Skip to main content

Home-loan swaps - Prepayment Rules May Be Changed To Help Borrowers Escape Rate Hike By Banks

 

THE government may seek changes in the pre-payment rules to enable a home loan borrower to shift to cheaper lenders if his bank raises interest rates soon after disbursing the loan. The government wants banks to provide a two-month window to their new borrowers to shift to some other bank without prepayment penalty if they have raised interest rates too quickly after disbursement. The finance ministry is likely to take up the matter with the central bank to seek these changes.


   "If a bank hike interest rates within a month of the loan taken by a customer, the borrower should also be allowed to look for cheaper options without paying any charges," said a senior finance ministry official adding that levying a pre-payment charge in such cases was like a double penalty.


   The government is not convinced with banks' argument that allowing easy foreclosure without any penal charges may lead to asset-liability mismatch. "The average maturity of deposits a bank holds is for a period of one and half years. If a loan is pre-paid within two months, it will not put any strain," the official said.


   It is expected that the banking regulator will discuss the issue with the Indian Banking Association (IBA), a body of all commercial banks, and may come up with new pre-payment norms including fixing the maximum and the minimum amount that a bank may charge. "We're open to discussion. One should understand that less than 5% borrowers switch loans," an IBA official said.


   Pre-payment charges differ across the industry. While private sector banks charge the customer a steep 2% on the principal outstanding, some public sector banks charge as low as 1% when transferring loan from one bank to another. If any prepayment is made within three years of the first disbursement, HDFC Bank charges an early redemption fee of 2% on amount prepaid in excess of 25% of the opening balance.


   "No charges if the prepayment is made after three years of the loan if it is from your own savings," stated the bank in an e-mail reply to ET query. The bank charges 6% foreclosure fee on auto loans if the pre-payment is made within a year of disbursement. Private lender, ICICI did not respond to an e-mail send by ET. Its website says that pre payment charge levied is 2% of the principal outstanding at the time of foreclosure and amount paid excess of the monthly instalment in the last one year. The bank allows part pre-payment.


   The Competition Commission of India (CCI) had earlier sought replies from all banks after receiving complaints from loan borrowers, asking why prepayment penalty should not be held as anti-competitive practice.

 

Popular posts from this blog

Mirae Asset Healthcare Fund

Best SIP Funds to Invest Online   Mirae Asset Global Investments (India) has launched Mirae Asset Healthcare Fund. The NFO of the fund will be open from June 11, 2018 to June 25, 2018. Mirae Asset Healthcare Fund is an open-ended equity scheme investing in healthcare and allied sectors. The scheme will invest in Indian equities and equity related securities of companies that are likely to benefit either directly or indirectly from healthcare and allied sectors. The investment strategy of this scheme aims to maintain a concentrated portfolio of 30-40 stocks. Healthcare is a broad secular theme that includes pharma, hospitals, diagnostics, insurance and other allied sectors. The fund will have the flexibility to invest across markets capitalization and style in selecting investment opportunities within this theme. Neelesh Surana and Vrijesh Kasera will manage this fund. In a press release, Swarup Mohanty, CEO, Mirae Asset Global Inves...

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...

Reliance Regular Savings Fund - Debt Option

Reliance Regular Savings Fund - Invest Online     The scheme aims to generate optimal returns consistent with moderate levels of risk. It will invest atleast 65 per cent of its assets in debt instruments with maturity of more than 1 year and the rest in money market instruments (including cash or call money and reverse repo) and debentures with maturity of less than 1 year. The exposure in government securities will generally not exceed 50 percent of the assets. The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year. The fund has been a consistent but not chart-topping performer in the income category. Despite its ...

Jeevan Labh

 The Life Insurance Corporation of India has announced Jeevan Labh , its limited-premium, with-profits endowment plan .   It comes with a premium paying terms of 10, 15 and 16 years for corresponding policy tenures of 16, 21, and 25 years respectively. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 83...

Income Tax Basics for beginners

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Tax is a compulsory payment made to the Government, but there are ways to optimise it   Income tax is an instrument used by the government to achieve its social and economic objectives. Simply put, tax is duty or tariff that income earning individuals pay to the Government in exchange of certain benefits such as law and order, healthcare, education and a lot more. With proper planning, your tax liability can be reduced and optimised effectively, leaving you with a greater share of your income in your hands than being paid out as tax. Income earned in the twelve months contained in the period from 1st April to 31st March (Financial Year) is taken into account when calculating income tax. Under the Income Tax Act this period is called the previous year.   ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now