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.
Monday, September 13, 2010
Friday, September 10, 2010
Policyholders can avail loan against ULIPs
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.
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.
Wednesday, August 25, 2010
Change in base rate won’t affect customers having fixed loan rate contract
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.
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.
Thursday, August 19, 2010
State Bank of Indore has raised its BPLR by 50 bps
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.
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.
Monday, August 9, 2010
How to increase loan eligibility
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.
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.
Friday, August 6, 2010
Borrowers still have to decided whether to switch to new base rate system
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.”
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.”
Thursday, August 5, 2010
Banks asked to speed up financing of over 59,000 projects under PMEGP
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.
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.
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