DHFL expects home loan rates to come down by 25-50 bps

As liquidity eases and inflation turns negative, Dewan Housing Finance Corporation today said it expects home loan rates to come down by 25-50 basis points in the near-term.     

"Interest rates will continue to remain low for some time. There is sufficient liquidity in the system. Inflation has also turned negative. My perception is that home loan rates will come down by 25-50 basis points in the near-term," DHFL Vice-Chairman and Managing Director Kapil Wadhwan told PTI.     

Inflation stood at minus 1.61 per cent, for the first time in thirty years, for the week ended June 6 as compared to 0.13 per cent in the previous week and 11.66 per cent during the corresponding week of last year.     

This might prompt the Reserve Bank to cut key policy rates once again. A few bakers have already indicated that they might look at bringing down the interest rate further.     

On top of that, there is a mounting pressure from the Government as well as the Reserve Bank to lower the interest rate further in order to ensure credit flow for all productive economic activity.     

The RBI had reduced the repo and reverse repo rates by 25 basis points each on April 21, 2009.

Economic think-tank Centre for Monitoring Indian Economy in its review of the Indian economy for the month of June has said that there was a scope for banks to prune prime lending rates further by about 50 basis points.        

"Deposit rates have eased by up to 200 basis points since October 2008. It is worth considering a reduction in interest rates on small savings to help deposit rates come down further. Lower deposit rates can help banks lower lending rates further," CMIE said.        

The liquidity condition in the system has improved significantly in the recent times as well. Over Rs one lakh crore is being parked daily by banks at the Liquidity Adjustment Faciltity (LAF) window through reverse repo transactions.        

T-bill yields and interbank call money rates fell below the four per cent mark in May 2009.        

Banks also mobilised Rs 121,942 crore during March 28 to May 9. During the March 28-May 23, 2009 period, RBI had also unwound liquidity worth Rs 48,187 crore through the Market Stabilisation Scheme.