The State Bank of Travancore offers online home loan at 8% interest

The State Bank of Travancore has given a double boost to the sagging home loan business, offering home loans at 8% for one year as against the current rate of 10.25%, and offering home loan applications on the net.

SBT managing director A K Jagannathan said here that the twin moves were expected to provide a shot in the arm for the bank’s home loan business as well as giving a stimulus to the housing sector.

In addition, the bank will offer car loans
to customers at 10% for one year, as against the existing rate of 11.5%. Mr Jagannathan said the special interest rates for one year would revert to the existing rate after the term, and the new rates would depend on the prime lending rates existing at that time.

He said SBT was working on strategic initiatives and new businesses and was aspiring to be one of the top five banks in the country. Towards this end, mobile banking business was also on the bank’s radar, he said.

SBT is the leader in Kerala in NRI remittances and the bank has so far recorded remittances to the tune of Rs 13,000 crore this fiscal. Mr Jagannathan said SBT was also the fourth largest among banks in the country in the car loan portfolio.

The bank has tied up with Avenues India for e-commerce facilities, which will enable its customers to be connected to over 2,500 e-merchants across the country and conduct transactions in a safe and secure manner.

SBT’s net profit for the first three quarters of 2008-09 was Rs 415.81 crore, as against Rs 236.91 crore in the corresponding period of the previous year. The total business of the bank crossed the Rs 71,000 crore milestone at the end of the third quarter.

Read More From:Economic.indiatimes.com

For special home loan scheme LIC ignored by Indian Govt.

State-owned banks, which have included free life insurance cover in their special home loan package, have mostly preferred to do business with their life insurance subsidiaries rather than state-owned Life Insurance Corporation of India.

On December 15, all state-owned banks announced a special home loan package that included free life insurance cover, in which premiums will be paid by the respective banks.

A tendering process was carried out by banks to choose life insurers, and LIC got orders from only eight banks, a source said. Total number of government-owned banks in the country is 27, including State Bank of India and its six associate banks.

When the package was announced, it was expected LIC would get maximum business from these banks, since both are owned by the state. LIC officials were not available for comment. While SBI owns 74 per cent in SBI Life Insurance Company, Canara Bank and Bank of India hold 51 per cent each in their respective companies. LIC has devised a scheme called Group Term Insurance Scheme for Special Home Loan Package that will be rolled out from March 1.

Premium pinches
Most public sector banks were of the view insurance premium is likely to result in loss for the bank. “It may happen the premium amount paid by the bank could eat up the profit earned by them in this special home loan scheme,” a banking industry official said.

Premiums paid by banks are likely to be Rs 2-3 for Rs 1,000 sum assured. Premium amount will depend on amount outstanding. In case a person defaults on the home loan, premiums will be charged on the amount outstanding plus interest.

“Banks would have made profit even if charging lower interest rates if the premium component was not there,” said an official at a state-owned bank. The interest rate bank charges for the special scheme is 8.5 per cent for loans up to Rs 5 lakh and 9.25 per cent for loans up to Rs 20 lakh. Duration of re-payment period is maximum 20 years for all tenures under this scheme.

Interest rates will be set for five years. After five years, borrower will have the option for going for a fixed rate or floating rate of interest. The special home loan package will be applicable for new loans that will be sanctioned up to June 30.
Source:business-standard.com

IDBI Home Finance

Even as a final decision on the sale of IDBI Home Finance (IHFL) is pending, the mortgage arm of IDBI Bank has sought time until March 31, 2009, from the National Housing Bank (NHB) to comply with the revised risk weight norms.


Under the new risk weight mechanism prescribed by NHB, IHFL needed an additional Rs 60.26 crore from December 2008 to maintain a capital adequacy ratio (CAR) of 12 per cent.

According to the earlier norms, the IDBI home finance subsidiary’s capital adequacy ratio was 14.7 per cent at the end of November 2008, but under the new guidelines applicable since December, CAR fell to 9.78 per cent.

Confirming the development, an NHB official said, “We have received a letter from IHFL in this regard. We are reviewing the reasons behind non-compliance.” The housing finance regulator needs to assess the steps that IHFL was taking to comply with the norms, he added.

IDBI Bank, which has put the home finance arm on the block, had cited the additional capital requirement as one of the reasons for the sale of IHFL. The proposal to sell the company, where Dewan Housing Finance is the highest bidder, was deferred at the last board meeting as the government sought more time to study the move.