Month: January 2021

HDFC Bank Q3: Continued growth momentum, provisioning buffer lend comfort

Banking & Finance

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HDFC Bank’s business update that was released over a week ago, reporting 16 per cent YoY growth in loans—way above the industry growth of 6.7 per cent, and strong traction in low cost CASA deposits, had suggested continued growth momentum for the private lender in the December quarter. In line with market expectations, HDFC Bank has delivered a healthy financial performance, reporting 18 per cent YoY growth in profit in December quarter, aided by healthy traction in corporate loans and trading gains, even as excess liquidity continued to weigh on the bank’s core net interest margin (NIMs).

But there were other key trends and management commentary that were keenly awaited. Post the RBI temporarily halting the bank’s acquisition of new credit card customers and all launches under its Digital 2.0 initiative in December, there have been concerns over the directive’s impact on the bank’s growth outlook and market share. The management post the Q3 results, stated that it is in the process of taking necessary remedial measures to strengthen its digital infrastructure and will update on the progress going ahead. Given that the credit card business has been a key driver of retail loan growth for the bank in recent years, near term growth and valuations could come under pressure, until there is more clarity on this front.

Recent management churn also adds an element of uncertainty. The key to the bank’s premium valuations will lie in tiding over these near term challenges.

That said, HDFC Bank continues to score over other players on its digital and technological drive, overall business momentum, strong operational metrics and higher provisioning buffer.

Impact of credit card business

Over the past few years, HDFC Bank has been gaining market share, amid lacklustre industry growth and challenges, thanks to its diversified loan mix. Hence, even as retail loan growth slowed in FY19 and FY20, strong growth in corporate loans, held the bank’s overall growth momentum. In the first half of the current fiscal too, even as the pandemic impacted retail credit growth, HDFC Bank’s corporate segment continued to deliver strong growth, aiding earnings.

In the latest December quarter, the management stated that retail disbursements have surpassed pre-Covid levels, thanks to the festive season. Corporate loans continued to register strong growth of 25.5 per cent in the December quarter (26.5 per cent in the September quarter).

While retail loan growth picking up is a positive, headwinds in the bank’s credit card business can impact growth in the near term. Since FY18, HDFC Bank’s growth in credit cards has been outpacing that of industry. Even in the first nine months of the current fiscal, HDFC Bank’s credit card has grown at a higher pace than the overall industry growth within the segment.

That said, in the December quarter HDFC Bank delivered a resilient performance, with strong traction in deposits alongside healthy growth in corporate loans aiding earnings. Low cost CASA deposits grew by a strong 29.6 per cent, offering cushion to NIMs. Importantly, the bank’s structurally low cost-to-income ratio is a key positive. In the December quarter cost-to-income ratio stood at 36.1 per cent as against 37.9 per cent for the corresponding quarter last year.

Prudent provisioning

While the bank’s reported GNPA ratio stood at 0.81 per cent, on a proforma basis (if the bank had classified borrower accounts as NPA after August 31, 2020 had it not been for the Supreme Court asset classification standstill), GNPA ratio would have been 1.38 per cent.

However, HDFC Bank has made contingent provisions on such accounts alongside Covid-related provisions. This should provide cushion to earnings if asset quality deteriorates here on. The bank holds floating provisions of ₹ 1,451 crore and contingent provisions of ₹ 8,656 crore as on December.

The bank’s NBFC subsidiary, HDB Financial Services, remains a weak link, which has witnessed uptick in bad loans—GNPA ratio at 5.9 per cent (proforma basis) up from 2.9 per cent last year.

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Finmin looks at BIC model after RBI raises concern over zero coupon bonds for PSBs recap

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With the RBI raising concern over the issuance of zero coupon bonds for recapitalisation of public sector banks (PSBs), the Finance Ministry is examining other avenues for affordable capital infusion including setting up of a Bank Investment Company (BIC), sources said.

Setting up a BIC as a holding company or a core investment company was suggested by the P J Nayak Committee in its report on ‘Governance of Boards of Banks in India’.

The report recommended transferring shares of the government in the banks to the BIC which would become the parent holding company of all these banks, as a result of this, all the PSBs would become ‘limited’ banks. BIC will be autonomous and it will have the power to appoint the board of directors and make other policy decisions about subsidiaries.

Capital infusion

The idea of BIC, which will serve as a super holding company, was also discussed at the first Gyan Sangam bankers’ retreat organised in 2014, sources said, adding it was proposed that the holding company would look into the capital needs of banks and arrange funds for them without government support.

It would also look at alternative ways of raising capital such as the sale of non-voting shares in a bid to garner affordable capital.

With this in place, the dependence of PSBs on government support would also come down and ease fiscal pressure.

To save interest burden and ease the fiscal pressure, the government decided to issue zero-coupon bonds for meeting the capital needs of the banks.

The first test case of the new mechanism was a capital infusion of ₹ 5,500 crore into Punjab & Sind Bank by issuing zero-coupon bonds of six different maturities last year. These special securities with tenure of 10-15 years are non-interest bearing and valued at par.

However, the RBI expressed concerns over zero-coupon bonds for the recapitalisation of PSBs. The RBI has raised some issues with regard to calculation of an effective capital infusion made in any bank through this instrument issued at par, the sources said.

Since such bonds usually are non-interest bearing but issued at a deep discount to the face value, it is difficult to ascertain net present value, they added.

As these special bonds are non-interest bearing and issued at par to a bank, it would be an investment, which would not earn any return but rather depreciate with each passing year.

Parliament had in September 2020 approved ₹ 20,000 crore to be made available for the recapitalisation of PSBs. Of this, ₹ 5,500 crore was issued to Punjab & Sind Bank and the Finance Ministry will take a call on the remaining ₹ 14,500 crore during this quarter.

Recapitalisation bonds

With mounting capital requirement owing to rising NPAs, the government resorted to recapitalisation bonds with a coupon rate for capital infusion into PSBs during 2017-18 and interest payment to banks for holding such bonds started from the next financial year.

This mechanism helped the government from making capital infusion from its own resources rather utilised banks’ money for the financial assistance.

However, the mechanism had a cost of interest payment towards the recapitalisation bonds for PSBs. During 2018-19, the government paid ₹ 5,800.55 crore as interest on such bonds issued to public sector banks for pumping in the capital so that they could meet the regulatory norms under the Basel-III guidelines.

In the subsequent year, according to the official document, the interest payment by the government surged three times to ₹ 16,285.99 crore to PSBs as they have been holding these papers.

Under this mechanism, the government issues recapitalisation bonds to a public sector bank which needs capital. The said bank subscribes to the paper against which the government receives the money. Now, the money received goes as equity capital of the bank.

So the government doesn’t have to pay anything from its pocket. However, the money invested by banks in recapitalisation bonds is classified as an investment which earns them an interest.

In all, the government has issued about ₹ 2.5 lakh crore recapitalisation in the last three financial years. In the first year, the government issued ₹ 80,000 crore recapitalisation bonds, followed by ₹ 1.06 lakh crore in 2018-19. During the last financial year, the capital infusion through bonds was ₹ 65,443 crore.

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Readers’ Feedback – The Hindu BusinessLine

Personal Finance

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I have been a regular reader of BusinessLine almost from its first edition way back in 1994. I was actually very disappointed when the Sunday edition was discontinued a few years ago. It’s reintroduction is really a welcome step.

––Varadarajan MN, Hosur

It’s good to read BL on Sundays. Would request for more articles for those who do not know much about investing and more importantly about personal finance. Thank you! Keep up the good work.

––Anonymous reader (through our WhatsApp number/Scan code

for feedback)

BusinessLine Research Bureau says: Thank you for your feedback. We have two pages of personal finance — ‘Your Money’ and ‘Safe Investing’ — every Sunday. We do write on basics from time to time across these pages.

We also have a weekly feature for new entrants in the ’Simply Put’ column in the ‘Safe Investing’ page.

You must have an app. Where are your podcasts?

––Hitesh D Gajaria

BLRB says: We do have an app that can be downloaded from app stores. You can access our podcasts through our website, Spotify or Google Podcasts.

I’m a new entrant to the BL readers’ club. I read BL Portfolio and I’m in love with it. Excellent contribution, keep improving, and try to make it less technical for ordinary investors.

––Uday Tendulkar, Kandivali, Mumbai

BLRB says: Welcome to BL. Thanks for your feedback and suggestion.

I recently started reading Business Line. The Sunday edition is excellent. I am impressed with Portfolio Star Track MF Ratings. I have a suggestion: please print the MF Ratings pages back-to-back, so that the same can be preserved as a single page for some time, for analysis and for helping first-time investors.

––Srinivas K

BLRB says: Thank you. We will surely consider your suggestion.

Your stock recommendations are the best.

––Kishan

Your business and market content is very insightful. Please publish an article giving guidelines for new retail investors covering 1) the sign-up process 2) mentors 3) recommended literature to follow 4) market leaders’ opinion.

––Santhosh Subramaniam, Coonoor

This refers to the ‘New year resolutions for your finances’ story published on January 3. Making our will, getting our family sufficiently insured and re-balancing our asset allocation in the times of the stock market touching new heights should be the top-most priorities for any individual investor.

If this pandemic has taught us the best financial lesson, it is to spend judiciously and save for times like these.

—Bal Govind

This is in the context of the article, ‘Do it yourself: Why PSU stocks can be a good bet’ that appeared on BusinessLine on January 3. Useful information. It was very helpful to pick PSU stocks. Appreciate it.

––Seetarama Rao

This is in the context of the article, ‘Simply put: Indexation benefit’ that appeared on BusinessLine on January 10. How immaculately the concept of ‘iIndexation’ has been explained by Maulik Madhu. The column ‘Simply Put’ is a great idea and definitely works towards its core objective of creating financial awareness.

––Suheil Merchant

This is in the context of the article, ‘Investica app review: For both novices and experts’ that appeared on BusinessLine on January 10. I think this is the second in this series. This is a nice start. Can you do some study on Fincart and INDmoney in the next article?

––Anoop Singh

BLRB says: Thank you. We have also reviewed Groww, Paytm Money, myCAMS and MF Utilities in this series. We will also look into other apps.

This is in the context of the article, ‘How to choose auto component stocks’ that appeared on BL on January 10. Super analysis.

––Samrat Shah

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Savings Account Vs Special FDs: Which Can Be A Good Bet For Senior Citizens?

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A Comparison Between Bank FDs and Savings Accounts

Currently, the State Bank of India (SBI) provides the general public with a 5.4 percent interest rate on a five-year FD whereas an interest rate of 6.20% is provided to senior citizens under the special FD scheme of the bank. The special FD scheme for senior citizens of ICICI Bank is named ICICI Bank Golden Years. The bank pays a higher interest rate of 80 bps on such deposits. ICICI Bank Golden Years FD scheme proposes an interest rate of 6.30 percent per annum for senior citizens. HDFC Bank’s special FD scheme is named HDFC Senior Citizen Care for senior citizens. On these deposits, the bank is giving a 75 bps higher interest rate as of now. Which means that the interest rate applicable to the FD will be 6.25% for a tenure of more than 5 years if a senior citizen goes for HDFC Bank Senior Citizen Care FD. In the range of 1-1.5 percent on these FDs, premature withdrawal penalties exist. As of now, these FDs are only accessible until March 31. That being said, Bandhan Bank is promising an interest rate on its savings account of up to 7.15 percent for a minimum and maximum balance limit of Rs 1 lac up to Rs 50 Cr.

5 Best Savings Accounts With Higher Interest Rates

5 Best Savings Accounts With Higher Interest Rates

Banks Interest Rates per annum
Bandhan Bank 3 to 7.15%
IDFC First Bank 3.5 to 7%
RBL Bank 4.75 to 6.75
IndusInd Bank 4 to 6%
Yes Bank 4 to 5.5%

Our take

Our take

Considering the long tenure of 5 years, we believe that one should not lock in their whole money in special FDs instead of diversifying their investments across different investment vehicles. When it comes to other investment options for senior citizens apart from banks FDs, Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana(PMVVY), and Post Office Monthly Income Scheme(POMIS) are taken first into consideration. With a maturity period of 10 years PMVVY comes with an interest rate of 7.4% along with monthly, quarterly, semi-annual or annually payout options.

Whereas for a maturity period of 5 years which can be further be extended to 3 years a senior citizen can deposit up to a limit of Rs 15 lakh under SCSS and can reap good returns at 7.4% per annum. Finally, coming to POMIS it also comes with a tenure of 5 years with an interest rate of 6.6%, but the best takeaways of this scheme is that it gives you a monthly payout option as the name suggests. By summing up you can diversify your investment across special FDs and savings account with higher interest rates if you are going to park higher amount. That being said, one should note that the bank can adjust the interest rate without any advance warning while holding the money in a savings account, so one should go for special FDs as the interest rate will remain stable for the entire tenure or lock-in period.



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How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

Personal Finance

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Planning

oi-Vipul Das

|

The National Pension System (NPS) Tier II Account is an add-on account that allows you the versatility to contribute and withdraw from multiple NPS schemes without any exit charge. NPS Tier II account has no lock in duration, whereas NPS Tier I Account has a lock in until 60 years of your age. Investment specialists claim investors can use the NPS Tier II Account as a replacement for the savings account of a bank. You can run the NPS tier II account as a savings account without a cheque book, but for each transaction you will have to pay transaction fees. Without holding an NPS Tier I account, depositors can not launch an NPS Tier II account. But if you’re a central government employee and have received a deduction under Section 80C for investment rendered to the Tier II account, the contribution made to the NPS Tier II account is not liable for any tax benefits, in which circumstance the amount so deposited will have 3 years of lock-in duration.

Under the NPS, NPS Tier II holders are entitled to pick any fund manager. Eight fund managers, namely SBI, UTI, LIC, HDFC, ICICI, Kotak, Reliance and Aditya Birla Sun Life Pension Fund, are currently in operation. For the NPS Tier 2 account, there is no minimum balance criteria or a minimum annual contribution. As long as the taxation of withdrawals from the NPS Tier II Account is important, no clear cut-off clause is given by the issuer. That being said, only the benefits on withdrawals will be taxable,

How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

5 Reasons Why You Must Go For NPS Tier II Account

Two types of accounts are offered by the National Pension System (NPS): NPS Tier I and NPS Tier II. Tier I is a mandatory pension account, whereas Tier II is an additional facility for owners of NPS Tier I accounts that can be accessed at the subscriber’s convenience. The NPS Tier-2 account is market-related and there are some benefits, according to the PFRDA or Pension Fund Regulatory and Development Body, for which one can have a more transparent NPS Tier-2 account:

  • In order to benefit from competent fund management to achieve superior returns, an NPS Tier II subscriber is welcome to select any of the approved Pension Fund (PF) and Investment Options, as in the NPS Tier I account.
  • NPS is a market-linked offering and can evaluate an acceptable asset allocation pattern (including equity, corporate bonds and government securities) under the specified limit to derive maximum returns, based on the risk tolerance of the subscriber.
  • NPS holds the advantage of being the nation’s cheapest possible pension product. Due to efficiency of scope in system implementation processes, the overall costs are minimal in NPS. Also, because of the compounding impact and negligible costs incurred by the subscriber, accumulation of the retirement corpus over a period is intensified.
  • For Central Government employees subject to a lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961, special tax advantages on contributions made to Tier II are open. The capital gains resulting from investments in Tier II are subject to taxation at a nominal rate
  • It is possible to run the NPS Tier II account (including withdrawals) using an online/mobile application. Subscribers are now eligible to transfer funds to NPS Tier I from their Tier II account (pension account).



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How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

Personal Finance

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Planning

oi-Vipul Das

|

The National Pension System (NPS) Tier II Account is an add-on account that allows you the versatility to contribute and withdraw from multiple NPS schemes without any exit charge. NPS Tier II account has no lock in duration, whereas NPS Tier I Account has a lock in until 60 years of your age. Investment specialists claim investors can use the NPS Tier II Account as a replacement for the savings account of a bank. You can run the NPS tier II account as a savings account without a cheque book, but for each transaction you will have to pay transaction fees. Without holding an NPS Tier I account, depositors can not launch an NPS Tier II account. But if you’re a central government employee and have received a deduction under Section 80C for investment rendered to the Tier II account, the contribution made to the NPS Tier II account is not liable for any tax benefits, in which circumstance the amount so deposited will have 3 years of lock-in duration.

Under the NPS, NPS Tier II holders are entitled to pick any fund manager. Eight fund managers, namely SBI, UTI, LIC, HDFC, ICICI, Kotak, Reliance and Aditya Birla Sun Life Pension Fund, are currently in operation. For the NPS Tier 2 account, there is no minimum balance criteria or a minimum annual contribution. As long as the taxation of withdrawals from the NPS Tier II Account is important, no clear cut-off clause is given by the issuer. That being said, only the benefits on withdrawals will be taxable,

How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

5 Reasons Why You Must Go For NPS Tier II Account

Two types of accounts are offered by the National Pension System (NPS): NPS Tier I and NPS Tier II. Tier I is a mandatory pension account, whereas Tier II is an additional facility for owners of NPS Tier I accounts that can be accessed at the subscriber’s convenience. The NPS Tier-2 account is market-related and there are some benefits, according to the PFRDA or Pension Fund Regulatory and Development Body, for which one can have a more transparent NPS Tier-2 account:

  • In order to benefit from competent fund management to achieve superior returns, an NPS Tier II subscriber is welcome to select any of the approved Pension Fund (PF) and Investment Options, as in the NPS Tier I account.
  • NPS is a market-linked offering and can evaluate an acceptable asset allocation pattern (including equity, corporate bonds and government securities) under the specified limit to derive maximum returns, based on the risk tolerance of the subscriber.
  • NPS holds the advantage of being the nation’s cheapest possible pension product. Due to efficiency of scope in system implementation processes, the overall costs are minimal in NPS. Also, because of the compounding impact and negligible costs incurred by the subscriber, accumulation of the retirement corpus over a period is intensified.
  • For Central Government employees subject to a lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961, special tax advantages on contributions made to Tier II are open. The capital gains resulting from investments in Tier II are subject to taxation at a nominal rate
  • It is possible to run the NPS Tier II account (including withdrawals) using an online/mobile application. Subscribers are now eligible to transfer funds to NPS Tier I from their Tier II account (pension account).



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Reserve Bank of India – Speeches

Speeches

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April 14, 2015




Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.




With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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HDFC Bank reports 18% rise in Q3 net profit

Banking & Finance

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Private sector lender HDFC Bank reported an 18.1 per cent increase in its net profit for the third quarter this fiscal at Rs 8,758.29 crore.

The bank had a standalone net profit of Rs 7,416.48 crore in the same period last fiscal.

For the quarter ended December 31, 2020, HDFC Bank’s net revenues (net interest income plus other income) grew to ₹ 23,760.8 crore from ₹ 20,842.2 crore a year ago.

Net interest income (interest earned less interest expended) for the quarter ended December 31, 2020 grew by 15.1per cent to ₹ 16,317.6 crore from ₹ 14,172.9 crore for the same period last fiscal.

In a statement on Saturday, the bank said this was “driven by advances growth of 15.6 per cent, and a core net interest margin for the quarter of 4.2 per cent”.

Provisions and contingencies for the third quarter this fiscal rose to ₹ 3,414.1 crore as against ₹ 3,043.6 crore for the quarter ended December 31, 2019. “Total provisions for the current quarter include contingent provisions of approximately ₹ 2,400 crore for proforma NPA as described in the asset quality section below,”it said.

The Gross and Net non-performing assets were at 0.81 per cent of gross advances and 0.09 per cent of net advances as on December 31, 2020 respectively. The restructuring under RBI resolution framework for Covid-19 was approximately 0.5 per cent of advances.

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HDFC Bank reports 18% jump in net profit to Rs 8,758 crore; gross NPA ratio at 0.81%

Banking & Finance

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In terms of asset quality, HDFC Bank noted that gross and net non-performing assets were at 0.81% of gross advances and 0.09% of net advances.

India’s largest private sector lender HDFC Bank, today reported an 18.1% on-year rise in net profit during the fiscal third quarter. HDFC Bank’s standalone net profit stood at Rs 8,758 crore in the October-December quarter against Rs 7,416 crore in the same period last year. The bank’s net revenue was recorded at Rs 23,760 crore against Rs 20,842 crore from the year-ago period. On a consolidated basis, HDFC Bank’s net profit for the period under review was Rs 8,769 crore, against Rs 7,659 crore in the previous year.

HDFC Bank’s net interest income for the previous quarter grew 15.1% to Rs 16,317 crore helped by growth in advances, which was at 15.6%. The liquidity coverage ration of HDFC Bank was reported to be at 146%, well above the regulatory limit. Other income in the said period was at Rs 7,443 crore, 31.3% of the net revenue. 

Related News

Pre-provisioning operation profit for the last quarter came in at Rs 15,186 crore, 17.3% higher on-year basis. HDFC Bank’s provisions during the quarter were Rs 3,414 crore of which Rs 691 crore were loan loss provisions while the reset was general provisions. Total deposits of the private sector lender were up 19% to Rs 12 lakh crore. Total advances as of December end stood at Rs 10.8 lakh crore an increase of 15.6%. Domestic advances grew 14.9%. 

Also Read: RBI open to examining bad bank proposal, says Shaktikanta Das; wants lenders to identify risks early

In terms of asset quality, HDFC Bank noted that gross and net non-performing assets were at 0.81% of gross advances and 0.09% of net advances. The lender said that if it had classified borrower accounts as NPAs despite the Supreme Court order to not declare accounts as NPAs, the gross NPA ratio would have been 1.38%. 

HDFC Bank’s net interest income and net profits for the third quarter the current fiscal year have beaten the estimates of at least three domestic brokerage and research firms. Shares of the lender continue to perform strongly on the bourses, even after having surged 38% in the last three months. Brokerage firm Motilal Oswal and Emkay Global have a ‘Buy’ rating on the scrip with a positive outlook.

Also Read: Rakesh Jhunjhunwala on selling spree; big bull cuts stake in Titan among other stocks

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Home Loans: Check The Top 15 Banks With The Cheapest Interest Rates

Personal Finance

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Investment

oi-Vipul Das

|

As a consequence of the Covid-19 outbreak, the Indian economy is still reeling from the disruptions, as an outcome of which the Reserve Bank of India has held the repo rate at a historic low of 4 percent to raise credit and support an economic recovery. This has prompted banks to lower their floating interest rates on home loans too. A big factor affecting the overall amount of your home loan is the interest rate. With higher value and longer duration of home loans, the interest rate on the loan can have long-term financial consequences for investors. Having home loans at a lower interest rate will not only decrease the EMI, but also the payout of interest.

Therefore, borrowers should aim to get housing loans at the lowest interest rate available. Their credit score, which has now been more important than ever before, is another thing that prospective homeowners must remember. They need to realize that these repo-linked home loans provided by the banks normally often comprise a range of credit risk. In other words, for all qualifying borrowers with stellar credit scores above 750, the lowest potential interest rates are typically set. The interest rate gap could be about 100 basis points for borrowers with outstanding and bad credit ratings.

Even so, in order to get the lowest possible rates, you will be well-advised to confirm your credit scores are decent if you are a potential property owner. Remember, the interest rate applied to you will be dependent on the size and location of your preferred home, your age, salary, gender, credit history, loan amount, lender, and other terms and conditions set by your bank. By summing up all if you are planning to purchase a home loan now, below are the cheapest rates that are currently provided by top 15 banks of India.

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Sr No. Banks ROI in % per annum
1 Kotak Mahindra Bank 6.75 to 8.45
2 Union Bank of India 6.80 to 7.40
3 Punjab National Bank 6.80 to 7.75
4 HDFC Bank 6.80 to 7.85
5 SBI >=6.80
6 Central Bank 6.85 to 7.30
7 Bank of Baroda 6.85 to 8.20
8 UCO Bank 6.90 to 7.25
9 Punjab & Sind Bank 6.90 to 7.60
10 ICICI Bank 6.90 to 8.05
11 Bank of Maharashtra 6.90 to 8.40
12 Axis Bank 6.90 to 8.55
13 Canara Bank 6.90 to 8.90
14 IDBI Bank 6.90 to 9.90
15 Bank of India 6.95 to 8.35

Types of interest rates on home loan

Types of interest rates on home loan

Fixed Interest Rate: The rate maintains even across the tenure of the loan under this. The rate maintains even across the tenure of the loan in this computing framework. Since the rate stays constant, there will not be an adjustment in interest payments. After meeting a certain period of the loan tenure, you will be eligible to switch to the floating rate scheme based on the bid. Here, the interest rates are known to the borrower since the rate stays constant. If there is a rise in lending rates, the loan can be insulated from regular rate increases and prevents money in a longer time. As the interest variable stays fixed, if the regular loan rates decline, you will not gain.

Floating Interest Rate: Interest charges on a home loan are subjected to the bank’s latest maximum lending rates. The interest rate is related to the bank’s recent available rate, which in particular relies on numerous variables such as monetary policy of RBI and modifications of the lending rate, action of the bank to the adjustment, and so on. The most obvious benefit of going for the floating rate is that you get the benefit of being charged on the basis of the current rate. You save on interest charges if the rates drop. In extreme circumstances, the loan needs to face the burden of being paid a higher rate if the regular rates increase. Floating home loan interest rates, however, are lower than the fixed home loan interest rates.

Considerations that decide the interest rate on home loan

Considerations that decide the interest rate on home loan

There are many variables influenced by the background and income category that impact the offering of the rate bank. To aid you negotiate a better cost, let’s glance at some of the key variables.

  • Lenders are now using the credit score beforehand to adjust home loan interest rates over and above the external benchmark limit. A higher rate of interest on home loans generates a lower credit rating and inversely.
  • When you request for a home loan, your credit history is carefully scrutinized before processing. This includes reviews on the background and present credit. For a decent credit score, you’re up to date, you’re sure to get a fair offer. As well, an excellent credit history provides you the trust to make a majority.
  • It also has an impact on the location and surrounding. If the estate is located in a prime position or is purchased from a reputable builder/agency, on the interest rate side, you should look forward to an ideal rate.
  • The loan amount suggested has the potential to affect the rate. The general rule is that the higher the value of the loan the lower the rate you will get.
  • The interest rates issued often rely on the kinds of home loan you use. Standard loans such as home buying will appear at regular rates, although a higher rate will be applied to their alternatives such as home renovation.
  • When the bank agrees on the interest rate to be given to you, the loan tenure selected has an influence. Odds are that the interest rate provided is lower if you’re able to settle for a lengthy period.
  • Compared to the self-employed, salaried applicants are expected to get a marginally lower rate, due to the uncertainties present. For salaried and self-employed employees, banks hold different slabs.



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