Loan package fuels bank funds

The special home loan package announced by public sector banks boosted returns of banking sector-dedicated funds for the week to Monday.

Banking funds registered 4.75 per cent average returns over the week. However, the category under-performed the BSE Bankex that rose 7.35 per cent and the Bank Nifty that gained 6.27 per cent during the period.

Over the one-month period, the category suffered, posting 0.82 per cent negative average returns.

The weekly returns were boosted after public sector banks yesterday said they will put a cap on interest rate charged on fresh home loans of up to Rs 5,00,000 at 8.50 per cent and announced a slew of measures to stimulate credit delivery to housing and micro, small and medium enterprises sector.

Following the announcement, the BSE Bankex and the Bank Nifty surged 1.51 per cent and 1.12 per cent, respectively.

The rally lifted the net asset value of banking plans, and, in turn, their weekly performance.

Among all sector-oriented schemes, banking funds were the second-best performing group, the first being automobile funds.

Across all fund categories, banking schemes secured the fifth rank.

JM Financial Services Sector Fund gained the most due to the special home loan package from state-run banks.

The special home loan package will be applicable for new loans that will be sanctioned up to June 30.

Among other features of the home loan package, state-owned banks will not charge more than 9.25 per cent on home loans of Rs 5 lakh to Rs 20 lakh having a tenure of up to 20 years.

Public sector banks will sanction loans worth Rs 15,000-20,000 crore under this package.

JM Financial Services Sector Fund with 9.01 per cent return was the best performer in the sector-dedicated funds category.