Home, auto loan rates to remain stable

Housing, auto and personal loan seekers can relax as major bankers have said that interest rates are not likely to go up following the Reserve Bank of  India's (RBI) decision to suck out more funds from the banks which normally makes borrowings costlier. Moreover, on deposit front, some bankers have said they are likely to maintain the current rates.

"I don't see much pressure on housing loan and personal loan front although a few thousand crore from banks are going to be impounded by the Reserve Bank," K C Chakrabarty, chairman and managing director, Punjab National Bank told PTI.

The RBI in its mid-term review of the credit policy, raised the Cash Reserve Ratio (CRR) by 0.5 per cent to 7.5 per cent appropriating Rs 16,000 crore (Rs 160 billion) of bank funds.

However, the RBI decision, the PNB chief said, would put pressure on Net Interest Margins of the banks which can be met by reducing cost of deposits or lowering the administrative cost.

"Anticipating the hike in CRR, we had already slashed deposit rates on selective maturities by 25 basis points a day before the policy announcement," he said.

Some bankers are of view that since the busy credit season has started, increased credit off-take would take care of the impact of the CRR hike.

According to Oriental Bank of Commerce (OBC) Executive Director Allen C A Periera, housing, personal and auto loans are likely to remain at this level for time being.

Pointing out that credit off-take has picked up and going by the past trend advances generally goes up in the third quarter and fourth quarter, he said, "in such a scenario, banks would not be forced to cut deposit rate to maintain its margin." 

However, the private sector lender Centurion Bank of Punjab on Thursday announced a downward revision in rates up to half a percentage point for deposits of various maturities.

The country's largest housing finance company HDFC is of the view that the housing loan is not going to go up from the current level.

"There is no upward pressure on home loan even though CRR has gone up. HDFC will wait and see how market pans out in next 3-4 days before taking any decision on the home loan front," HDFC chairman Deepak Parekh said.

"There is enough liquidity in the system, softening of lending rate could happen," he said. Interest rates can come down despite CRR (percentage of total deposits that banks keep with RBI) hike, he said.

ICICI Bank joint managing director Chanda Kochhar said "the amount of CRR hike could be absorbed... there should not be much change in the interest rates" despite some pressure on net interest margins.