KATHMANDU, April 13, 2012
Home buyers may soon be able to get credit at lower rates, as liquidity-flush banks, who were so far resisting market calls for cheaper loans, are beginning to loosen their stance.
The indication in this regard came Thursday when Bank of Asia reduced its home loan rate to 11.99 percent. Previously, the bank was charging interest in a range of 14-18 percent on home loans.
Although NIC Bank had earlier reduced its housing rates to as low as 9.99 percent, rest of the banks were reluctant to follow and continued to maintain their rates between 12 percent and 18 percent.
But such reluctance is not likely to work in the near future, bankers said. Why? "Competitive markets like ours respond immediately to the shifts in business strategies," Rajan Singh Bhandari, CEO of Citizens Bank, said.
That´s why many are calling Bank of Asia´s decision a prelude to a general reduction in home loan rates.
One of the reasons why banks are reducing rates is lower cost of fund.
In other words, banks, these days, are not paying as much interest as they used to on money parked by depositors, thanks to liquidity surplus which presently stands at Rs 15 billion in the banking system.
Bank rates on one-year fixed deposit have dropped to an average of around 9.5 percent on average, whereas it was around 12 percent a year ago.
"As more of our customers renew their fixed deposits, they will be subject to new rates, which are lower. This provides cushion to banks to reduce credit rates as well," said Anal Bhattarai, CEO of Commerz and Trust Bank, which is one of the banks that are planning to reduce credit rates soon.
"Yes, cheaper credit is on cards," Bhattarai told Republica. "But we will be reducing lending rates across the board, which also includes home loans."
Narayan Das Manandhar, CEO of Prime Commercial Bank, also joined the chorus.
"There is too much of liquidity and yields on government treasuries are as low as less than a percent," he said, indicating, there is no other way than reducing the credit rates.
However, banks with relatively higher exposure to the real estate market are not keen on reducing such rates. "We have no such plans," Surendra Man Pradhan, CEO of Sunrise Bank, said.
Source: Republica
Home buyers may soon be able to get credit at lower rates, as liquidity-flush banks, who were so far resisting market calls for cheaper loans, are beginning to loosen their stance.
The indication in this regard came Thursday when Bank of Asia reduced its home loan rate to 11.99 percent. Previously, the bank was charging interest in a range of 14-18 percent on home loans.
Although NIC Bank had earlier reduced its housing rates to as low as 9.99 percent, rest of the banks were reluctant to follow and continued to maintain their rates between 12 percent and 18 percent.
But such reluctance is not likely to work in the near future, bankers said. Why? "Competitive markets like ours respond immediately to the shifts in business strategies," Rajan Singh Bhandari, CEO of Citizens Bank, said.
That´s why many are calling Bank of Asia´s decision a prelude to a general reduction in home loan rates.
One of the reasons why banks are reducing rates is lower cost of fund.
In other words, banks, these days, are not paying as much interest as they used to on money parked by depositors, thanks to liquidity surplus which presently stands at Rs 15 billion in the banking system.
Bank rates on one-year fixed deposit have dropped to an average of around 9.5 percent on average, whereas it was around 12 percent a year ago.
"As more of our customers renew their fixed deposits, they will be subject to new rates, which are lower. This provides cushion to banks to reduce credit rates as well," said Anal Bhattarai, CEO of Commerz and Trust Bank, which is one of the banks that are planning to reduce credit rates soon.
"Yes, cheaper credit is on cards," Bhattarai told Republica. "But we will be reducing lending rates across the board, which also includes home loans."
Narayan Das Manandhar, CEO of Prime Commercial Bank, also joined the chorus.
"There is too much of liquidity and yields on government treasuries are as low as less than a percent," he said, indicating, there is no other way than reducing the credit rates.
However, banks with relatively higher exposure to the real estate market are not keen on reducing such rates. "We have no such plans," Surendra Man Pradhan, CEO of Sunrise Bank, said.
Source: Republica
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