Those who are on the old lending rate regimes and have not moved to MCLR, will be benefited from this reduction.
The central bank last year had raised key policy rates which resulted in tightening of liquidity, a step aimed towards addressing inflation concerns.
The Reserve Bank of India is likely to introduce benchmark prime lending rate based on various parameters like actual cost of funds, operating expenses and non-performing assets by October this year.\n
The small loan size, strict vigil of bankers and the already high interest rates paid by the borrowers to moneylenders make the scheme attractive for banks. Banks are also devising new models for recovering such loans, mostly by deploying agents or vendors on a daily or weekly basis in rural areas.
Finance Minister P Chidambaram on Wednesday asked public sector banks not to increase interest rates for home loans up to Rs 30 lakh (Rs 3 million) and lend more to consumers even as the Reserve Bank of India is trying to moderate credit growth to contain inflation.
Soon after RBI's decision, three banks namely Yes Bank, HDFC Bank and Union Bank reduced the benchmark prime lending rate by 50 basis point each. SBI had last month slashed benchmark prime lending rate by 75 basis points to 13 per cent.
The increase is effective from November 7, the bank said.
Housing Development Finance Corporation, India's largest mortgage financier, today increased its retail prime lending rate by 50 basis points to 14.25 per cent. This is the first time HDFC is increasing its PLR in two years.
State Bank of India (SBI) Chairman O P Bhatt said the bank might raise deposit rates next week, at least by 50 basis points. However, he ruled out any increase in the base rate or the benchmark prime lending rate in December.
State Bank of India would announce its much-awaited base rate on Tuesday, Chairman OP Bhatt said on Monday. On how much will the rate be, Bhatt said, "Not more than 8 per cent. . . 8 per cent or less."
Base rate system set to replace BPLR system for loan rates.
The interest rates that we have now, including the interest rate measure that we have announced, should be treated as benign.
Base rate effectiveness under review due to lack of monetary transmission
Following in the footsteps of other public sector banks, Mumbai-based Bank of India (BoI) On Tuesday cut its benchmark prime lending rate (BPLR) by 50 basis points to 12 per cent and there are indications that State Bank of India may lower rates by the end of the month.
The recent spate of interest rate hikes is unlikely to leave any major hole on the balance sheets of India Inc, as the sensitivity of corporate earnings to interest rates has declined over the years, HDFC Bank has said.
Your guess is as good as mine. Unless something changes dramatically, the expectation that loan interest rates will be fixed in a more transparent manner, is likely to take a long time to realise.
Currently, banks follow system of internal benchmarks, including Prime Lending Rate, Benchmark Prime Lending Rate, Base rate and Marginal Cost of Funds based Lending Rate.
Mapping of spreads means effective rates in the base rate system are lower.
Banks are divided over the Reserve Bank of India's move to evolve a benchmark prime lending rate, saying it may not be feasible to smaller financially sound banks and the rate should be pegged to the average returns on government papers.
After a marginal increase in home loan rates, prime lending rate and domestic deposit rates, the largest bank of the country State Bank of India on Wednesday revised upwards the interest rates on non resident Indian deposits.
None of the four benchmarks suggested by the RBI is ideal as banks in India create loan assets from their deposits and not borrowing from the regulator or market, says Tamal Bandyopadhyay.
Shifting to floating rate deposits can work as an anaesthetic gel for some customers, points out Tamal Bandyopadhyay.
'We are going to need more technical people in government.' 'You can't expect a generalist to understand the complicated world of financial engineering.' 'I regret to say that most of our politicians have no competence to deal with these things. Nor is there a willingness to learn.'
The RBI under former governor Shaktikanta Das resisted pressures to cut interest rates through 2024 as it kept its 'Arjuna's eye' trained on inflation, but the central bank under a new detail-oriented head will soon have to take a call if it can continue sacrificing growth. Das, a career bureaucrat who in 2016 oversaw Prime Minister Narendra Modi's highly disruptive demonetisation move, left a lasting legacy as he demitted office towards the end of 2024 after expertly navigating monetary policy for six years, the highlight of which was steering India's recovery through the pandemic.
In an effort to boost credit flow to the housing sector, public sector banks are going to finalise the new interest rate regime for home loans up to Rs 20 lakh (Rs 2 million) on Thursday.
Bapi Munshi, president, treasury, at Axis said the 50 bps rate cut was in line with the current liquidity and market environment. "Our cost of funds for the fourth quarter of 2008-09 was better than the third quarter," he said. "We expect to do even better in the current quarter and based on those expectations, we have decided to pass on the benefit to our customers." Axis Bank had already revised its BPLR by 50 bps, from 15.75 per cent to 15.25 per cent, from April 1.
Banks are likely to take a final view on raising interest rates on loans as well as deposits by the end of this week or early next week.
While inflation dropped to 0.44 per cent for the week ended March 7, the BPLR of the top five Indian banks was in the range of 12.25-16.75 per cent. In the corresponding period last year, inflation was estimated at 7.78 per cent, while lending rates were in the range of 12.25-12.75 per cent. Real interest rate is the difference between WPI-based inflation and the prevailing benchmark prime lending rate.
Reduced EMIs may be very appealing to borrowers because of a lesser burden on a monthly basis, but there is a catch to it. If the tenure remains unchanged, there is a higher interest outgo.
Talking about home loan rates, there is good news for borrowers.
The soft interest rate regime is now over with the rates on government securities likely to harden for at least two years, economic think tank Institute of Economic Growth has said.
A host of public sector banks had cut interest rates in the earlier part of this year following an advisory from Finance Minister P Chidambaram in January. Private and smaller state-owned banks, however, did not cut rates.
Speaking at a function at Ghaziabad on Monday, State Bank Chairman-cum-Managing Director O P Bhatt said the bank has decided to raise the interest rate by 0.5 per cent on all loans such as home loans and auto loans which are linked to PLR. The revision in PLR came after SBI raised its PLR from 12.25 per cent to 12.75 per cent last week following Reserve Bank's increasing its key short-term lending rate to banks.
Banks seems to be upset over RBI's move over rate cut.
Floating rate home loan borrowers, stuck on higher interest rates, can expect some relief from today (July 1).
The banking industry could witness another round of prime lending rate hikes beginning next week, a top Indian Banks' Association official said on Wednesday.
Punjab National Bank and Bank of Baroda said on Monday they will reduce their prime lending rate by 50 and 75 basis points, respectively with effect from January 1. Besides, PNB announced a reduction in its peak deposit rate by 100 basis points to 8.5 per cent for deposits of one year to less than three years beginning new year, the state-run lender said in a filing to the Bombay Stock Exchange.
ICICI Bank, India's second biggest bank, has offered to lower the equated monthly installments for a large number of its borrowers by enhancing the tenure of their home loans.
State Bank of India has fixed its benchmark prime lending rate at 10.25 per cent, 0.25 per cent below the existing PLR, which is 10.5 per cent
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