Archive for the ‘home loan’ Category

Banks May Not Up Interest Rates For Next Six Months

Banks May Not Up Interest Rates For Next Six Months

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New Year has brought a good news for the Corporate India.

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SBI Bank chairman has indicated that there will be no increase in interest rates for next six months despite inflationary pressure.

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As inflation is rising, there was speculation going around that RBI, (in its review of monetary policy) might take measures to tighten the money supply which would have led to the hardening of interest rates.

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As the global economy is still in the grip of recession, industry players feel that any hike in interest rates will affect the economic recovery in India.

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Banks authorities and market analysts feel that there was surplus liquidity in the system and credit offtake was slowly picking up.

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This situation of liquidity surplus will force banks not to increase interest rates, in current situation.

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Because of this surplus liquidity, banks have cut deposits rates.

But they are not cutting the lending rates due to slow credit offtake, despite the speculation that RBI can increase key rates (repo or reverse repo) to contain inflation.

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🙂

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In the eight months of the current financial year till December 4, while the deposits with the commercial banks rose by 3,69,535 crore, credit off take was only Rs 1,44,151 crore.

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This forced the banks to park around Rs 100,000 crore with the RBI at reverse repo rate of 3.25%.

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When the interest rate condition was benign, Banks had cut their lending rates, particularly home loan rate.

This had helped reviving real estate market. The buyers started coming back and cement and steel sectors also started improving.

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The recession did not hit India the way it had affected European countries last year.

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There was only a slowdown in the growth rate which came down to 7% from 9%.

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Market experts believe that withdrawal of stimulus package by the government should not be done in the prevailing situation, but should be phased out in staggered manner.

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🙂

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Dubai Shakeout Leaves Thousand of Indian Families Worried

Dubai Debt Fallout Leaves Thousand of Indian Families Worried

The $59-billion debt woes of state-run Dubai World, one of the largest global conglomerates, has left thousands of Indian families worried, as the region accounts for half of the country’s $25-billion remittances.

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Gulf countries employ five million Indians, out of the 25 million total strength of the Indian diaspora in 130 countries, and Dubai being a key driver of the region’s economy, a shakeout there is seen unsettling the job market — and the incomes of relatives.

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Market experts have expressed that there will be at least 25-percent contraction in the job market and there may be a ripple effect on most Middle East countries because of Dubai World bust.

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They also said that Middle East meltdown is not a last month generated phenomena  rather it has been there for the past one year.

Infact, people have been coming back to India for the past one year.

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🙂

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Market experts and policy makers have expressed concern over the prospect of Indians employed in the Gulf losing their jobs.

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However they insist that much would depend on Dubai world Bust’s impact on the real economy there and employment.

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Many relatives of Indian expatriates in the Gulf have expressed concern and worries over the prospect of the loss of jobs in Gulf  in the wake of Dubai World Fiasco !!

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Many of families have taken huge amount of home loans to construct houses or to buy flats.

(With the dependence of paying it through the remittances they generally receive from their relatives working in Gulf).

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Now, they have worries like if their close family member working in Gulf loses the job then it will get impossible to repay the loan amount in full.

😦

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In Andhra Pradesh, which accounts for the largest share of remittances from the Gulf after Kerala, the realty industry feel there is an underlying worry that the Dubai World episode may just be the tip of the iceberg.

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Experts over there feel that things might go from bad to worse when the Dubai companies announce their financial results in December and January and many more could lose jobs.

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Analysts, nevertheless, maintained that while the future plans of Dubai World in India may be affected, the existing ones may not suffer much.

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Record Fund Raising by India Inc,through QIPs, is on the Cards.

 

Record Fund Raising by India Inc,through QIPs, is on the Cards

Record Fund Raising by India Inc,through QIPs, is on the Cards

 

 

Indian companies are all set to  raise record fund through share sales to institutional investors in the next few months as they attempt to reduce debt accumulated during their takeovers.

Hindalco, Aban Offshore and Tech Mahindra, which bought the scandal-hit Satyam Computer, will lead this record fund raising by India Inc.

Indian companies have approvals from shareholders to raise as much as Rs 68,000 crore by selling shares to institutional investors under the so-called qualified institutional placement route.

This is in addition to around Rs 26,000 cr that has been raised by companies such as real estate developer Unitech and Suzlon Energy in the last six months, thanks to the signs of economic revival and  record stocks rally.

India Inc raised as much as Rs 26,430 cr in the last thirty-six QIP issues since March this year, according to the analysis.

These companies which raised funds in the last six months still have room to raise another Rs 23,000 cr based on the approvals shareholders have given them.

There are several companies which have received approval for QIPs between June and October with a potential to raise as much as Rs 44,000 crore, but are yet to hit the market.

Hindalco, which is saddled with debt after it acquired Canada’s Novellis, plans to raise Rs 2,900 crore and Tech Mahindra plans to raise to partly repay the loan it took to buy Satyam Computer.

Essar Oil which is negotiating to buy Shell’s refineries in the UK plans to raise around Rs 9,000 cr, whereas JSW Steel has a mandate raise Rs 4,853 cr.

Shareholders’ approval is valid for a year and most of these companies took approval after June this year.

“The issues that have come till now got strong interest from institutional investors, and predominantly from foreign buyers who bought over 90% of the QIP issues.  Given the current market conditions and the kind of interest that Investors displayed in the Indian growth story, the proposed issues should be subscribed successfully,” said Jagannadham Thunuguntla, equity head, SMC Capitals.

The fund raising gets bigger when one takes into account the potential IPOs and government share sales which may run into billions of dollars more.

🙂

 

RBI’s Monetary Policy – Analyst View

Hello Friends, last month we witnessed loads of action with the RBI’s monetary policy being laid down.

Just an extension of our previous blog “RBI’s Monetary Policy Stance – Part 3.

 

 

Analyst View RBI policy

RBI Monetary Policies and Projections Part 4

 


In this Blog we would read the Analyst views with respect to the monetary point of view.

Analysis from the Analyst from monetary point of view:

Though there is a hike in SLR to 25 % but we think it will not have much more impact because the total investment book of commercial banks is already at 30.4% of total NDTL.

Although key rates of CRR, reverse repo and repo rates have been left unchanged, special repo facilities have been withdrawn.

Real estate loans provisioning are set to become more expensive.

NPA norms for banks have been tightened while liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR.

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The RBI is thus attempting to withdraw liquidity from areas where excess liquidity had reached a point it was more than comfortable with, while also targeting better quality management of credit.

Another point is that in the policy stance, RBI has given first priority to keep a vigil on trends in inflation and to be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Second, it will monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

Lastly, RBI will maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.

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In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability.

It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively.

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To conclude all the factors it seems that with the withdrawal of special liquidity measures together with an imposition of CRR in borrowing in CBLO market, RBI has taken a first to step towards controlling liquidity.

 

With prioritizing inflation it is expected that the next step of RBI could hike in CRR as it has also reduced the indicative growth of Broad money to 17% from 18%.

🙂

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RBI, Monetary Projections And Indian Economy

Hello Friends,

Just an extension of our previous blog ”RBI And Its Policies – Part 1″.

RBI, Monetary Projections And Indian Economy

RBI, Monetary Projections And Indian Economy

In this Blog we would touch upon the aspects as that of Monetary projection from RBI, assessment of economy scenario at present and relevance of RBI policy on economy.

Monetary projection:

For policy purposes, money supply (M3) growth for 2009-10 is placed at 17.0 per cent, down from 18.0 per cent projected in the Annual Policy Statement.

Consistent with this, aggregate deposits of scheduled commercial banks are projected to grow by 18.0 per cent.

The growth in adjusted nonfood credit, including investment in bonds/debentures/shares of public sector undertakings and private corporate sector and Commercial Papers (CPs), has been revised downwards at 18.0 per cent as in the Annual Policy Statement.

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Economy:

Since the last review in July 2009, there has been a discernable improvement in the global economy.

The recovery is underpinned by output expansion in emerging market economies, particularly in Asia.

World output has improved in the second quarter, manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning.

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A sharp recovery in equity markets has enabled banks to raise capital to repair their balance sheets.

If we talk about the home country then there are definitive indications of the economy attaining the ‘escape velocity‘ and reverting to the growth track.

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The performance of the industrial sector has improved markedly in recent months.

Domestic and external financing conditions are on the upturn.

Capital inflows have revived.

Moreover activity in the primary capital market has picked up and funding from non-bank domestic sources has eased.

Liquidity conditions have remained easy and interest rates have softened in the money and credit markets.

Growth projection for GDP for 2009-10 on current assessment is placed at 6.0% with an upward bias, the same as the previous policy review.

But some darker parts also persist.

There are clear signs of rising inflation stemming largely from the supply side, particularly from food prices.

Private consumption demand is yet to pick up.

Agricultural production is expected to decline.

Services sector growth remains below trend.

Bank credit growth continues to be sluggish.

The central bank has warned of possible asset price bubbles, raised banks’ provisioning requirements for commercial real estate loans and lifted inflation forecast.

WPI inflation for end-March 2010 is projected at 6.5 per cent with an upward bias.

This is once again higher than the projection of 5.0 per cent made in the Annual Policy Statement in July 2009.

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Stay Tuned for more on the topic.

We would look into Monetary Policy stance, more facts about economic indicators and Analysis from the Analyst from monetary point of view.

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INTEREST RATE FUTURES – Part 2

Hello Friends, just an extension of our previous blog on interest rates futures where we touched upon the topic of interest rates future and what is it exactly.

Now we would understand that why is there need for interst rate futures and many more related aspects in this regard.

Here we go :

Why Interest rate futures?

Why Interest rate futures?

Why Interest rate futures?

The risk associated with the interest rate is uncertain and it never has been constant in the past, infact it would not remain constant in future also.

The volatility of interest rates has increased manifold in the last couple of years and recorded 17.40% in 2008 as compared to 8.51% in 2007.

This high fluctuation in volatility increases risk and requires tools to manage those risks.

Interest rate futures are the product for managing such interest rate risk.

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Backbone of Interest Rate Future:

NSE, India’s largest stock exchange, began interest rate futures and offers the same reliable features as it provide to its other products with the following advantages:

Standardization and flexibility

•Price transparency and liquidity

•Leverage effect due to a wider collateral management

•Advance trading software and technological edge

•Centralized clearing supported by guaranteed settlement

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Who can be a part of it?

The major market participants of interest rate futures are

•Banks and Primary Dealers

• Mutual Funds and Insurance Companies

• Corporate Houses and Financial Institutions,

•FIIs and NRIs

• Member Brokers and Retail Investors.

In Final part of this topic (which we would cover in our next blog), we would throw light on the benefits of the Interest Rate Futures and the future scenario related to Interest rate futures.

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Stay Tuned 😉

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Interest Rates War Heating Up,Home Loans Rates Down!

An interest rate war led to the dip in home loan rates

An interest rate war led to the dip in home loan rates

An interest rate war is brewing in the home loans this festive season.

Development Credit Bank (DCB) and GIC Housing offering home loans below the psychological 8%.

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DCB, which recently entered the segment, is offering home loans at 7.95% for loans up to Rs 5 crore at fixed interest rate for the first year and floating rates from year two.

Affordable housing is the buzzword these days, but the market would get a further boost if attractive financing options are available.

Therefore, bankers have started coming up with the attractive options for their target segments.

Central Bank of India and PNB have waived processing fee and documentation charges on certain loans.

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Bankers have basically started offering a psychological pricing to get more borrowers into their fold.

According to bank observers, borrowers have started preferring low interest bearing home loan accounts of nationalised banks over private banks.

However, private sector bankers maintain that borrowers should not fall flat over the sub 8% schemes and exercise caution before signing on the dotted line.

As well as borrowers also say that such switch over is not easy.

Half way through EMI repayments, it is getting quite impossible for borrowers to get their account Shifted.

Constraints like, paying a hefty penalty and transfer fees are proving to be deterrents for them.

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Interest Rate War is really heating up coming Diwali. 🙂