Loans
Home Loans: Existing borrowers cannot immediately avail of lower interest rates
Here is good news for new borrowers of home loans as they can now get lower interest rates, with several lenders having reduced the rates. However, for existing borrowers on floating rate basis, there is no immediate respite, as they will have to wait for the next reset date for the marginal cost of funds based lending rate (MCLR). In addition, they may have to pay certain charges to lower their interest rates for home loans. 
 
Several prominent banks, including State Bank of India, the country's largest lender, ICICI Bank, HDFC Bank, Bank of Baroda and Bank of India have reduced the interest rate on home loans of up to Rs30 lakh, to 8.35%. However, this is applicable only for salaried women borrowers. Other borrowers will have to pay 8.40% interest on home loans of up to Rs30 lakh.
 
Last year the Reserve Bank of India (RBI) issued guidelines on MCLR, which is a tenor-based benchmark rate. Banks are required to review and publish their MCLR for different maturities every month on a pre-announced date. 
 
However, the same tenor-based clause is preventing existing borrowers from getting the benefit of lower interest rates. When one of our readers approached his bank for reduction in interest rate for his home loan, he was told "...MLCR is revised on annual basis, so no changes can be done before that."
 
This is as per the guidelines issued by RBI. For a borrower, the guidelines say, the MCLR prevailing on the day the loan is sanctioned will be applicable till the next reset date, irrespective of changes in the benchmark rates during the interim period. 
 
For example, if the bank has given a one-year reset period in the home loan agreement, then the borrower will continue to pay interest on the same rate till next reset date. If she had taken home loan at 9.5%, then even if the interest rate comes down to 8.35%, she cannot get the benefit and will have to wait for the next reset day and pray that the reduced interest rate prevail on that day.
 
Here are the new interest rates of some banks for the salaried

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COMMENTS

manish vora

6 months ago

Dear team, existing borrowers are not passed on benefit of reduced interest rate but the article provides incomplete information. NHB circular of 2009 is not followed by leaders, still NHB being watchdog is silent.

Banks need to raise private capital to deal with bad loans: RBI
Mumbai, The mounting problem of bad loans of banks cannot be resolved by their simple recapitalisation and options like raising private capital for state-run banks need to be considered to deal with the issue, the RBI said on Friday.
 
"I wish to propose that we deal with the ailing public sector banks in creative ways instead of just propping them up with state aid," said Reserve Bank of India Deputy Governor Viral Acharya addressing an event by the Federation of Indian Chambers of Commerce and Industry (FICCI) Ladies Organisation.
 
"Clearly more recapitalisation with government funds is essential. However, as a majority shareholder of public sector banks, the government runs the risk of ending up paying for it all. The expectation of government dole-outs has been set by the past practice of throwing more good money after bad," he said.
 
Some nationalised banks need to be "re-privatised", Acharya said, to reduce the amount of capital that the government needs to infuse in them and help maintain fiscal discipline.
 
Citing the Global Financial Stability Report by the International Monetary Fund, he said: "Indian industrial sector is now among the most heavily indebted in the world in terms of the ability of its cash flows to meet its bank loan repayments and it comes out as worse-off compared to other emerging economies in terms of how little bank capital it has set aside to provision for losses on its assets."
 
Under its Indradhanush programme, the government is putting in Rs 70,000 crore in state-run banks over four years starting from financial year 2015-16. Of this, Rs 50,000 crore is the allocation for the first two years, with the balance equally divided between financial years 2017-18 and 2018-19.
 
The non-performing assets (NPA) of state-run banks at the end of last September, rose to Rs 6.3 lakh crore, as compared to Rs 5.5 lakh crore at the end of June 2016.
 
Former RBI Governor Y.V. Reddy has recently said there is no "political economy consensus" on tackling the mounting problem of bad loans of banks, which cannot be resolved by their simple recapitalisation.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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HDFC cuts lending rate by 15 basis points
HDFC Ltd, one of the largest housing finance company, on Thursday announced a 15 basis points (bps) reduction in its retail prime lending rate (RPLR). This reduction would benefit all existing customers, the lender said.
 
For all new home loans of up to Rs75 lakh, interest rates for women customers would be 8.65% and for others, it would be 8.70% per annum, HDFC said in a release.
 
 
The reduction in the RPLR will also be applicable on loans to non-resident Indians (NRIs)/ persons of Indian origin (PIO) card holders.
 

 

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