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Tuesday, May 9, 2017

SBI makes home loans cheaper, cuts rate by up to 25 bps; but analysts don’t see a rush by buyers anytime soon

Even as home buyers put off purchases in anticipation property prices could correct, State Bank of India (SBI) on Monday made home loans cheaper for new customers. Loans of up to Rs 30 lakh will cost women 8.35% and others 8.4%; that’s 25 basis points (bps) less than rates available a few months ago. Women borrowing more than Rs 30 lakh will need to pay an interest rate of 8.5% while others will cough up 8.55%.

Rival ICICI Bank charges salaried persons an interest rate of 8.7% for loans up to Rs 75 lakh while mortgage specialist HDFC charges between 8.5% and 9% for a loan of up to Rs 75 lakh. So far, Bank of Baroda’s product is the most attractive at an interest rate of 8.35%.

With little demand for corporate loans, lenders are trying to make mortgages more affordable. A CLSA report says mortgage rates are at 12-year lows, having dropped 150 bps in the last two years; every cut of 100 bps is equal to a 5-6% price cut, CLSA notes.  But this may not be enough to nudge buyers; loans for housing grew at a slower 15.2% year-on-year (y-o-y) in March compared with 18.8% growth in March 2016, data from the Reserve Bank of India (RBI) show.

Clearly, there’s no rush. Stocks of unsold apartments are piled high and even before demonetisation, inventories were not small. At last count, there were 6.7 lakh unsold residential units across the country with 1.55 lakh in the Mumbai Metropolitan Region (MMR) alone. Registrations of property sales in MMR, which had fallen to a six-year low in November and December, remain low.

If 2016 ended with the lowest number of residential launches and sales, 2017 hasn’t got off to a great start, say builders. Banks, however, are trying to prod potential customers to buy homes. SBI had revised rates in January, effecting a steep 90 bps cut to its one-year MCLR, and bringing it down to 8%. ICICI had cut its one-year MCLR by 70 bps to 8.2% and HDFC had lowered its benchmark rate by up to 45 bps.

The country’s largest lender is also hoping to cash in on the push to affordable housing. “We have come out with a special offering of lower rates for the category,” said Vaijinath MG, CGM (real estate and housing), SBI.

The general slowdown in home purchases is hurting developers. Gopal Sarda, group CEO, Kolte-Patil Developers, told FE, “The real estate market had seen some fluctuations in recent times. The implementation of demonetisation and the introduction of RERA (Real Estate Regulation Act) and GST (goods and services tax) only made home buyers delay their decision of home buying.”

In March, the government had raised the annual income ceiling for families eligible under the credit-linked subsidy scheme (CLSS) to up to Rs 18 lakh. The move, however, is likely to benefit housing finance companies (HFCs) rather than banks, analysts say.

According to a report by Crisil, that the assets under management of pure-play affordable HFCs have risen nearly 50% in the past fiscal to Rs 23,000 crore as on March 31. “The high growth has also led to increase in market share of these new pure-play players in the overall affordable housing finance sector from ~10% as on March 31, 2016 to ~15% as on March 31, 2017,” the report said. Crisil defines affordable housing loans as those with a ticket size less than `15 lakh.


Source : Financial Express
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Shareholders to elect 4 independent directors of SBI on Jun 15

The country's largest lender SBI has invited applications for appointment of four independent directors to its central board who will be elected by the public shareholders on June 15.

The election has been necessitated after the resignation of Sunil Mehta and the expiry of the three-year-term of the three other directors -- Deepak Amin, Sanjiv Malhotra and MD Mallya, the bank said in a notice.

The term of appointment for the four new directors will be for three years till 2020, and the election will be held during the forthcoming general meeting of shareholders on June 15, it said.

"The election of directors is being held to fill in the vacancies arising out of the retirement/resignation of the four directors elected by eligible shareholders of the bank, other than the government," it said.

Any shareholder having not less than 5,000 shares either in his/her name or as first named holder when jointly held, is eligible to contest the election.

Led by chairman Arundhati Bhattacharya, who is on an extension till September, the central board of SBI comprises four independent directors, two government nominees, one representative from the Reserve Bank and also four of its managing directors.

Nomination form and the format of declaration and undertaking to be submitted by shareholders is available with the secretariat of the chief general managers at all the local head offices and the central board secretariat at the Corporate Centre of the bank in Mumbai.

The final date for submitting the documents is May 24, the notice said.

If the total number of valid nominations exceed four, there would voting for the election at the general meeting.

Any shareholder other than government with over 50 shares each for a minimum of three months prior to the date of the general meeting will be eligible to vote in the election, the public notice said.



Source : Economic Times
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Stake dilution in PSBs after their health improves: Arun Jaitley

The government will dilute its stake in state-run banks to 52 per cent once the health of the lenders improve and the money will be used to inject capital in them, Finance Minister Arun Jaitley said today.

He hoped for a resolution to the burgeoning bad loan problem following the government empowering the Reserve Bank of India (RBI) to order lenders initiate insolvency proceedings against defaulters and create committees to advise banks on recovering non-performing loans.

"We already have a programme under which we have been supporting recapitalisation of banks. Where more funds are required from the government, we will be quite willing to look at that.

"But once the health of the banks themselves improve, we have also announced that the government will be willing to bring down its own equity in the banks to 52 per cent and that can be used for banks' recapitalisation," he said at a CII-Kotak investor roundtable here.

This fiscal, the government has budgeted Rs 10,000 crore of capital infusion in public sector banks.

The amount is lower than Rs 25,000 crore set aside in the previous budget but will be insufficient to help state-run banks raise about Rs 80,000 crore of equity capital that they will require over the next two years to comply with the Basel III norms and support credit growth.

Jaitley said the non-performing assets (NPA) problem is limited to "a certain set of accounts and these numerically are not very large in number but the quantums are high and therefore, they impact the balance sheet of banks".

"Now, we will wait for the result over the next few months of what we decided (through the ordinance) and ensure that under the empowerment that is being given to the RBI, the banking industry itself goes in for resolution," he said.

At a separate interactive session on 'India's Business Environment: Reforms and Opportunities' organised by CII, Indian Embassy and Japan Chamber of Commerce, he said that with the new empowerment of RBI, a resolution to the stressed asset problem will be reached.

"We were trying over the last few years to address this problem and about three days ago, we have empowered the central bank to take certain precipitative action in relation to resolving the issue of stressed asset itself.

I do hope, with this new system in place, resolution of lot of stressed asset in India would take place," he said.



Source : Economic Times
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Bad debt situation not that grim, recovery hopes intact: SBI chief Arundhati Bhattacharya

State Bank of India, the country's largest lender, today said most of the nation's bad loans belong to industries that are still in business and banks will probably recover the write-downs when growth turns up and they perform again.

Speaking at a seminar on 'Asian Banking in Challenging Times' here, SBI Chairman and Managing Director Arundhati Bhattacharya said the loans which have turned bad are because they are not producing enough money to cover their interest liability.

And the reasons for that have been huge time overruns, leading to cost overruns, which lead to over leveraged positions, she said.

About 16.6 per cent of loans to corporates - or about 8.4 per cent of the GDP - had been declared non-performing, according to Credit Suisse.

Banks are straddled with anywhere between Rs 9 lakh crore to Rs 12 lakh crore of stressed assets - made up of bad loans, restructured debt and advances to companies that cannot meet servicing obligations.

The government yesterday through an ordinance amended law to give powers to the Reserve Bank of India (RBI) to order banks to initiate insolvency proceedings against defaulters and to create committees to advise them on recovering non- performing loans.

"I still believe we have huge potential in the country. The difference of the NPLs (non-performing loans) this time around is the fact that many of the NPLs are assets that are still working," she said at the seminar held on the sidelines of annual meeting of the Asian Development Bank here.

To set this NPL cycle right would need dilution of equity, paring down of debt and finally leaving the asset with debt that ensures that it can be sustainably serviced, Bhattacharya said, adding this will ensure that these units get the support to enable them to raise their capacity utilisation.

"In view of the fact that our economy is still growing so there is demand over there which has to be properly nurtured and may be also channelised. If you do that, many of these units will probably come back and the write-downs that we will take will probably, not surely, but probably, we will be able to claw back at some point of time," Bhattacharya said.

She said the Indian banking sector faces headwinds both in respect of over-leveraged corporate debt and "stiffer" regulatory requirements.

The biggest challenges faced by the regulators, she said, was how to handle the bad debt situation to ensure that the resources are not wasted.

"On the other hand they have to ensure that they are perceived as being conservative and they are perceived as doing the right thing for right reasons. So I think this is the challenge that we as a country have and the regulators have as well," Bhattacharya said.



Source : Economic Times
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Friday, April 21, 2017

Finance Ministry approves 8.65% interest rate on EPF for 2016-17

Labour Minister Bandaru Dattatreya on Thursday said that the Finance Ministry has approved 8.65 per cent interest rate on Employees Provident Fund (EPF) for 2016-17.

The ratification of the 8.65 per cent on EPF will enable the retirement fund body Employees' Provident Fund Organisation (EPFO) to credit this rate of return into the accounts of four crore subscribers.

"Finance Ministry has agreed to 8.65 per cent rate of interest. Now, the communication will come. The formal discussions are over," the minister said.

He further added, "We will immediately issue the notification and credit the rate of interest to over four crore subscribers."

The Employees' Provident Fund Organisation trustees had approved 8.65 per cent rate on EPF in December last year.

The Finance Ministry has been nudging the Labour Ministry to lower the EPF rate for aligning it with the rates of small savings schemes like PPF.



Source : Business Standard
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