Prepaying to cost Less

Home loan borrowers soon may not have to pay any penalty for prepayment of loans linked to floating rate of interest. Banks currently charge anywhere between 1% and 3% of the principal if customers want to pay back the loan amount before the tenure ends. However, for fixed-rate loans, banks will continue to charge the prepayment penalty. The removal of the prepayment penalty will make it easier for customers to shift loans to other banks if they get a better interest rate and, most importantly, increase competition among banks. The RBI's recent...

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LIC HFL launches 'New Advantage 5'

Mumbai: LIC Housing Finance on friday launched 'New Advantage 5', a new home loan product that offers fixed rates of interest for the first five years and floating rates thereafter. The floating rates will be linked to the LHPLR (LIC HFL Prime Lending Rates) prevailing at the time of the switch, country's largest housing finance company said in a release issued here. For loans up to Rs 30 lakh, the fixed rate offered is 11.15 percent, for loan above Rs 30 lakh and less than Rs 75 lakh, rate is 11.40 percent and for loans of between Rs 75 lakh and...

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Banks can lend below base rate to tribals, disabled: RBI

Mumbai: The Reserve Bank on Friday said banks can lend below the base rate, or the minimum lending rate, to tribals and physically challenged persons. “Such lending (to tribals and handicapped), even if below base rate, would not be considered as a violation of our base rate guidelines,” the central bank said in a circular. At present, banks get refinanced from National Scheduled Tribes Finance and Development Corporation (NSTFDC) and National Handicapped Finance and Development Corporation (NHFDC) for loans extended to tribals and differently-abled...

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Lenders to GTL Infrastructure agree to clear a proposal to restructure its debt

MUMBAI: Lenders to GTL Infrastructure, the troubled tower company, on Friday agreed to clear a proposal to restructure its debt on condition that promoters provide a personal guarantee and infuse fresh equity. Bankers would also evaluate proposals to sell the tower business during the implementation of the corporate debt restructuring package, said a source aware of the development. "Lenders have agreed to clear the GTL Infrastructure debt restructuring scheme. The reduction in interest rate and tenure of the loan are yet to be finalised. The...

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Government seeks PSU bank role in speedy project approvals

MUMBAI: Agovernment desperate to halt the slide in economic growth rate has directed state-run bankers to wear the hat of a middleman and negotiate with bureaucrats for faster project clearances. Public sector banks, which account for more than three-fourths of the industry, have been ordered to clear loan applications within 30 days in some cases, which bankers fear may lead to slack due diligence that will turn into bad loans in future. "The loan application pending for want of response or information from different state governments may be...

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Swiss open to taxing Indian deposits

New Delhi: The lure of Swiss bank deposits for Indians wanting to keep their unaccounted money away from the taxman’s glare could end as the Swiss government is ready to discuss a formula with India to tax such funds. Switzerland recently agreed to tax the money held by British and German citizens in Swiss banks and the idea is to replicate the model for India too. Responding to queries sent by FE, the Swiss Federal Department of Finance, the counterpart of India’s Union finance ministry, said: “Switzerland is open to explaining the Swiss model...

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ICICI Bank to hire 6,000 people

Mumbai: Country's largest private lender ICICI Bank will recruit up to 6,000 people this fiscal to help its business growth and expansion, a top official said today. "Our business is growing between 18 to 20 per cent and we are also adding branches...its expected that we would hire between five to six thousand people in our workforce," the bank's Managing Director and chief Executive Chanda Kochhar told reporters. Most of the recruitments will be at the entry level and will be done either directly or through institutes training graduates in banking...

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HDFC Bank launches 'Swift' loan

New Delhi: Private sector lender HDFC Bank has launched personal loan 'Swift', a product that is processed in 24 working hours of receiving complete loan document. Using cutting-edge imaging solution technology, the bank will now set the pace in this product category and ensure that loan processing will start the moment a customer steps into a branch in the morning and be complete in 24 hours, HDFC Bank said in a statement. Swift will soon be available to all customers who hold salary accounts with the bank in 25 select branches across the country,...

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Bank of America mulls 40,000 job cuts: WSJ

Bank of America Corp officials have discussed slashing roughly 40,000 jobs during the first wave of a restructuring, the Wall Street Journal said, citing people familiar with the plans. The number of job cuts are not final and could change. The restructuring aims to reduce the bank's workforce over a period of years, the Journal said. The newspaper said BofA executives met Thursday in Charlotte and will gather again Friday to make final decisions on the reductions, putting the finishing touches on five months of work. Bank of America could not...

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RBS expands India equities team to boost growth

Royal Bank of Scotland has expanded its Indian equities team with eight new hires, the British bank said on Friday, as a part of its plan to boost growth in a highly competitive market for equities business. RBS has hired five analysts for equities research, which include Harish Bihani from domestic brokerage Indiabulls Institutional Equities and Atul Rastogi who previous worked at Daiwa and UBS, it said. The bank has also hired three more for equities sales to enhance its onshore equities platform, it said in a statement. A host of global banks...

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HDFC doubles issue size to Rs 10 bln

Mumbai: India's Housing Development Finance Corp has upsized its issue to 10 billion rupees, double its initial size, as it received strong investor demand, three sources with direct knowledge of the matter told Reuters on Thursday. We are seeing very good demand from corporates, insurance companies and foreign institutional investors, two sources said. The arrangers have already received commitments for 8.50 billion, the sources said. The company has maintained the pricing at 9.65 per cent. Deutsche Bank has joined as the arranger along with ICICI...

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Banks find it tough to hike loan term

NEW DELHI: Public sector banks are finding it tough to increase the tenure of housing loans to soften the impact of repeated increase in interest rates, despite the finance ministry advising banks to keep the equated monthly instalments constant. Bankers said as far as possible they were trying to increase the tenure but in a majority of cases the extended term of the home loan was exceeding the working life of the borrower. Canara Bank chairman and managing director S Raman said in most cases the lender was extending the term to 65 years. Asked...

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RBI seeks one-time tax relief to arm MNC banks

The Reserve Bank of India has sought a one-off tax exemption from the government for foreign banks that convert into local subsidiaries as it intensifies efforts to ring-fence the domestic financial system from global shocks. The permission, if granted by the government that's already facing widening fiscal gap, may lead to thousands of crores of notional revenue loss. "It is likely that the foreign banks which have attained a particular asset size may be asked to convert into wholly-owned subsidiaries. RBI is also expected to extend the branch...

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Banks' IT spending to surge 50% to Rs 10,000 cr annually

As Indian banks gear up for the second wave of technological enhancement, their spending is likely to shoot, a little over fifty per cent, to Rs 10,000 crore annually. According to The Boston Consulting Group (BCG), the current expenditure on information technology (IT) for banks on the whole is Rs 6,500 crore per year, about 2.7 per cent of their revenues. The first phase of IT upgradation largely included migration of banks to a core banking system, which allowed for consolidation of banking services offered across regions and channels. “We expect...

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LIC & IIFCL to invest Rs 10k cr in take-out financing scheme

India Infrastructure Finance Company Ltd (IIFCL) and Life Insurance Corporation (LIC) have drawn up plans to invest Rs 10,000 crore during 2011-12 in the infrastructure sector, through the take-out financing route. They have agreed to jointly buy out up to 40 per cent of infrastructure loan portfolios of banks, each having 20 per cent exposure. “IIFCL will take all the initiatives with the banks regarding the portfolios. We have earmarked a total of Rs 10,000 crore, each investing Rs 5,000 crore, for the current financial year,” S K Goel, chairman...

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Once bitten, SBI says enough with teaser loans

MUMBAI: Country's largest lender SBI on Wednesday ruled out re-launching teaser rate loans, days after its private sector rivals HDFC and ICICI introduced special hoam loan schemes with interest rates fixed for initial few years. "We have no plans as of now to launch any special home loans," State Bank of India (SBI) Chairman Pratip Chaudhuri told reporters here. Reminiscing of the bank's earlier brush with the Reserve Bank in this regard, he said, "We have been through the teaser loan definition. We respect the regulator's stance." The country's...

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RBI hawkish ahead of review despite global gloom

The Reserve Bank of India (RBI) remains bent on fighting domestic inflation despite weakening global conditions, officials with direct knowledge of policymaking said, a week before it is widely expected to raise interest rates once again. The RBI, which has lifted rates 11 times in 18 months, makes its mid-quarter review on September 16. Though senior bank officials are hawkish, RBI Governor Duvvuri Subbarao will not make a final decision before the release of August inflation data on September 14, the sources said. "We still have high food and...

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HDFC Bank, TVS Motor in pact for inventory funding

MUMBAI: Two wheeler maker TVS Motors has entered into a memorandum of understanding (MOU) with HDFC Bank for inventory funding for its dealers. As part of this arrangement, HDFC will provide funding to over 600 dealers of TVS Motors across the country that would enable them to increase their working capital, boost vehicle stocks and consequently enhance retail sales, the company said in a statement today. The agreement has features such as online fund transfers, online repayment, real time viewing of account status and considerably reduces transaction...

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Poor are much better at loan repayment: K C Chakravarty

MUMBAI: Banks should offer services to the poor with a profit objective rather than a social objective and this is possible by adopting an appropriate business model, said a top RBI official. He also underscored the need of combined efforts by the entire society to achieve financial inclusion. "The poor is more creditworthy than the rich," said deputy governor KC Chakravarty, while addressing students in a college in Mumbai. "Business for poor is viable provided you have the ability," he said. The deputy governor called for an integrated approach...

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RBI to reintroduce inflation-indexed bonds

Mumbai: RBI Governor Duvvuri Subbarao said the central bank is planning to introduce inflation- indexed bonds, under which an investor would get a return on the basis of the prevailing inflation at the time of maturity. "One cause of concern is whether in a period of relative high inflation ... whether they (inflation-indexed bonds) will be successful. We will think through this... but certainly we will introduce that," Subbarao told a national finance symposium organised by the Indian Institute of Foreign Trade and the Bombay Chamber of Commerce...

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Don't levy pre-payment fee on floating loans: RBI

The Reserve Bank of india (RBI) in a release on Tuesday barred banks from imposing pre-payment charges on floating rate loans and also asked them to offer long-term fixed rate housing loans. In an annual conference of banking ombudsman, the RBI laid down 10 action points to improve customer service of banks and suggested banks should address their asset liability mistmatches by participating in the interest rate swap market. "Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and,...

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Reducing CRR, SLR rates necessary to unlock funds: RBI

The Reserve Bank is committed to bringing down the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) in a "calibrated manner" to increase availability of credit, Governor D Subbarao today said. "It's not that SLR should be thrown away but certainly we should bring it down, so that there is credit availability and the private sector is not crowded out," he said on the sidelines of an event here. CRR is the portion of deposits that banks are required to keep in cash with the the Reserve Bank of India (RBI), while SLR is the amount that...

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