The Monopolies and Restrictive Trade Practices Commission (MRTPC) had sent a letter to about half a dozen banks last month, seeking details on how they had determined the interest rate increases on their housing loans.
Banks had raised the interest rates on loans by as much as 350 basis points although the cost of deposits had increased by a maximum of 200 basis points. With the deposit rates having softened from the April 2007 levels, banks have decided to pass on the benefits but only to the new borrowers.
Policy rates are not likely to increase in 2008 but a cut in repo rate too is uncertain.
At the start of April, State Bank of India (SBI) and ICICI Bank, the country's two largest banks, reviewed the situation. They felt the resource-raising madness was over and that interest rates on bulk deposits would drop automatically with credit growth expected to temper between June and September.
ICICI Bank, the country's second-largest bank, has stopped lending to borrowers from the sub-prime segment, while the biggest player in small loans, Citigroup, has made its processes more stringent.
ICICI Bank, the country's second largest bank, has sold roughly 45 per cent of its sticky home loans to the Asset Reconstruction Company India Ltd (Arcil) in a first step towards creating a market for retail loans that have turned bad.ICICI Bank sold Rs 360 crore of non-performing home loans at a price around the book cost, confirmed Rajiv Sabharwal, senior general manager, ICICI Bank.
After nearly three quarters of generosity , banks are now facing pressure to reduce deposit rates.
We are focusing on how to make banking affordable for the customer. The bank is bullish on retail business, says Suresh Gurumani.
The interest rates on deposits continue to be high despite ample liquidity due to monetary policy uncertainty and expectations that liquidity would tighten later this year. Banks are still offering peak interest rates of 9 to 9.5 per cent on deposits
The loan portfolio of banks has grown by Rs 54,908 crore (Rs 549.08 billion) till September 14, representing only 3.6 per cent growth. During the same period last year, banks had lent Rs 147,657 crore (Rs 1,476.57 billion), a rise of 10.5 per cent.
Banks are facing increasing delinquencies by overleveraged mid-sized companies, now caught in hardships due to changes in their operating environment.
Prudential ICICI's managing director, Shikha Sharma, talks about how the journey has been so far and also why she thinks unit-linked insurance plans are the best allocators of long-term funds.
Public sector banks, in a frenzy to cash in on the retail credit boom during the three years beginning 2003-04
The RBI had raised the issue with thegovernment, stating that foreign banks buying majority stakes in non-deposit-taking NBFCs (NBFC-ND) would provide room for regulatory arbitrage.
The two had signed an operating agreement for cross-selling each other's products recently.
Srei Infrastructure Finance last month sold 50 per cent stake in a part of its business equipment financing arm to France's largest bank BNP Paribas for Rs 775 crore
Corporates being compelled to pay higher rates on term loans of 3 years and above, struck at fixed rates a year ago.
Companies will now have to pay a charge for loans sanctioned to them but not utilised
The exchange rate policy has served us very well in the last so many years and the exchange rate has been commended all around, says RBI Governor Y V Reddy.
The clampdown will be part of a package from the central bank to make end-use norms for external commercial borrowing (ECB) funds more stringent for various sectors.