Home loan rates not to rise in near future, says FM

Addressing reporters after a meeting with the chairmen and managing directors of state-owned banks to review their operations in 2007-08, he also said that home loan rates were unlikely to go up since the RBI had modified the portfolio norms. The central bank had sharply reduced the risk weightage for loans up to Rs 30 lakh to 50 per cent from 150 per cent.

“They (banks) are quite happy that only CRR has been hiked and policy rates have been untouched. They don’t expect the CRR hike to impact interest rates. So going forward, in the reasonable future I do not expect an increase in interest rates by PSU banks,” Chidambaram said. “So housing sector can expect higher credit flow without impacting interest rates,” he added.

Country’s largest bank, State Bank of India (SBI), today said that it does not expect interest rates to go up in the short term. “I do not see them (interest rates) rising in the near future,” SBI chairman O P Bhatt said.

During the last financial year, personal and home loans grew at a much lower rate compared with lending to commercial real estate and capital markets. While home loans to individuals grew 16.44 per cent to touch Rs 1,48,489 crore as on March 31, 2008, personal loans (excluding vehicle and educational loans) grew only 10.93 per cent. Credit flow towards capital market activities, however, jumped 47.17 per cent to Rs 29,027 crore. Similarly, lending towards commercial real estate grew 45.76 per cent to Rs 64,812 crore during the last financial year.

The finance minister said he expected the state-run banks to perform strongly in the current financial year and urged them to review their derivative portfolios and make sure customers understood them fully.