The wholesale price index (inflation) has touched 11.05% for the week ended June 7-highest in 13 years and earlier the Reserve Bank of India in order to control inflation had hiked repo rate following this bankers are planning to increase both lending and deposit rates in the next one month. Another hike in interest rates by the central bank looks on the cards.
The RBI will be holding its quarterly policy review on July 29, after this bankers are expecting a hike in repo rate (at which RBI lends money to other banks) or the cash reserve ratio (the amount banks have to park with the central bank) by 0.25-0.50 percentage points again.
Although most bankers have refused to commit on possible rate hikes, but on seeing the recent trends in the banking sector there are indications of increase in interest rates.
The smaller banks like Jammu & Kashmir Bank and Yes Bank, have already increase PLR rates now the larger have also started feeling the pinch of the RBI's rate hikes.
In fact, HDFC Bank, the third-biggest bank by market value, has raised its main lending rate by 25 basis points to 15.25% effective from June 18. The bank has also increased its deposit rates by 25 bps.
"Our cost of funds has gone up by 50 basis points in the last one year," an official said, explaining the rational behind the lending hike.
HDFC Bank stands at the fourth place who have hiked interest rates after the Jammu & Kashmir Bank upped its main lending rate by whopping 100 basis points (1%) to 14% last week and Yes Bank's 50 basis points hike to 16% on Monday.
Yes Bank has hiked its rates for one year to 18 months' deposits by 50 basis points to 9.50%. Kolkata-based United Bank of India (UBI) hiked deposit rates by 25 to 75 basis points.
Increase in inflation at 11.05% means that investors are losing money on deposits. The average rate on one-year fixed deposits is 8.5%, which means a loss of 2.45% for depositors (11.05 - 8.5).
Meanwhile not all banks are ready to hike fixed deposit rates. V Santhanaraman, executive director of Bank of Baroda, says banks cannot hike deposit rates much because that would mean an increase in lending rates as well. "As credit growth has been slow, banks cannot increase loan rates," he said. Santhanaraman informed that his bank will be taking decision next week on interest rates.
On the loan rates front, Suresh Gurumai, director, retail banking at Barclays Bank, said his bank will be taking decision later and expects some adjustment in interest rates. Meanwhile Prakash P Mallya, chairman and managing director of Vijaya Bank, expects no hike in home loan rates.
On the other hand two of the biggest banks - the State Bank of India and ICICI Bank - are, however, are in 'wait and watch' mode.
V Vaidyanathan, executive director of ICICI Bank, the country's largest private sector bank, on Thursday gave a statement in which he said bank would 'await cues from the RBI' next month before taking a decision on interest rates.
A senior State Bank of India official in an interview told DNA earlier this week that it is monitoring the situation. "There has been a hardening in rates but we need to take into account many other factors. We will meet on Saturday to take stock," the official said. SBI's main lending rate currently stands at 12.25%.
The CMD of Dena Bank, PL Gairola, said if inflation continues to remain high then the banks are not left with any choice but to hike deposit rates. But he expects that there will be moderation in prices in the medium term.
Monday, June 23, 2008
Friday, June 20, 2008
You may get loans against your post office savings
The Post Office Savings Bank Scheme is an agency which functions under the department of posts on behalf of the ministry of finance. It is the oldest and largest banking institution in the country.
There are around 14 crore account holders with the 1.5 lakh post offices across country; all these years have been denied credit against their investments in various savings schemes because the post offices are not authorized to give credit against investment in various savings schemes. Therefore people especially living in the rural areas are dependent on local moneylenders and banks for credit.
Jyotiradiya Scindia, union minister for state for communication and information technology has advised finance minister P Chidambarm to authorize department of post for sanctioning loan against investments in savings schemes such as National Saving Certificates (NSC), Kisan Vikas Patras (KVP) and other instruments of investments.
As per data available from department of post more than Rs 97,000 crore is deposited under the various schemes. Currently, under the NSC and KVP rules, many depositors can take loans from public sector banks by pledging their investment certificates under NSC and KVP as security. However, the department of post has not been authorized to sanction loan against such investment.
Scindia wrote a letter to the finance minister, he stated, “Many depositors particularly those residing in rural areas are facing difficulties in getting loans against their own deposits and have to approach local financers or banks which are using their discretion for sanctioning loans and charge high rate of interest.”
Scindia gave an advice that if the department of post is authorized to sanction loans against deposits made under small savings schemes it will be helpful for large number of small investors in accessing credit especially the rural people. This will also generate greater revenue, which had been badly impacted by the private couriers Companies.
In India the postal department has a huge network of more than 1, 55,000 post offices, the DoP is also looking at tie-ups with other banks for the distribution of housing loans in the rural areas. India Post in its bid to leverage its reach has also started retailing various financial products.
Currently India Post is selling mutual fund products of various banks with which it had a tie-up with UTI MF, Principal PNB AMC, Prudential ICICI and SBI Mutual Fund. It has also signed a joint venture pact with the Centurion Bank of Punjab for business in foreign exchange.
There are around 14 crore account holders with the 1.5 lakh post offices across country; all these years have been denied credit against their investments in various savings schemes because the post offices are not authorized to give credit against investment in various savings schemes. Therefore people especially living in the rural areas are dependent on local moneylenders and banks for credit.
Jyotiradiya Scindia, union minister for state for communication and information technology has advised finance minister P Chidambarm to authorize department of post for sanctioning loan against investments in savings schemes such as National Saving Certificates (NSC), Kisan Vikas Patras (KVP) and other instruments of investments.
As per data available from department of post more than Rs 97,000 crore is deposited under the various schemes. Currently, under the NSC and KVP rules, many depositors can take loans from public sector banks by pledging their investment certificates under NSC and KVP as security. However, the department of post has not been authorized to sanction loan against such investment.
Scindia wrote a letter to the finance minister, he stated, “Many depositors particularly those residing in rural areas are facing difficulties in getting loans against their own deposits and have to approach local financers or banks which are using their discretion for sanctioning loans and charge high rate of interest.”
Scindia gave an advice that if the department of post is authorized to sanction loans against deposits made under small savings schemes it will be helpful for large number of small investors in accessing credit especially the rural people. This will also generate greater revenue, which had been badly impacted by the private couriers Companies.
In India the postal department has a huge network of more than 1, 55,000 post offices, the DoP is also looking at tie-ups with other banks for the distribution of housing loans in the rural areas. India Post in its bid to leverage its reach has also started retailing various financial products.
Currently India Post is selling mutual fund products of various banks with which it had a tie-up with UTI MF, Principal PNB AMC, Prudential ICICI and SBI Mutual Fund. It has also signed a joint venture pact with the Centurion Bank of Punjab for business in foreign exchange.
Thursday, June 19, 2008
RBI issue notification for deposit norms for NBFCs
The Reserve Bank of India (RBI) issued a notification to the Non-banking finance companies (NBFCs) having net-owned funds (NOF) less than Rs. 200 lakh to freeze their deposits at current levels
Further in a notification RBI has also asked the asset finance companies (AFCs), having a minimum investment grade credit rating and CRAR (capital-to-risk assets ratio) of 12 per cent, to bring down public deposits to a level i.e. 1.5 times their NOF. RBI has told NBFCs to bring their public deposits to a level equal to their NOF by March 31, 2009.
As per notification companies which have become eligible to accept public deposits up to a certain level and have not accepted deposits up to that limit have been permitted to accept public deposit up to the revised ceiling. NBFCs who have reached NOF level of Rs 200 lakh have to get a certificate issued from statutory auditor on NOF.
RBI stated that these measures are being taken with an aim to strengthen the financials of all deposit taking NBFCs. The notification stated the main objective is to make sure that they raise the NOF to a minimum Rs 200 lakh“in a gradual, non-disruptive and non-discriminatory manner.” RBI further stated that the NBFCs which have not been able to achieve the prescribed ceiling within the set time can approach it for appropriate action on a case-by-case basis.
Further in a notification RBI has also asked the asset finance companies (AFCs), having a minimum investment grade credit rating and CRAR (capital-to-risk assets ratio) of 12 per cent, to bring down public deposits to a level i.e. 1.5 times their NOF. RBI has told NBFCs to bring their public deposits to a level equal to their NOF by March 31, 2009.
As per notification companies which have become eligible to accept public deposits up to a certain level and have not accepted deposits up to that limit have been permitted to accept public deposit up to the revised ceiling. NBFCs who have reached NOF level of Rs 200 lakh have to get a certificate issued from statutory auditor on NOF.
RBI stated that these measures are being taken with an aim to strengthen the financials of all deposit taking NBFCs. The notification stated the main objective is to make sure that they raise the NOF to a minimum Rs 200 lakh“in a gradual, non-disruptive and non-discriminatory manner.” RBI further stated that the NBFCs which have not been able to achieve the prescribed ceiling within the set time can approach it for appropriate action on a case-by-case basis.
Wednesday, June 18, 2008
Banks are increasing deposit rates to cope with high inflation
After the Reserve Bank of India had hiked repo rates by 0.25 percentage points the banks have started increasing deposit rates. A senior banker said this has led to rise in both the deposits as well as lending rates. Earlier banks had increased the lending rates. The increase in deposit rates is definitely going to bring cheers for depositors particularly for the retired persons and those who are mostly dependent on the interest income.
Banks sources informed that if needed the deposit rates may be revised upwards further, if inflation continues to rise. High rate of inflation affects the net return of a depositor on negative terms. Inflation at 8.75% has already considerably reduced net return of a depositor. It is understood that if inflation continues at the current rate, banks will be forced to revise both the lending as well as deposits rates upwards again.
Last month SBI had increased the deposit rates, following SBI, Oriental Bank of Commerce, Yes Bank and Bank of India have increased deposits rates by half a percentage point to one percentage point. Oriental Bank of Commerce has increased the rates for its special deposit scheme Asha Kiran (FDs for 400 days) to 9.75% for senior citizens. For the common man, the interest rate on 400-day deposits is 9.25%.
Yes Bank has increased the rates by 0.5 percentage points across all maturities. According to Yes bank sources, senior citizen depositors of Yes Bank will get a maximum of 10% on fixed deposits with a maturity of one year to 18 months. The others would receive 9.5% return.
SBI revised FD rates for 5-10 years by 0.5 percentage points to 9% while 3-5 years tenure was hiked by 0.35 percentage points. Senior citizens will get 0.5 percentages more.
Bank of India has also increased deposit rates up to 0.5 percentage point for various maturities. For maturities between one year and two years, the rates have been revised to 9.15%, against the earlier rate of 8.50%. For two to three years, the new rate is 9.25% as against earlier rate of 8.75%.
Similarly, fixed deposits of Bank of India of the maturity of three to five years will earn 9.50% interest, against the earlier 8.75%.
The sources said if the inflation continue to rise and crosses 10% mark, there will be another session of increase in the interest rates in the country.
Banks sources informed that if needed the deposit rates may be revised upwards further, if inflation continues to rise. High rate of inflation affects the net return of a depositor on negative terms. Inflation at 8.75% has already considerably reduced net return of a depositor. It is understood that if inflation continues at the current rate, banks will be forced to revise both the lending as well as deposits rates upwards again.
Last month SBI had increased the deposit rates, following SBI, Oriental Bank of Commerce, Yes Bank and Bank of India have increased deposits rates by half a percentage point to one percentage point. Oriental Bank of Commerce has increased the rates for its special deposit scheme Asha Kiran (FDs for 400 days) to 9.75% for senior citizens. For the common man, the interest rate on 400-day deposits is 9.25%.
Yes Bank has increased the rates by 0.5 percentage points across all maturities. According to Yes bank sources, senior citizen depositors of Yes Bank will get a maximum of 10% on fixed deposits with a maturity of one year to 18 months. The others would receive 9.5% return.
SBI revised FD rates for 5-10 years by 0.5 percentage points to 9% while 3-5 years tenure was hiked by 0.35 percentage points. Senior citizens will get 0.5 percentages more.
Bank of India has also increased deposit rates up to 0.5 percentage point for various maturities. For maturities between one year and two years, the rates have been revised to 9.15%, against the earlier rate of 8.50%. For two to three years, the new rate is 9.25% as against earlier rate of 8.75%.
Similarly, fixed deposits of Bank of India of the maturity of three to five years will earn 9.50% interest, against the earlier 8.75%.
The sources said if the inflation continue to rise and crosses 10% mark, there will be another session of increase in the interest rates in the country.
Wednesday, June 4, 2008
Bank of Rajasthan hikes its interest rates for NRE and FCNR (B)
On Tuesday Bank of Rajasthan hiked its interest rates for Non-Resident (External) rupee deposits (NRE) and Foreign Currency Non-Resident Deposits (Banks) FCNR(B).
A statement released by the bank stated the revised rates will be valid from June 1, 2008.
According to bank sources on Non-Resident (External) rupee deposits, the annual interest rates have been raised to 3.16 percent from 3.08 percent for one year to less than two years, with 3.46 percent from 3.18 percent for two years to less than three years and 3.81 per cent from 3.45 percent for three years and above.
The interest rate on FCNR (B) deposits in US dollar has been hiked to 2.41 percent from 2.33 percent (per annum) for time span of one year to less than two years with 2.71 percent from 2.43 percent (per annum) for two years to less than three years.
And for maturity of three years and above in the FCNR (B) category, the bank has hiked the annual interest rates from the earlier 2.70 percent to 3.06 percent for three years and above but less than four years. Likewise for the maturity of four years and above but less than five years, the new interest rate has been increased to 3.30 percent from the earlier 3.06 percent and for the five year period the rate of interest has been changed from 3.11 percent to 3.47 percent.
Meanwhile in Britain, also the interest rates on FCNR (B) deposits have also been revised from 5.06 percent to 5.40 percent for one year to less than two years and for time period between two and three years the bank has decided to increase it from 4.65 percent to 5.26 percent. For the three year period, the bank has decided to hike it from the earlier 4.62 percent to 5.21 percent.
Moreover the annual interest rates on FCNR (B) deposits in Euro have also been hiked from 4.21 percent to 4.34 percent for the period between one year and two year. For the maturity between two and three years the bank has hiked the interest rate from 3.78 percent to 4.23 percent while for the three year period, the bank has changed it from 3.68 percent to 4.11 percent.
A statement released by the bank stated the revised rates will be valid from June 1, 2008.
According to bank sources on Non-Resident (External) rupee deposits, the annual interest rates have been raised to 3.16 percent from 3.08 percent for one year to less than two years, with 3.46 percent from 3.18 percent for two years to less than three years and 3.81 per cent from 3.45 percent for three years and above.
The interest rate on FCNR (B) deposits in US dollar has been hiked to 2.41 percent from 2.33 percent (per annum) for time span of one year to less than two years with 2.71 percent from 2.43 percent (per annum) for two years to less than three years.
And for maturity of three years and above in the FCNR (B) category, the bank has hiked the annual interest rates from the earlier 2.70 percent to 3.06 percent for three years and above but less than four years. Likewise for the maturity of four years and above but less than five years, the new interest rate has been increased to 3.30 percent from the earlier 3.06 percent and for the five year period the rate of interest has been changed from 3.11 percent to 3.47 percent.
Meanwhile in Britain, also the interest rates on FCNR (B) deposits have also been revised from 5.06 percent to 5.40 percent for one year to less than two years and for time period between two and three years the bank has decided to increase it from 4.65 percent to 5.26 percent. For the three year period, the bank has decided to hike it from the earlier 4.62 percent to 5.21 percent.
Moreover the annual interest rates on FCNR (B) deposits in Euro have also been hiked from 4.21 percent to 4.34 percent for the period between one year and two year. For the maturity between two and three years the bank has hiked the interest rate from 3.78 percent to 4.23 percent while for the three year period, the bank has changed it from 3.68 percent to 4.11 percent.
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