Housing Finance Companies ask for exemption from base rate system
by 25, February, 2010 0 |
Housing finance companies (HFCs), which depend a lot on banks for funds, have said that loans they take from banks should be excused from the anticipated base rate system. RR Nair, director and chief executive of LIC Housing Finance said that if the base rate is expected to be as high as 9%, then HFCs do have a case to be excluded from this base rate.
Banks derive the advantage of priority sector lending by offering loans to HFCs. If they do not do so, then banks might experience problems in fulfilling their priority sector lending goals. LIC Housing Finance borrows 30-35% of funds from bank term loans.
For big lenders like State bank of India, Bank of India and Union Bank of India, the rate is expected be approximately 9%, as per the initial calculations. Other factors like tenor premium, credit risk premium and product-related operating costs will then be added to get the final lending rate.
Currently, big HFCs can avail of bank term loans at 6-8.5%.
A senior official of HDFC, India’s biggest mortgage financier said that if this step leads to increase in costs of funds, this hike might then be passed on to home loan borrowers.
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