Govt banks will not raise home loan
rates
FM on Banking: Moderate
credit to risk-prone sectors
February 5: In a meeting
with chairmen of all public sector banks (PSBs),
finance minister P. Chidambaram urged them
"not to raise interest rates on home
loans", and added "they have unanimously
agreed to the same." Talking to media
persons, O.P. Bhatt, chairman, State Bank
of India, said, "Almost 90 per cent of
home loans are taken by middle and lower middle
class and this will help ease pressure on
potential customers."
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Following the recent monetary
policy, the FM requested PSBs to moderate
credit to risk-prone sectors like real estate,
capital markets, non banking finance companies
(NBFCs) and commercial loans. The banks have
agreed to moderate their lending to these
areas in next three to six months.
On the move to increase prime
lending rate (PLR) as a result of the 25 basis
point rise in repo rate by Reserve Bank of
India, banks are of the view that they will
review their financial position in order to
see if the PLR has to be revised said Prakash
P. Mallya, CMD, Vijaya Bank: "An increase
of 25 basis points can happen depending on
the funds position and net interest margin."
The FM said interest rates
for education loan upto Rs 4 lakh have to
be maintained between 10.5 and 11 per cent.
Commenting on this move, M.B.N. Rao, CMD,
Canara Bank said, "Investment in education
is a long term capital as it will build future
capacity of economy and hence it should be
promoted." Another agenda that was a
part of discussion was to raise SME lending
and increase low cost deposits.
Expressing satisfaction with
the performance of PSBs and credit growth,
Chidambaram said there's ample liquidity.
He said that the deposits have increased by
22.5 per cent as on December 31, 2006 over
the previous year while bank credit has grown
by 30.2 per cent.
On non performing assets
(NPA), the FM said, "NPAs are fine though
the NPA on personal loan and credit card front
is higher than average and PSU banks will
moderate in that area." Last year the
combined NPAs of all PSBs stood at 1.32 per
cent; the FM expects it to remain below that
Source: Indian Express
