After Pm Narendra Modi’s Pitch, Banks to Modify Rates
May 22, 2017 Home Loan
The day after Prime Minister Narendra Modi encouraged lenders to broaden their aim to the vast range of poorly served borrowers ranging from the poor to the middle class. State Bank of India slashed their interest rates to the lowest in a decade which forced the rivals to follow the same step in order not to lose their market share.
The government bank SBI reduced its marginal cost of lending rate (MCLR) at a historic low which serves a huge range of customers- it went from 8.90 percent directly down to 8 percent. The largest bank in the country cut it rates by 0.9 percentage points or 90 basis points (bps), which made the loans, provided by the bank the cheapest ones in the market.
SBI is bringing back teaser rate loans which were dissuaded by the Reserve Bank a few years ago. The bank is providing fixed rate loan for two years at 8.55 percent (8.50 percent for women borrowers. SBI's prospective home loan borrowers will be expected to pay 8.65 percent (8.60 percent for women), on a floating rate loan.
The recently developed rates will be effective for new borrowers. The old borrowers will get the benefit of new rates at the limit of the lock-in period when rates are evaluated in line with existing levels. The lock-in could vary in time from as low as one month to as high as three years, depending on the loan agreement. State-owned Union Bank of India and Punjab National Bank also declared cuts ranging from 60 to 90 basis points. Delhi-based PNB will charge 8.45 percent for a year while Union Bank will charge 8.65 percent.
Sources also indicate that a private meeting between the CEOs of five large banks namely SBI, Union Bank, ICICI Bank, Dena Bank and Central Bank of India- 10 days prior to discuss the possibilities of a sharp reduction in the rates which might result in boosting the investment sentiment.
Banks usually in a normal year receive deposits of around Rs 9 crores by the way of incremental deposits in a fiscal year. Although in the month after demonetization banks collected over Rs 12.44 lakh crores in deposits over a month.
However, demand for loans, reflecting investment activity, has almost dried up. Reserve Bank of India’s data shows that bank credit rose 1.2 percent amounting to Rs 73 lakh crore from April 1 to December 9 which is part of the fiscal year- the 1.2 percent rise is way more sluggish than the 6.2 percent rise amounting to Rs 69.6 lakh crore in same period almost a year ago. Deposits were seen rising to 13.6 percent which amounts to Rs 105.9 lakh crore compared with a previously recorded 7 percent rise to Rs 91.8 lakh crore in the year earlier.
The government bank SBI reduced its marginal cost of lending rate (MCLR) at a historic low which serves a huge range of customers- it went from 8.90 percent directly down to 8 percent. The largest bank in the country cut it rates by 0.9 percentage points or 90 basis points (bps), which made the loans, provided by the bank the cheapest ones in the market.
SBI is bringing back teaser rate loans which were dissuaded by the Reserve Bank a few years ago. The bank is providing fixed rate loan for two years at 8.55 percent (8.50 percent for women borrowers. SBI's prospective home loan borrowers will be expected to pay 8.65 percent (8.60 percent for women), on a floating rate loan.
The recently developed rates will be effective for new borrowers. The old borrowers will get the benefit of new rates at the limit of the lock-in period when rates are evaluated in line with existing levels. The lock-in could vary in time from as low as one month to as high as three years, depending on the loan agreement. State-owned Union Bank of India and Punjab National Bank also declared cuts ranging from 60 to 90 basis points. Delhi-based PNB will charge 8.45 percent for a year while Union Bank will charge 8.65 percent.
Sources also indicate that a private meeting between the CEOs of five large banks namely SBI, Union Bank, ICICI Bank, Dena Bank and Central Bank of India- 10 days prior to discuss the possibilities of a sharp reduction in the rates which might result in boosting the investment sentiment.
Banks usually in a normal year receive deposits of around Rs 9 crores by the way of incremental deposits in a fiscal year. Although in the month after demonetization banks collected over Rs 12.44 lakh crores in deposits over a month.
However, demand for loans, reflecting investment activity, has almost dried up. Reserve Bank of India’s data shows that bank credit rose 1.2 percent amounting to Rs 73 lakh crore from April 1 to December 9 which is part of the fiscal year- the 1.2 percent rise is way more sluggish than the 6.2 percent rise amounting to Rs 69.6 lakh crore in same period almost a year ago. Deposits were seen rising to 13.6 percent which amounts to Rs 105.9 lakh crore compared with a previously recorded 7 percent rise to Rs 91.8 lakh crore in the year earlier.
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