News Roundup – Oct 7, 2011

In this news roundup, we bring you our analysis of the latest and most interesting loans, interest rates and EMI related news from various resources.



Banks not to raise lending rates for now

While the mortgage rates in U.S. are at a record low, the persistent rate hike by RBI has increased borrower’s anxiety in India. However, banks are taking a cautious approach towards increasing their loan rates. Apart from ING Vysya Bank Ltd and Dhanlaxmi Bank Ltd, no other bank has raised their loan rates. While Canara Bank and Punjab National Bank have adopted wait and watch approach, SBI has stated that it is not in favour of rate hike at this stage. This is in stark contrast to the July interest rate hike when most banks increased their prime lending rates within 2 weeks. The banks are apprehensive about slowing loan demand and risk of bad debts. Banks also expect the interest rates to either stabilize or go down from here. While year-on-year loan growth is quite high despite high rates, demand in this fiscal year has dipped. Also, borrowers concerned with increasing EMI payments appear to be opting for fixed rate loans (although its a bad idea to opt for fixed rate loans when interest rates are near or at their peak).

Loan Scam

CBI chargesheets former CEO and director of LIC housing finance Ramchandran Nair and several officials of Punjab National Bank, Bank of India and private firms for allegedly receiving bribes for sanctioning large loans on easier terms and conditions. While all the accused were arrested soon after the cases were registered against them on November 22 last year, the accused were released on bail later. LIC housing finance is one of India’s largest lenders with a total housing finance market share of 8% behind SBI, HDFC (both 17%) and ICICI Bank (13%).