a proposal of setting up of a credit risk fund, called the National Agriculture Stabilization Fund, to cover the risk of future default due to reasons beyond the farmers’ control.
Under the package to be announced in the budget proposals, the Ministry have plans of giving big relief to the small and marginal farmers owning land up to two hectares, by waiving off the entire over dues, an outgo of about Rs. 25,000 crore.
Around seventy per cent of the farmers come under this category who had availed themselves of loans.
For the rest of the farmers, there will be separate one-time settlement (OTS) scheme. It will be shared among the government, farmers and banks over four years. The farmers who have been given debt relief will be eligible for fresh credit.
The total overdue in the case of direct agriculture advances has been estimated to be of Rs. 91,200 crore.
From this, the Non-Performing Assets have been estimated at Rs. 31,200 crore, the overdue above one year at about Rs. 30,000 crore and the less-than-one-year overdue at Rs. 30,000 crore.
The Ministry is also planning to give a three percent interest grant to those who are paying back their loans regularly, such as bringing down the rate of interest from seven to four per cent.
This will be done with the recommendation of the National Commission on Farmers.
Tuesday, January 22, 2008
SBoP organized campaign to help farmers
State Bank of Patiala (SBoP) had launched a scheme “SME Bonanza Campaign” for small and medium entrepreneurs for sanction of fresh loans. The bank scheme worked out successfully. Following this bank organized “SME Customer meets” at various intensive centers throughout the country.
An official statement released from the SBoP headquarters in Patiala on Saturday stated as part of the campaign, the Bank organized a customer meet at Chandigarh to identify prospective customers.
The industrialists from the Industrial estate of Mohali attended the meet. The Bank main aim was to target fresh SME business of Rs.700 crore during the campaign, which has already obtained applications aggregating Rs.450 crore since January 1, this year.
The meet was presided over by the SBoP General Manager (Planning and Development), Sebastian Chacko, Deputy General Manager (Development Banking) from the bank’s Head Office, Ranjit Datta and Deputy General Manager (Chandigarh Zone), C.S. Kang.
At the same time the Bank launched a powerful campaign for financing the agriculture sector in Punjab. At Sudhar village in Ludhiana district on Saturday, it organized a farmers’ meet.
Around 600 farmers attended the meet where the SBoP officials made a presentation on the bouquet of products developed exclusively to meet the needs of the Punjab farmers.
These included finance proposals related new ventures like commercial dairy, horticulture and net house farming.
An official statement released from the SBoP headquarters in Patiala on Saturday stated as part of the campaign, the Bank organized a customer meet at Chandigarh to identify prospective customers.
The industrialists from the Industrial estate of Mohali attended the meet. The Bank main aim was to target fresh SME business of Rs.700 crore during the campaign, which has already obtained applications aggregating Rs.450 crore since January 1, this year.
The meet was presided over by the SBoP General Manager (Planning and Development), Sebastian Chacko, Deputy General Manager (Development Banking) from the bank’s Head Office, Ranjit Datta and Deputy General Manager (Chandigarh Zone), C.S. Kang.
At the same time the Bank launched a powerful campaign for financing the agriculture sector in Punjab. At Sudhar village in Ludhiana district on Saturday, it organized a farmers’ meet.
Around 600 farmers attended the meet where the SBoP officials made a presentation on the bouquet of products developed exclusively to meet the needs of the Punjab farmers.
These included finance proposals related new ventures like commercial dairy, horticulture and net house farming.
Friday, January 18, 2008
Government clears gamut of social sector packages seeing polls
Keeping in mind the up coming polls the government is trying to make a strong ground for itself. Working on this line the government on Thursday cleared a range of social sector packages. For the distressed farmers of the 31 debt-ridden districts of suicide-prone Maharashtra, Andhra Pradesh, Karnataka and Kerala CCEA announced a fresh package of Rs 530 crore. The package is intended at helping farmers whose loans were overdue in July 2006.
The questions are being raised within the government on the way the package is being handled as many believe that it is the loans from moneylenders which are the prime driving force. In addition to this the experts believe that it takes three years for the banks to waive the interest and the principal in case of drought affected areas which puts pressure on farmers.
The CCEA also approved embellishing the coverage of the Kasturba Gandhi Balika Vidyalaya scheme. The rural blocks having below 30% female literacy will qualify to be treated as educationally backward, while 94 out of the 338 towns and cities having minority population and literacy rate under the 54% national average would have access to additional residential schools for girls. While the loan package was a result of Prime Minister Manmohan Singh's package for the suicide prone areas, the scheme for the physically challenged was announced by finance minister P Chidambaram in the last budget.
But UPA which had planned to announce the packeages ahead of the Gujarat elections may find itself in a slightly tough position in the weeks ahead. “The government was hoping to announce elections after the Gujarat elections which have now disappeared after the setback engineered by Narendra Modi. The finance minister may just fall short of schemes to announce in the budget,” said an official.
Therefore, finance ministry officials said, government may end up allocating more funds for already-operational flagship schemes and projects like the agriculture mission. “Some schemes may see allocation double. Besides, the government does not have to worry about how much the ministries can spend,” an official said.
The questions are being raised within the government on the way the package is being handled as many believe that it is the loans from moneylenders which are the prime driving force. In addition to this the experts believe that it takes three years for the banks to waive the interest and the principal in case of drought affected areas which puts pressure on farmers.
The CCEA also approved embellishing the coverage of the Kasturba Gandhi Balika Vidyalaya scheme. The rural blocks having below 30% female literacy will qualify to be treated as educationally backward, while 94 out of the 338 towns and cities having minority population and literacy rate under the 54% national average would have access to additional residential schools for girls. While the loan package was a result of Prime Minister Manmohan Singh's package for the suicide prone areas, the scheme for the physically challenged was announced by finance minister P Chidambaram in the last budget.
But UPA which had planned to announce the packeages ahead of the Gujarat elections may find itself in a slightly tough position in the weeks ahead. “The government was hoping to announce elections after the Gujarat elections which have now disappeared after the setback engineered by Narendra Modi. The finance minister may just fall short of schemes to announce in the budget,” said an official.
Therefore, finance ministry officials said, government may end up allocating more funds for already-operational flagship schemes and projects like the agriculture mission. “Some schemes may see allocation double. Besides, the government does not have to worry about how much the ministries can spend,” an official said.
Wednesday, January 16, 2008
Decline in the number of farmers taking loan
In spite of increasing loan payment in the last three financial years, the number of farmers who have been financed by banks has declined considerably.
During the last three years - 2004-05, 2005-06 and 2006-07 the number of farmers financed was 41.3 million, 38.5 million and 39.7 million respectively.
Though, the loan payments to farmers have increased by 44 per cent to Rs 1,25,309 crore in 2004-05, by 44 per cent to Rs 1,80,486 crore in 2005-06 and by 13 per cent to Rs 2,03,297 crore in 2006-07. In April-October of 2007-08 loan disbursements stopped at Rs 1,20,062 crore.
On seeing such figures the National Bank for Agriculture and Rural Development (NABARD) have decided to conduct a study at the ground level to examine this mismatch with the help of expert bodies such as Gokhale Institute of Politics and Economics, Xavier’s Institute of Development Action and Studies and Indian Institute of Bank Management. Official sources said once the study is completed, the reasons for the mismatch between the number of accounts financed and credit disbursed will be clear.
The number of farmers financed declined sharply in the case of cooperative banks. Due to inherent weakness of the cooperative credit structure loans financed by cooperative banks have declined from 22.5 million in 2004-05 to 19.3 million in 2005-06 and further to 18.9 million in 2006-07
According to officials the main reasons for the reduction in the number of accounts is accredited to the multi-purpose Kisan Credit Card (KCC).
KCC is a combined loan facility, which includes components for production, consumption and investment purposes. As one KCC account effectively covers three accounts, this has also led to a decrease in the number of accounts financed.
Likewise, loans issued during the kharif and rabi seasons were treated as two separate loan accounts previously. Official stated with the introduction of KCC, the same are now treated as a single account.
Officials added more stress on providing finance to the rural poor under a group mechanism such as a self help group, presently a ‘Group Account’, effectively covers a number of farmers, thereby affecting the growth in the number of accounts financed.
During the last three years - 2004-05, 2005-06 and 2006-07 the number of farmers financed was 41.3 million, 38.5 million and 39.7 million respectively.
Though, the loan payments to farmers have increased by 44 per cent to Rs 1,25,309 crore in 2004-05, by 44 per cent to Rs 1,80,486 crore in 2005-06 and by 13 per cent to Rs 2,03,297 crore in 2006-07. In April-October of 2007-08 loan disbursements stopped at Rs 1,20,062 crore.
On seeing such figures the National Bank for Agriculture and Rural Development (NABARD) have decided to conduct a study at the ground level to examine this mismatch with the help of expert bodies such as Gokhale Institute of Politics and Economics, Xavier’s Institute of Development Action and Studies and Indian Institute of Bank Management. Official sources said once the study is completed, the reasons for the mismatch between the number of accounts financed and credit disbursed will be clear.
The number of farmers financed declined sharply in the case of cooperative banks. Due to inherent weakness of the cooperative credit structure loans financed by cooperative banks have declined from 22.5 million in 2004-05 to 19.3 million in 2005-06 and further to 18.9 million in 2006-07
According to officials the main reasons for the reduction in the number of accounts is accredited to the multi-purpose Kisan Credit Card (KCC).
KCC is a combined loan facility, which includes components for production, consumption and investment purposes. As one KCC account effectively covers three accounts, this has also led to a decrease in the number of accounts financed.
Likewise, loans issued during the kharif and rabi seasons were treated as two separate loan accounts previously. Official stated with the introduction of KCC, the same are now treated as a single account.
Officials added more stress on providing finance to the rural poor under a group mechanism such as a self help group, presently a ‘Group Account’, effectively covers a number of farmers, thereby affecting the growth in the number of accounts financed.
Monday, January 14, 2008
IIBI gets approval to sell its loan portfolio
Industrial Investment Bank of India (IIBI) is winding up its business in the move towards this the board members of the IIBI has decided to sell the entire loan book at one go.
The directors on the IIBI board have cleared the proposal to auction both the good and the bad assets of IIBI for cash in the past week. The company also took a decision of appointing Deloitte & Touche for selling the loan book.
When press person contacted, chairman of Allahabad Bank, AC Mahajan, who is holding concurrent charge of IIBI, he refused to comment. According to sources IIBI loan is having a loan of about Rs 1,000 crore and this includes both — standard and sub-standard assets. Sources stated that auction would be in line with CVC guidelines.
IIBI is government-owned bank; it started working towards winding its business way back in 2005 after the Industrial Development Bank of India rejected a government proposal to merge the Kolkata-based institution with itself.
From couple of years IIBI has stopped giving additional loans to corporates. Moreover, IIBI has already started reducing its staff, giving them a choice of joining other public sector banks. Earlier in this month, IIBI withdrew its membership from the corporate debt restructuring (CDR) forum — where lenders get together to resolve sticky assets.
The reason why the government chose to close IIBI is the high level of bad loans and poor capital. According to RBI data, IIBI’s capital adequacy ratio (CAR) was negative at 64%, while its bad loans stood at 13% for March 2006. It had a loan book of Rs 1,006 crore with Rs 874 crore of standard assets. As on March 2006 the balance Rs 132 crore was sub-standard and doubtful assets. Though details for 2007 are not available, RBI has given the indication that IIBI is in the process of voluntary winding up.
High level of bad loans in IIBI books has originated from its original avatar as an asset reconstruction company. Previous to being converted as a full-fledged financial institution as IIBI, it was in the business of acquiring and restructuring bad loan as the Industrial Reconstruction Bank of India.
The directors on the IIBI board have cleared the proposal to auction both the good and the bad assets of IIBI for cash in the past week. The company also took a decision of appointing Deloitte & Touche for selling the loan book.
When press person contacted, chairman of Allahabad Bank, AC Mahajan, who is holding concurrent charge of IIBI, he refused to comment. According to sources IIBI loan is having a loan of about Rs 1,000 crore and this includes both — standard and sub-standard assets. Sources stated that auction would be in line with CVC guidelines.
IIBI is government-owned bank; it started working towards winding its business way back in 2005 after the Industrial Development Bank of India rejected a government proposal to merge the Kolkata-based institution with itself.
From couple of years IIBI has stopped giving additional loans to corporates. Moreover, IIBI has already started reducing its staff, giving them a choice of joining other public sector banks. Earlier in this month, IIBI withdrew its membership from the corporate debt restructuring (CDR) forum — where lenders get together to resolve sticky assets.
The reason why the government chose to close IIBI is the high level of bad loans and poor capital. According to RBI data, IIBI’s capital adequacy ratio (CAR) was negative at 64%, while its bad loans stood at 13% for March 2006. It had a loan book of Rs 1,006 crore with Rs 874 crore of standard assets. As on March 2006 the balance Rs 132 crore was sub-standard and doubtful assets. Though details for 2007 are not available, RBI has given the indication that IIBI is in the process of voluntary winding up.
High level of bad loans in IIBI books has originated from its original avatar as an asset reconstruction company. Previous to being converted as a full-fledged financial institution as IIBI, it was in the business of acquiring and restructuring bad loan as the Industrial Reconstruction Bank of India.
Thursday, January 10, 2008
Study points out further decline in the real estate market
According to a research analysis the $15 billion real estate market which witnessed a sales drop of 60 per cent in the metros, might worsen further if reversal in rising interest rates for housing is not tackled urgently.
A study was conducted by industry body Assocham on 'Impact of Rising Home Loan Rates'. According to the study the housing sector which has declined considerably to 26.6 per cent in 2006-07, in the current fiscal year it might slow down further to touch between 17 to 20 per cent due to rising home loans.
The study stated that major expansion drive in tier II and tier III and even tier IV cities, for providing housing units to neglected lot of society, would generate the growth of this sector between 40-45 per cent this year, but it will slow down in metros and large cities by 2010.
''Since no suitable corrective measures to contain the interest rates, particularly on housing segment have been effected, nearly 60 per cent of home aspirants are staying away from the pre-launch sales,'' Chamber's President Venugopal N Dhoot said in a statement.
The study said usually the builders depend on the advance amount received by way of pre-launch bookings, which is collected well before the starting of construction work, as the loans are becoming costlier so the buyers are not keen to expose themselves to an extended time period.
Regarding the differential between EMIs, prevailing at 7 per cent and 12 per cent, the study stated that the change in EMI for housing loan of Rs 10 lakh comes out to be Rs 3250 and this puts an additional burden of Rs 39,000 per annum on end-users.
Similarly, on a housing loan of Rs 30 lakh, EMI differential works out to be Rs 9770 which adds to a fiscal burden of Rs 1,17,240 per annum. On 50 lakh housing loans, the EMI change is estimated at Rs 16,290 putting an annual burden of Rs 1,95,480 on those who have taken housing loans in this sector.
According to the study the speculators play a significant positive and negative role in pushing the prices of property by more than 20 per cent and some times rise in interest rates give opportunity to the speculators to dictate the prices.
As per Chamber's research, the recent boom in property market along with low interest rate regime had served as a breeding ground for speculators. And the speculators consists of a whole range of players such as small property brokers, big or small retail investors apart from big players.
A study was conducted by industry body Assocham on 'Impact of Rising Home Loan Rates'. According to the study the housing sector which has declined considerably to 26.6 per cent in 2006-07, in the current fiscal year it might slow down further to touch between 17 to 20 per cent due to rising home loans.
The study stated that major expansion drive in tier II and tier III and even tier IV cities, for providing housing units to neglected lot of society, would generate the growth of this sector between 40-45 per cent this year, but it will slow down in metros and large cities by 2010.
''Since no suitable corrective measures to contain the interest rates, particularly on housing segment have been effected, nearly 60 per cent of home aspirants are staying away from the pre-launch sales,'' Chamber's President Venugopal N Dhoot said in a statement.
The study said usually the builders depend on the advance amount received by way of pre-launch bookings, which is collected well before the starting of construction work, as the loans are becoming costlier so the buyers are not keen to expose themselves to an extended time period.
Regarding the differential between EMIs, prevailing at 7 per cent and 12 per cent, the study stated that the change in EMI for housing loan of Rs 10 lakh comes out to be Rs 3250 and this puts an additional burden of Rs 39,000 per annum on end-users.
Similarly, on a housing loan of Rs 30 lakh, EMI differential works out to be Rs 9770 which adds to a fiscal burden of Rs 1,17,240 per annum. On 50 lakh housing loans, the EMI change is estimated at Rs 16,290 putting an annual burden of Rs 1,95,480 on those who have taken housing loans in this sector.
According to the study the speculators play a significant positive and negative role in pushing the prices of property by more than 20 per cent and some times rise in interest rates give opportunity to the speculators to dictate the prices.
As per Chamber's research, the recent boom in property market along with low interest rate regime had served as a breeding ground for speculators. And the speculators consists of a whole range of players such as small property brokers, big or small retail investors apart from big players.
SBI agriculture gold loan scheme up by Rs 490 crore
In June, State Bank of India started its agriculture gold loan scheme. in the first six months of 2007-08 (April-September) has recorded an increase of Rs 490 crore in agriculture gold loans to Rs 2,279.
According to the figures given by SBI, the number of agriculture gold loan accounts in April-September has gone up by 119,000 to 757,642. “SBI is the country’s only bank, which has modified its agri gold loan scheme to create a running cash credit account for the farmer, reducing his risk in carrying gold from village to bank every year for loan sanction,” K J Taori, general manager, agriculture business unit of SBI, said.
The scheme also helps farmers save on interest costs due to an ongoing deposit/withdrawal facility, and does away with the need to await sanction of a fresh limit every sowing season and store gold at home, directly serving as a safe deposit, according to SBI. Banks have a demand loan facility, whereby farmers pledge gold against credit.
Hence, under demand loans, the gold is returned to the farmer once he had paid back the loan. If the farmer requests for the fresh credit, he has to redeposit the gold, pay charges for re-assaying, and for completing other formalities.
According to Taori SBI’s rates of interest for agriculture gold loans are much cheaper at 57 paise per Rs 100 a month against Rs 3 charged by non-banking finance companies and 4-5 rupees charged by private money lenders.
Usually, private money lenders give discount on the original amount to be lent by deducting the interest, which, however, is calculated on the original amount and works out substantially higher, Taori said.
According to SBI analysis, gold loans for agriculture are one of the safest advances, registering low non-performing assets of 0.33 per cent against an outstanding of Rs 1,715 crore as of December 31, 2006.
Taori said, a further advantage of financing under this portfolio is moderating of the bank’s capital adequacy ratio as RBI has reduced the risk weighting on loans up to Rs 1 lakh from 125 per cent to 50 per cent. “Considering these benefits, we have encouraged our branches to lend more against gold and silver ornaments,” Taori said.
He informed while from June 2007, the modified agriculture gold scheme has been extended throughout India and has picked up well in Andhra Pradesh, Tamil Nadu, Kerala, and Karnataka. SBI is expecting for the scheme to pick up in northern and central India in the next kharif season.
“In terms of advances, our target for the current financial year is at par with last year, with another 5-bln-rupee loans expected to be added by March. However, we expect advances and loan accounts to increase sharply by the forthcoming kharif season,” Taori said. SBI shares closed at Rs 2,465.6 on the National Stock Exchange, up 2.6 per cent from Monday.
According to the figures given by SBI, the number of agriculture gold loan accounts in April-September has gone up by 119,000 to 757,642. “SBI is the country’s only bank, which has modified its agri gold loan scheme to create a running cash credit account for the farmer, reducing his risk in carrying gold from village to bank every year for loan sanction,” K J Taori, general manager, agriculture business unit of SBI, said.
The scheme also helps farmers save on interest costs due to an ongoing deposit/withdrawal facility, and does away with the need to await sanction of a fresh limit every sowing season and store gold at home, directly serving as a safe deposit, according to SBI. Banks have a demand loan facility, whereby farmers pledge gold against credit.
Hence, under demand loans, the gold is returned to the farmer once he had paid back the loan. If the farmer requests for the fresh credit, he has to redeposit the gold, pay charges for re-assaying, and for completing other formalities.
According to Taori SBI’s rates of interest for agriculture gold loans are much cheaper at 57 paise per Rs 100 a month against Rs 3 charged by non-banking finance companies and 4-5 rupees charged by private money lenders.
Usually, private money lenders give discount on the original amount to be lent by deducting the interest, which, however, is calculated on the original amount and works out substantially higher, Taori said.
According to SBI analysis, gold loans for agriculture are one of the safest advances, registering low non-performing assets of 0.33 per cent against an outstanding of Rs 1,715 crore as of December 31, 2006.
Taori said, a further advantage of financing under this portfolio is moderating of the bank’s capital adequacy ratio as RBI has reduced the risk weighting on loans up to Rs 1 lakh from 125 per cent to 50 per cent. “Considering these benefits, we have encouraged our branches to lend more against gold and silver ornaments,” Taori said.
He informed while from June 2007, the modified agriculture gold scheme has been extended throughout India and has picked up well in Andhra Pradesh, Tamil Nadu, Kerala, and Karnataka. SBI is expecting for the scheme to pick up in northern and central India in the next kharif season.
“In terms of advances, our target for the current financial year is at par with last year, with another 5-bln-rupee loans expected to be added by March. However, we expect advances and loan accounts to increase sharply by the forthcoming kharif season,” Taori said. SBI shares closed at Rs 2,465.6 on the National Stock Exchange, up 2.6 per cent from Monday.
Tuesday, January 8, 2008
Leading banks SBI, ICICI extend festive loan offer to January 31
Last year banks have announced festive loan offer at the start of the festival season. The banks have cut interest rates on home loans and on retail loans.
Good news for people who have plans or were planning to buy new home or want to take loan to buy car, etc before the budget can now do so. The two leading banks State Bank of India, country’s largest bank and the ICICI Bank the largest lender amongst the private sector banks have extended their limited period festival offers, providing lower interest rates on new home and other retail loans, till January 31.
From October 8, 2007, SBI had reduced interest rates on new home, car, truck and farm equipment loans by 50 to 200 basis points, as a special offer.
ICICI Bank, on October 10, 2007, had reduced interest rates on floating rate home loans by 50 basis points to 11 per cent and on other retail loans by 25-50 basis points.
Good news for people who have plans or were planning to buy new home or want to take loan to buy car, etc before the budget can now do so. The two leading banks State Bank of India, country’s largest bank and the ICICI Bank the largest lender amongst the private sector banks have extended their limited period festival offers, providing lower interest rates on new home and other retail loans, till January 31.
From October 8, 2007, SBI had reduced interest rates on new home, car, truck and farm equipment loans by 50 to 200 basis points, as a special offer.
ICICI Bank, on October 10, 2007, had reduced interest rates on floating rate home loans by 50 basis points to 11 per cent and on other retail loans by 25-50 basis points.
Friday, January 4, 2008
Indian Bank set target to recover bad loans
Public sector lender Indian Bank said during the ongoing fiscal, bank aims at recovering of 670 crore bad loans.
Indian Bank's CMD M S Sundarrajan told pressperson, "So far, we have recovered 440 crore and expect to recover another 230 crore in the next three months."
He said from the total recovery amount around 300 crore would be added to the bank's reserves and surpluses, giving more space for raising capital through bonds.
Regarding the loan target he said for the ongoing fiscal, bank expects credit growth of 25 per cent during the year, with the deposit growth target fixed at 20 per cent.
Indian Bank's CMD M S Sundarrajan told pressperson, "So far, we have recovered 440 crore and expect to recover another 230 crore in the next three months."
He said from the total recovery amount around 300 crore would be added to the bank's reserves and surpluses, giving more space for raising capital through bonds.
Regarding the loan target he said for the ongoing fiscal, bank expects credit growth of 25 per cent during the year, with the deposit growth target fixed at 20 per cent.
Wednesday, January 2, 2008
Good news for borrower’s interest rates on home and consumer loans may decline
Borrowers can find some relief in the New Year as interest rates on home and consumer loans could decline from the second quarter onward. According to bankers and economists’ high fuel and food prices might killjoy by putting pressure on inflation.
Experts are of a view that the interest rates have peaked and with deposit rates on the decline, consumers can see moderation in interest rates in 2008 because of the cautious stand taken by the Reserve Bank of India for almost the whole of last year, had managed to keep inflation low without disrupting economic growth.
“Our margins were a bit strained during the year but now banks have begun reducing deposit rates. With RBI’s objective to keep inflation close to three per cent in the medium term, interest rates are bound to come down,” Union Bank of India Chairman and Managing Director M V Nair said.
Rana Kapoor, managing director & CEO, Yes Bank, also feel that a 0.5 per cent reduction in interest rates was in the offing.
“We see no decline in interest rates in the next three months. RBI is not likely to reduce rates in January but in the next financial year starting April, there could be a reduction of half a per cent,” he said. Reserve Bank had raised key interest rates six times in the past year-and-a-half. The central bank also raised banks’ mandatory cash deposits or Cash Reserve Ratio (CRR) by 2.5 per cent as from December 2006 to 7.5 per cent for tightening liquidity as part of steps to keep inflation within limits.
Banks also raised interest rates on home, vehicle and personal loans in line with these measures. Currently floating home loan interest rates range from 10-11.5 per cent, while fixed rates are two-three percentage points higher. The India chief of ABN Amro Bank, Meera H Sanyal, also supported the view and said there could be a small decline in rates. She said the inflation based on wholesale prices will remain within the RBI’s comfort zone of below 5 per cent.
But some of them feel that inflation, which touched 3.45 per cent for the week ended December 15, can accelerate if the government allows state oil firms to raise prices of petrol, diesel, cooking gas and kerosene. Further increase in prices of food products such as wheat and edible oils will also put pressure on inflation. In such a scenario, RBI might keep up its tight monetary stance this year as well.
“Consumers are unlikely to get any relief in the near future as there is little chance of interest rates coming down due to high inflationary expectations,” HDFC Bank chief economist Abheek Barua said last week.
According to him fuel and food prices remain are the key concerns, adding to this revision in oil prices can push inflation beyond 4 per cent.
In 2007 international crude oil prices almost doubled from the year’s low to come within striking distance of 100 dollars a barrel. India imports nearly three-fourth of its crude oil needs, however, the government has not allowed state-run marketing firms to raise retail prices so far. With elections in politically sensitive state of Gujarat is over, it is expected that UPA Government might raise fuel prices this month.
Bankers are of view that the Reserve Bank’s monetary tightening measures has brought down credit off taking to around 25 per cent from more than 30 per cent a year ago. Apart from inflation, these measures were also aimed at preventing overheating of some sectors such as housing by limiting credit supply.
“The overall growth in credit was good. It was low compared to 2006, but on a long term average, credit offtake of 23-25 per cent (in 2007) was still good,” Union Bank’s Nair said.
Experts are of a view that the interest rates have peaked and with deposit rates on the decline, consumers can see moderation in interest rates in 2008 because of the cautious stand taken by the Reserve Bank of India for almost the whole of last year, had managed to keep inflation low without disrupting economic growth.
“Our margins were a bit strained during the year but now banks have begun reducing deposit rates. With RBI’s objective to keep inflation close to three per cent in the medium term, interest rates are bound to come down,” Union Bank of India Chairman and Managing Director M V Nair said.
Rana Kapoor, managing director & CEO, Yes Bank, also feel that a 0.5 per cent reduction in interest rates was in the offing.
“We see no decline in interest rates in the next three months. RBI is not likely to reduce rates in January but in the next financial year starting April, there could be a reduction of half a per cent,” he said. Reserve Bank had raised key interest rates six times in the past year-and-a-half. The central bank also raised banks’ mandatory cash deposits or Cash Reserve Ratio (CRR) by 2.5 per cent as from December 2006 to 7.5 per cent for tightening liquidity as part of steps to keep inflation within limits.
Banks also raised interest rates on home, vehicle and personal loans in line with these measures. Currently floating home loan interest rates range from 10-11.5 per cent, while fixed rates are two-three percentage points higher. The India chief of ABN Amro Bank, Meera H Sanyal, also supported the view and said there could be a small decline in rates. She said the inflation based on wholesale prices will remain within the RBI’s comfort zone of below 5 per cent.
But some of them feel that inflation, which touched 3.45 per cent for the week ended December 15, can accelerate if the government allows state oil firms to raise prices of petrol, diesel, cooking gas and kerosene. Further increase in prices of food products such as wheat and edible oils will also put pressure on inflation. In such a scenario, RBI might keep up its tight monetary stance this year as well.
“Consumers are unlikely to get any relief in the near future as there is little chance of interest rates coming down due to high inflationary expectations,” HDFC Bank chief economist Abheek Barua said last week.
According to him fuel and food prices remain are the key concerns, adding to this revision in oil prices can push inflation beyond 4 per cent.
In 2007 international crude oil prices almost doubled from the year’s low to come within striking distance of 100 dollars a barrel. India imports nearly three-fourth of its crude oil needs, however, the government has not allowed state-run marketing firms to raise retail prices so far. With elections in politically sensitive state of Gujarat is over, it is expected that UPA Government might raise fuel prices this month.
Bankers are of view that the Reserve Bank’s monetary tightening measures has brought down credit off taking to around 25 per cent from more than 30 per cent a year ago. Apart from inflation, these measures were also aimed at preventing overheating of some sectors such as housing by limiting credit supply.
“The overall growth in credit was good. It was low compared to 2006, but on a long term average, credit offtake of 23-25 per cent (in 2007) was still good,” Union Bank’s Nair said.
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