Loans for home buyers, builders to get cheap

In order to give a fillip to the housing sector at a time when the economy is facing a slowdown, the Reserve Bank of India on Friday announced two measures that will increase flow of bank credit to builders/developers and individuals buyers.

Further, loans to the these entities could become a tad cheaper and the prices of housing units could come down.

According to the RBI, builders/developers of residential housing projects will now be classified under the commercial real estate-residential housing (CRE-RH) category, attracting lower risk weight and lower standard asset provisioning.

Depending on the risk involved, banks are required to attach weights to loans to arrive at the capital they will have to apportion for making a loan.

They are also required to set aside funds for making provision for standard loans (or performing loans).

Builders/developers coming under the CRE-RH category will attract lower risk weight of 75 per cent (as against 100 per cent for CRE projects) and lower standard asset provisioning of 0.75 per cent (1 per cent for CRE projects).

As banks will get capital relief on account of lower risk weight and standard asset provisioning, they will be able to offer loans to builders/ developers at slightly lower rates. In turn, the builders/developers are expected to pare the selling price of the homes they build.

Home loan rates

Interest rates on housing loans could come down marginally as the central bank has revised risk-weights downwards.

As property prices in metros and their extended suburbs are ruling high, the central bank has brought down the risk weight on home loans above Rs 75 lakh to 75 per cent from 125 per cent. Lower risk weight translates into lesser capital that a bank has to set aside for making a home loan.

For example, if a borrower took a Rs 1-crore loan, earlier the bank would have had to set aside Rs 11.25 lakh (at a risk weight of 125 per cent and capital adequacy of 9 per cent) capital to make the loan. Following the downward revision, the bank will need to set aside only Rs 6.75 lakh.

NHB to follow suit

The regulator of housing finance companies, the National Housing Bank, plans to follow in the RBI’s footsteps and issue a similar notification within a week.

NHB Chairman and Managing Director R.V. Verma said the RBI measures recognise the fact that quality of loans (assets) in the housing sector is quite good.

“With cheaper loans, builders/developers will be encouraged to bring down the unit price. Individual borrowers will also get some relief on the interest-rate front. The latest RBI measures will give a boost to the economy,” said Verma.

ramkumar.k@thehindu.co.in

Source: thehindubusinessline

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J&K Bank announces Rs 50 dividend

Jammu & Kashmir Bank today announced a dividend of Rs 50 per share or 500 per cent to its shareholders.

The dividend of 500 per cent on a share of face value Rs 10 was approved at the annual general meeting of shareholders which was held here, a spokesman of the bank said.

Shares of J&K Bank had closed at Rs 1,178.60 on BSE yesterday.

Bank’s Chairman and CEO Mushtaq Ahmad expressed satisfaction on achieving targets for 2012—13 fiscal.

“We have not only achieved, but even surpassed our Rs 1 lakh crore business target and Rs 1,000 crore profit in the Platinum Jubilee year,” he said.

The bank had reported a profit of Rs 1,055.10 crore and revenue of Rs 6,136.80 crore for 2012—13 fiscal.

“While these achievements enhance our confidence in our abilities, the core guiding philosophy remains the same: creating opportunities and touching lives in more ways than one,” Ahmad said.

Source: thehindubusinessline

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BoB opens agri loan factory in Gujarat

Bank of Baroda Chairman and Managing Director S.S. Mundra on Friday inaugurated the bank’s national pilot agri loan factory at Himatnagar in Gujarat

He said that Gujarat had been selected for the project as the farmers of the state were dedicated and hard-working.

BoB has sanctioned Rs 53 crore advances to farm sector and the cheques were also distributed to top borrowers. This specialised loan factory would process all types of loans related to agriculture sector under one roof.

Source: thehindubusinessline

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Oriental Bank of Commerce to halt sale of gold coins

Oriental Bank of Commerce (OBC) has decided to discontinue sale of gold coins, it's Chairman & Managing Director S.L. Bansal has said.

The decision will be implemented across all OBC branches with effect from Monday, it is learnt.

OBC is the first public sector bank to discontinue sale of gold coins following the Government expressing concern over increased gold imports affecting the health of the economy.

This move is in keeping with the Government’s objective of curbing gold imports.

Finance Minister P. Chidambaram had urged people to resist the temptation of buying gold. Gold buying should be brought down for the sake of the health of the economy, Chidambaram had said.

On its part, the RBI has taken several measures to discourage banks and nominated agencies from resorting to gold imports.

UTTARAKHAND RELIEF

Bansal said the entire staff of Oriental Bank of Commerce has decided to donate one day's salary to the Prime Minister’s relief fund towards victims of flood-hit Uttarakhand.

Also, the bank has decided not to charge any fees for contributions made by people to the Prime Minister's Relief Fund through its branch network.

As part of its CSR initiative, OBC has set up camps at Gadwal and Rudraprayag to distribute food and medicines to flood-affected victims, Bansal said.

srivats.kr@thehindu.co.in

Source: thehindubusinessline

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SBI needs capital up to Rs 3,000 cr for subsidiary’s merger

State Bank of India (SBI) said it will require up to Rs 3,000 crore capital to merge one of its associate banks.

SBI will need Rs 1,000-3,000 crore in capital if it were to merge one of its subsidiaries with itself, its Chairman Pratip Chaudhuri said.

He was speaking to shareholders at the bank’s annual general meeting here.

The bank has appointed a committee headed by Managing Director S Vishwanath to look into the aspect of merging one of the five subsidiaries, he said.

The subsidiary to be merged with SBI has not been identified yet.

“The committee headed by Vishwanath is looking into all the aspects (of merger). That committee would report to the Board and then we will finalise the name (of associate to be merged),” Chaudhuri said after the meeting.

Asked which of the five — State Bank of Patiala, State Bank of Hyderabad (both unlisted), State Bank of Travancore, State Bank of Bikaner and Jaipur and State Bank of Mysore — will be merged in this round, Chaudhuri declined to give an answer, saying the Board will take a call based on the committee’s recommendation.

He also did not say whether a listed or an unlisted associate would be preferred for merger.

On SBI’s own capital raising plans, he said a decision in this regard will be firmed up by next month.

About the recent depreciation of rupee against the dollar, he said the slide in Indian currency was because of a global trend of money heading back to the US.

“I think it is not a reaction to India, it’s a reaction overseas everywhere. Some of the money is headed back to US. All the markets, including those of Britain and Germany, have lost substantially,” he said, adding it affects Indian market more because of our dependence on capital inflows.

Source: thehindubusinessline

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