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

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- 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 Saver 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. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

L&T Income Opportunities Fund dividend

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 L&T Income Opportunities Fund declares L&T Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( R /unit) L&T Gilt Investment-DQ 0.3 L&T Gilt Investment Direct-DQ 0.3 L&T Income Opportunities Ret-DQ 0.31 L&T MIP-Wealth Builder-DQ 0.3 L&T MIP-Wealth Builder Direct-DQ 0.3 L&T MIP-DQ 0.3 L&T MIP Direct-DQ 0.3 L&T Short Term Opp-DQ 0.26 L&T Short Term Opp Di...

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Birla Sun Life Top 100 Fund dividend

  Birla Sun Life Mutual Fund has announced dividend under the dividend option of Birla Sun Life Top 100 Fund . The quantum of dividend shall be R0.85 per unit.   The fund house has also announced dividend under the dividend option of Birla SL FTP Series JT Reg-DQ and Birla SL FTP Series JT Reg-D . The quantum of dividend will be the entire distributable surplus as on the record date.   The record date has been fixed as January 22, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For fu...
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