Banks will not lend below the minimum or base interest rate from today as directed by Reserve Bank of India (RBI), but may continue to give cheaper credit to some preferred clients as per their discretion under existing agreements
Banks will not lend below the minimum or base interest rate from today as directed by Reserve Bank of India (RBI), but may continue to give cheaper credit to some preferred clients as per their discretion under existing agreements, reports PTI.
While public sector major State Bank of India (SBI) has made its intentions partly clear in this regard, industry sources said that some of the top private sector banks might do the same.
RBI's direction on having a base rate—the minimum rate below which banks cannot lend with effect from 1st July—was largely aimed at bringing parity between different classes of borrowers and discourage discounted lending by banks to blue-chip customers, mostly large corporate houses.
However, the banks seem to have found a loop-hole in the whole exercise in the name of loan agreements already signed with their existing clients.
Almost all the banks have announced their respective base rates, being effected from today, which range between 7.0%-8.75%. This means they would have to lend at a rate equal to or above these base rates.
In the previous regime, the banks' interest rates were linked to their benchmark prime lending rates (BPLR) decided by them from time to time.
In the earlier system, the banks could lend at a rate above the BPLR, and even below that for their preferred customers. But discounted rates are not allowed in base rate regime.
However, to honour the existing loan agreements signed with their customers, the banks can give the customer an option to continue with the BPLR system till the facility falls for renewal or review.
If the customers want to switch over to the base rate regime they are allowed to do so on their existing loans also.
A circular to this effect was issued by SBI today, the first day of its base rate regime, wherein it has fixed the rate at 7.5%.
Sources said that some of the leading private sector lenders are also going to follow the same model, where they would allow the existing customers to continue with their existing rates if they desire so.
This is despite, the banks having the right to change the rates or even enforce a renewal or review of the rates as per their convenience in floating rate schemes.
But, they are giving this option as they do not want to lose blue-chip customers, especially large corporate clients.
As such, SBI has also decided to continue its teaser home loan rates, where it offers an aggressive 8% interest rate for the first year and subsequently increase it in later years. The scheme was earlier valid till yesterday. Such offers have already come in for criticism by RBI and government officials.
The exploration major began production from C-Series fields last month and is currently producing between 0.8 and 1.2 mmscmd from 6-7 wells drilled to date. Peak output of 2.8 mmscmd will be reached once all the 15 wells are drilled
The government has approved $5.25 per million British thermal unit (mmBtu) as the price of gas produced from Oil and Natural Gas Corporation’s (ONGC) C-Series fields in Mumbai offshore, reports PTI.
State-owned ONGC had initially sought $5.5 per mmBtu but the oil ministry last month approved a price of $5.25 per mmBtu, a senior ministry official said.
Natural gas produced from C-Series fields is sold to GAIL, which further markets it to end users.
ONGC began production from C-Series fields last month and is currently producing between 0.8 and 1.2 million standard cubic meters per day (mmscmd) from 6-7 wells drilled to date. Peak output of 2.8 mmscmd will be reached once all the 15 wells are drilled, which may happen post-monsoon.
The official said the price approved for C-Series field is about a dollar more than the price at which Reliance Industries (RIL) sells gas from the nation's biggest gas field in Krishna Godavari (KG) basin off the east coast.
Reliance gets $4.215 per mmBtu for the gas it produces from KG-D6 fields off the Andhra coast. The price is fixed for the first five years of production—till March 2014.
KG-D6 gas production began on 2nd April and is slated to rise to 80 mmscmd by year-end, nearly doubling the nation's gas output.
The official said according to the production profile given by ONGC, the peak output of 2.8 mmscmd from C-series will last 5-6 years.
The price for C-series fields is lower than what GAIL pays for gas from the western offshore Panna/Mukta and Tapti or PMT, fields that are jointly owned by British Gas, RIL and ONGC.
GAIL pays $5.7 per mmBtu for PMT gas, compared to $4.3 per mmBtu for Cairn India-operated Ravva field off the east coast.
None of the prices, include transmission charges, marketing margins or local levies on gas sales.
ONGC sells a large chunk of its gas at the government controlled price, which was recently revised to $4.2 per mmBtu.
The company has invested Rs3,195 crore to develop the C-Series marginal field that is estimated to hold in-place reserves of 15.54 billion cubic metres of gas and 4.46 million cubic metres of condensate.
The C-Series fields were discovered in 1990s and are about 60 km west of Daman in the Tapti-Daman block offshore Mumbai at water depths ranging from 19 metres to 35 metres, but considered marginal at the pre-revised price of $1.79 per mmBtu that ONGC got for most of its gas.
Exports rose to $16.1 billion from $11.95 billion in the same month last year on account of the low base effect as recession in the US and several other countries impacted global trade
India's exports rose 35.1% in May to $16.1 billion year-on-year, but the trouble brewing in some European economies may weigh on future demand, reports PTI.
The seventh straight month of rise was registered on a low export base of $11.95 billion in May 2009, when shipments had plunged by over 29% from the previous fiscal under the impact of the recession in the US and several other advanced economies.
For the April-May 2010-11 period, exports grew by 35.7% to $33 billion against the year-ago period, according to official data released today.
President of the Federation of Indian Export Organisations (FIEO) A Sakthivel said that the crisis in some European countries is a cause for concern.
"We hope the growth trend will continue but the only worrying aspect is the crisis in the Eurozone, which is likely to affect India's exports in that area," he said.
He also said the depreciation of euro would provide fierce competition to Indian products in countries where they are facing competition from Euro nations. The euro has depreciated by about 17.5% against the rupee since November last year.
Of the $176.50 billion exports last fiscal, Europe accounted for 23%.
Ministry officials said that labour-intensive sectors like engineering, gems and jewellery, leather and man-made fibres have registered healthy growth rates in May.
Imports also surged 38.5% in May to $27.4 per cent, indicating a rapid pace of domestic economic activity and leading to a trade gap of $11.29 billion during the month under review.
Imports during the first two months of the current fiscal grew 40.9% to $54.7 billion against USD 38.85 billion in the same period last year.
Oil imports in May were valued at $8.8 billion while the non-oil import bill was about $18.6 billion.