MUMBAI, MAR 1: The Reserve Bank of India's decision to cut the cash reserve ratio (CRR), bank rate and repos rate will make housing loans more cheaper with housing finance companies and banks seen cutting interest rates on their loans. The inflow of additional resources via the CRR cut is estimated to be at Rs 3,500 crore. "Now that the Reserve Bank has signalled a lower interest rate regime, banks and housing finance agencies will drop interest rates," said a GIC HF official. For banks, it would now be easier to meet finance minister, Yashwant Sinha's target of 3 per cent of incremental bank deposits to be directed toward the housing sector."Housing finance intermediaries will reduce rates given that the Reserve Bank had allowed them to charge differential interest (to housing finance intermediaries) provided these were below the appropriate prime lending rates". Up to February 12, incremental deposit growth in the current fiscal was to the tune of Rs 86,308 crore. The overall minimum target for 1997-98as well as for 1998-99 for housing finance allocation by scheduled commercial banks was fixed at 1.5 per cent of the industry's incremental deposits of the previous year or the amount of housing finance allocation fixed for the previous year, whichever was higher.Leading the pack of aggressive entrants into the housing sector are the State Bank of India (SBI) and Bank of India (BoI). On Saturday, SBI chairman GG Vaidya said the bank's target for the housing finance was already over three per cent during 1998-99. "At 3 per cent of the incremental deposits, we need to deploy about Rs 700 crore worth of funds in the housing sector. Against this, we have already targeted Rs 1,000 crore worth of housing loans disbursement this year itself," Vaidya said.Going by the new ceiling of three per cent, as announced by the finance minister, the aggregate exposure of the banks for domestic housing finance sector will exceed Rs 4,000 crore during 1999-2000, say HFC officials. "It is a safe investment and the bank willopt for a subsidiary during current fiscal," BoI chairman and managing director, S Rajagopal had earlier said. According to him, BoI is expected to have an incremental deposit of Rs 4,000 crore during 1998-99. "Though BoI has so far a mixed portfolio of both direct and indirect exposure for housing finance, it will now focus more on direct exposure in housing," Rajagopal said.
