Companies & Sectors
Scope for price wars in housing mortgage space exists: NHB

Pointing to the signs of heightened competition, the housing finance regulator sees further price wars among banks and the housing finance companies

Mumbai: Housing finance regulator National Housing Bank (NHB) has said there is scope for "further price wars" in the country's housing mortgage space as demand continues to be robust, reports PTI.


The NHB expects housing loans to clip at 20% in the current financial year compared to 17% observed last fiscal, especially after looking at the demand in the first half.


"Going forward, we do not rule out further price wars amongst banks themselves and the housing finance companies also," NHB chairman RV Verma told reporters at an event.


Pointing to the signs of heightened competition, he said, some banks have lowered interest rates on housing loans, some have cut their base rates (the minimum rate of lending), while many have abolished/reduced processing fees.


"The demand for housing loans has been good and sustained and we are seeing a growth of close to 20% this year compared to last year's 17%," he added.


Retail lending so far has been showing signs of resilience amidst a slowdown in demand by larger borrowers due to the overall macroeconomic atmosphere.


A majority of banks are focusing on the retail sector now to overcome problems and deploy funds. Housing finance is a lucrative area for banks due to low incidences of stress and smaller ticket sizes.


Verma said banks account for 70% of the overall lending in the housing finance. Housing Finance Companies (HFCs) constitute the rest.


On asked about how the HFCs will face the much larger in size banks in the market, Verma said HFCs have some inherent advantages like personalised services and quicker turnarounds, even though their cost of funds is high.


He said NHB will be able to meet its refinance target of Rs17,000 crore for the July 2012-June 2013 period given the demand for housing loans and it has already disbursed Rs3,500 crore to the bank in the first quarter ended September.


HFCs have explored newer sources of borrowings and the demand for loans will compensate for the higher cost of funds, he said.


To a question, Verma said the NHB is not considering increasing the capital adequacy requirement for HFCs from the current 12%.


Companies can pay in foreign currency for services by SEZ units

The move from RBI assumes significance as the SEZs or the tax-free zones are losing sheen because of withdrawal of tax incentives

Mumbai: Relaxing the norms for Special Economic Zones (SEZs), the Reserve Bank of India has allowed domestic companies to make payments to units in these zones in foreign currency for the services delivered by them, reports PTI.


Earlier this facility was allowed only for payments made towards goods.


"... it has been decided to allow ADs (banks) to sell foreign exchange to a unit in the domestic tariff area (DTA) for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (a unit in SEZ) to a DTA unit," the central bank said in a notification released today.


The move assumes significance as the tax-free zones are losing sheen because of withdrawal of tax incentives.


To attract investments in these zones, the Commerce Ministry is expected to soon announce some more incentives for SEZs to be set up in backward areas of the country.


However, RBI said that such payments would be authorised for only those services which are mentioned in the Letter of Approval issued to the SEZ unit.


Also to promote rising software exports, RBI in a separate notification said it has simplified the procedure for exporting goods and services by all the Software Technology Parks of India (STPIs) from five STPIs allowed earlier.


Earlier, only five STPIs-Bangalore, Hyderabad, Chennai, Pune and Mumbai came under this facility.


Moreover, to ensure larger flow of credit to trade and industry in Jammu and Kashmir, RBI has extended credit relaxations to borrowers in the state until March 2014.


"It has been decided that the concessions/credit relaxations to borrowers/customers in the State of Jammu and Kashmir...will continue to be operative up to March 2014."


Syndicate Bank raises $500 million through bonds

The state-run bank raised $500 million from overseas market, the second and final tranche under its medium term note programme size of $1 billion

New Delhi: State-owned Syndicate Bank has raised $500 million (about Rs2,600 crore) through bonds to fund its overseas business growth, reports PTI.


"We have raised from overseas market $500 million, the second and final tranche under the bank's MTN (medium term note) programme size of $1 billion," a senior Syndicate Bank official said.


The bond with maturity period of 5.5 years carries a coupon rate of 4.125% per annum payable semi-annually in arrears.


The money raised would be utilised for expanding operation of the bank's London branch functioning since 1976, the official said.


The services rendered at its London branch include corporate lending, participation in syndications, handling Letters of Credit and Guarantees transactions, trade finance, NRI services, ECBs and international treasury services.


Syndicate Bank has reported 43.3% increase in net profit at Rs463 crore for the second quarter ended September.


The bank had a net profit of Rs323 crore during the same quarter of the previous fiscal.


However, gross NPAs rose marginally to 2.47% of loan assets as on September 2012 as compared to 2.38% at the end of second quarter of the previous fiscal.


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