Pnb Housing Lowers Rates By 0.5%

PNB Housing Finance Company Ltd (PNBHFL) has decreased the interest rates for housing finance by 0.5 per cent. While the interest rate for a seven-year loan has been lowered from 12.25 per cent to 11.75 per cent, it has been lowered to 12.25 per cent from the earlier 12.5 per cent for over seven years loan.

"We have decided to decrease our interest rates with immediate effect as a response to some other commercial banks decreasing their bank rates," chairman and managing director R Nambirajan said.

PNBHFL had recently introduced a bond issue of Rs 25 crore with an option to retain excess Rs 25 crore subscription amount. The coupon rate for the bond issue has been fixed at 9.75 per cent.

 

"Our bond issue has been over subscribed. We will shortly close the issue after raising Rs 50 crore," Nambirajan said. He said the company plans to transfer the benefit of raising money at lower cost to customers. Nambirajan said that PNBHFL now has the lowest interest rates in the industry.

Recently, the State Bank of India (SBI) had announced a reduction in interest for its housing loans. It is offering loans up to Rs 10 lakhs at 12 per cent and above Rs 10 lakh loans at 12.25 per cent.

In September this year, the decision of the National Housing Bank to reduce its refinance rate (the rate at which NHB lends to the housing finance companies) by 0.25 per cent to 11.25 per cent had failed to enthuse the housing finance companies, including PNBHFL, which ruled out any reduction in the interest rates for customers.

The HFCs were peeved with the NHB because the reduction was far below their demand for a two per cent reduction. "The 0.25 per cent reduction by the housing finance regulator will not allow HFCs to reduce our lending rates," Nambirajan had then said.

Nambirajan had also said that commercial banks were waiving various charges including processing fees in order to attract more customers and in order to compete with the banking system, the HFCs also have to waive off various charges. "The 0.25 per cent reduction will at the most make up for the loss on account of waiver of various charges," he had said.

NHB's decision came in the wake of HFCs demanding a reduction in the refinance rate in order to compete with the commercial banks who are aggressively eyeing the housing finance sector. In order to compete with the commercial banks who lend at a lower rate (because they raise funds at the bank rate which is substantially lower than the refinance rate), the HFCs had to substantially reduce their lending rates and thus there is a tremendous pressure on the margins of the HFCs.

According to the NHB statistics, the housing finance firms have registered a compound annual growth rate of about 32 per cent per annum over the last four years and the rate is expected to go up further. The disbursals of the 29 housing finance companies increased from about Rs 7500 crore in 1998-99 to Rs 12700 crore in 1999-2000. The disbursals for the year 2000-2001 are expected to touch the Rs 17,000 crore mark.