The Hindu Business Line : PSBs not to hike home loan rates for now

PUBLIC sector banks appear to be in no hurry to hike home loan rates, despite the leader in housing loan market, HDFC, recently stating that it might raise its lending rates.

PSU banks, which collectively command a huge share of the home loan market, say that there was no immediate compulsion to hike interest rates.

"We do not plan to change the interest rates on any of our retail products including housing loans," the Chairman and Managing Director, Punjab National Bank, Mr S.C. Gupta, told Business Line.

He said that PNB was currently concentrating on reducing its cost of funds and increasing efficiency in credit delivery, instead of increasing lending rates.

"We are focussing on low cost deposits and have managed to bring down cost of deposits from 4.43 per cent to 4.32 per cent during the current fiscal. Our yield on advances has also improved," Mr Gupta said.

PNB's outstanding housing loan portfolio on September 30, 2005, stood at around Rs 5,300 crore showing a 29 per cent year-on-year growth while total advances stood at Rs 63,862 crore at the end of the half-year.

The Chairman and Managing Director, Union Bank of India, Mr K. Cherian Varghese, also said that his bank was unlikely to revise home loan rates in the near future. "We are not likely to increase our lending rates immediately," he said.

Mr Varghese also said that he was focussing on the deposit side to contain the cost of funds. "We are shifting our focus from scouting bulk deposits to attracting the more sustainable retail deposits. We should be able to maintain our spreads through this exercise," he said.

However, he said that he would keep a strict watch on the strategies of competitors to decide the course of action in future. "We would partly be guided by what our competitor is doing in the home loan segment," Mr Varghese said.

Union Bank's housing loan portfolio at the end of the first half of the current fiscal stood at Rs 3,508 crore growing by 34 per cent year-on-year, while its overall advances portfolio at the end of September 30, 2005 stood at Rs 47,498 crore.

Taking a similar view, the Chairman and Managing Director of Syndicate Bank, Mr N. Kantha Kumar, said that there was no proposal for any immediate hike in interest rates on housing loans. However, he said that given the present market situation there might be pressure on banks to take a re-look at their lending rate structure.

"Right now there is no proposal before us to increase interest rates on housing loans. But since cost of deposits of banks is going up there might be a need to revisit the issue soon. If the trend continues there might be a need to look at a possible 25 basis points increase in the coming days," Mr Kantha Kumar said.

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