Govt banks will not raise home loan rates

In a meeting with chairmen of all public sector banks, finance minister P. Chidambaram urged them 8220;not to raise interest rates on home loans8221;...

In a meeting with chairmen of all public sector banks PSBs, finance minister P. Chidambaram urged them 8220;not to raise interest rates on home loans8221;, and added 8220;they have unanimously agreed to the same.8221; Talking to media persons, O.P. Bhatt, chairman, State Bank of India, said, 8220;Almost 90 per cent of home loans are taken by middle and lower middle class and this will help ease pressure on potential customers.8221;

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: 8220;An increase of 25 basis points can happen depending on the funds position and net interest margin.8221;

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, 8220;Investment in education is a long term capital as it will build future capacity of economy and hence it should be promoted.8221; 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 there8217;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, 8220;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.8221; Last year the combined NPAs of all PSBs stood at 1.32 per cent; the FM expects it to remain below that.