Even as most of the bankers have indicated a possible hike in their lending rates in the near future, out of compulsion, they will apprehend a rise in delinquencies in their home loan portfolios if the rates are made to spiral over the current levels.
ICICI Bank?s joint managing director and CFO Chanda Kochchar said, ?The lending and deposit rates would surely go up now. Our housing portfolio is expected to grow at 5-10% in the current fiscal. Obviously, the number of real estate transactions has gone down in the past. That is going to affect the home loan business of Indian banks.?
Union Bank of India, chairman and managing director, MV Nair said, ?The latest hike in the cash reserve ratio as well as the repo rate is expected to hit my bank?s profitability. To take a view on this, our ALCO is meeting within the next ten days to review the bank?s deposit as well as the lending rates in all segments, including the housing credit portfolio.?
Adopting a cautious approach, TS Narayanasamy, chairman and managing director, Bank of India said, ?We will watch the government securities yield for a few more days before taking a final decision on revising our lending as well as deposit rates. We do not have any intention to hike our home loan rates, as I feel such a move could lead to an increase in the delinquencies in our Rs 4,000-crore worth housing credit portfolio.?
Ashish Parthasarthy, head of trading at HDFC Bank, said the government securities yield might rise up till 10% in the future, leading to an upward pressure on the lending rates of Indian banks.
KC Chakrabarty, chairman and managing director, Punjab National Bank said, ?We are definitely hiking lending as well as deposit rates, and also housing loan interest rates in the near future. Our ALCO is meeting on July 31, 2008 to chalk out a further strategy.?
Bank of Baroda, chairman and managing director, MD Mallya said, ?I do not expect a huge demand for housing credit in the next few months due to prevailing high interest rates. The latest hike in the cash reserve ratio will suck out Rs 300 crore from Bank of Baroda. Thus, the pressure on the bank?s profitability could be as high as Rs 2-2.5 crore per month.?
Yogesh Agarwal, chairman and managing director, IDBI Bank said, ?Our ALCO is meeting shortly and it is expected to announce a hike in bank rates. The proposed hike would lead to an increase in our housing loan rates.?
Analysts believe that up to one percent hike in the prevailing floating interest rates of 12.5% for Rs 20 lakh worth home loan of 20-year long tenure could burden a borrower with the monthly equated installment (EMI) of around Rs 1,200 – about 6% rise of EMI. About 80-90% of housing loans fall-in in this category in the country.
