Byapaar.com – The Indian Business Blog

Amidst global economic turmoil and financial crisis caused by US subprime lending crisis that caused havoc in markets around the world, Indian nationalized banks in consultation with the government have announced reduction of interest rates on home loans of up to Rs. 2 million that could lead to partial impetus in the realty sector. Just last week industrial production in India contracted for the first time in 14 years.

According to the new rates set by the banks, housing loans of up to half a million Rupees will now have interests of 8.5 percent and that of loans between half a million to two million will have interest rates of 9.25 percent. Presently, interest for home loans is 9.75 to 10.5 across various sectors in the banking industry.

This brings very good news for millions common people who can not afford to think of a house or flat beyond Rs. 2 million. Another additional feature of the new housing loan package is that interest rates will remain frozen for 5 years which means clients will not have to worry about increased equated monthly installments (EMIs) during this period. Also they will enjoy the benefit of rate cuts in between while banks will take the burden if rates rise. After five years, consumers could choose either fixed or fluctuating rates according to their choice. This makes debt management a lot easier for the common person.

Not only this, but banks have also reduced the margin requirements for loans. While previously, borrowers were required to pay between 20 to 25 percent of the total amount as margin money, it has been trimmed down to 10 percent for loans up to half a million and 15 percent for loans between half a million to 2 million.

According to bankers, this move will see around Rs. 150 to 200 billion being released over next few years and help the common men who constitute eighty percent of nationalized banks’ housing loan book. (continue reading…)

In the midst of warning by the International Monetary Fund (IMF) of developing economies being toppled in the ongoing financial crisis, guardians of the Indian economy are working overtime to ensure India did not suffer much due to the global phenomenon. There is already signs from everywhere about an imminent slowdown of economies all over the world including the USA which reported a contraction of .1 percent of its economy last week.

It is really heartening to see that the Government of India is doing its best and working with leaders of the industry to see off the crisis. Last week the Prime Minister of India, Dr. Manmohan Singh held a meeting with business leaders like Anil Ambani, Sunil Mittal and others to hear their views on tackling the problem. According to the captains of the industry, the government must relax the credit policy without worrying too much about inflation so as to pump in money in the cash strapped financial sector. They opined that there is already signs of slowdown and if liquidity crunch is not addressed immediately, the economy would suffer more. They urged the government to lower interest rates and release more cash in the market to shore up the already nervous financial sector and thus bring the much needed confidence back in the market.

It seems it is lucky last few weeks in the office for the Manmohan Singh led NDA government as inflation dipped below 11 percent last week for the first time for 5 months and as a result the Reserve Bank of India announced a cut in CRR (Cash Reserve Ration) rate by one percentage point to 5.5 and REPO rate by 50 point basis to 7.5. This will release Rs. 700 billion in the market. Both the government and industry hope that the latest action is a step in the positive direction and it will boos liquidity in the system, stimulate growth and stabilize the financial market. The governor of RBI while announcing the news hoped that the credit requirements would be met through this action and effect the industry positively by picking up growth momentum.

But as always, while welcoming the move, industry leaders hoped the government and the Apex Bank would take more measures to tide over the global financial crisis.  They are asking more reforms in sectors including government debt market to tap new class of buyers and thus bring in more money in the market.

The stock market has responded positively to all these steps as it has been gaining continuously for last 4 trading days. The BSE Sensex has gained a credible 293.44 points today and have crossed the psychological barrier of 10,000 for the first time after it sank few weeks back.

First of all, my heartiest congratulations to Abhinav Bindra J who made India proud by winning gold medal for the 10m Air Rifle section at the Beijing Olympic. It is the first ever individual gold that India won in the history of Olympic.

Now, this post is a little bit personal as I’ll try to put a point across by taking example of one of my friend. But before I dwell into that, let me give a brief update on the latest business scenario.

Inflation is at 18 years high that stands more than 12 percent. Stock market has recovered to some extent and has been on a bullish run for last 10 days or so. Tatas and Reliance Infocom have decided to invest huge sum to create GSM based network while keeping their CDMA services. The central government has decided to come to the exporters’ aid and has announced that it would return taxes already paid.

Well, that’s what I call brief update. J

Now the main topic! The other day I was called by my fried who got some exorbitant Credit Card bill and didn’t know where he spent the money. He called me because we went to some websites one night and used it to get membership. It was quite late in night and he didn’t know how to browse the net properly. L So I told him not to browse the net any more after I left. He did!

For the next 3 months he kept receiving those bills and soon he was in debt. I repeatedly asked him to contact the issuing branch to block the card. He didn’t! But when the bill piled on, he was desperately looking how to get out of debt and this mess. Finally he called the customer service of the issuing bank and they did oblige his request.

I am blogging on this because this might happen to anybody who is regularly using credit cards for online purchase – especially from phony sites. There are lots of instances of unauthorized use of credit cards by hackers who steal the card access codes. So everybody must first check how reputed and trusted the site is (Verisign verification is one of those) before putting the sensitive personal data.

While plastic money in the form of credit or debit cards is of great convenience, one must use it judiciously even if they are not using them online. As one does not have to carry and dish out lots of cash, it is very easy to spend a lot by swiping the card at various counters. Its only after that you start worrying how you pay off credit card debt that is now quite a huge amount.

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Finally the turbulence of politics is over with the UPA led by the Indian National Congress withstanding a tight no-confidence motion in the Lok Sabha on 22^nd July. The Left Front has been blocking almost all major reforms which are so badly needed to push the economy to the next level. It has been frustrating 4 years for both pro-reform Prime Minister Mr. Manmohan Singh and also the business community. Now that all is over, the UPA government is determined to push through reforms in many fields like insurance, telecom etc. despite the alarmingly high rate of inflation that stands @ 11.98% today!

High rate of inflation has also made the apex bank (Reserve bank of India) to raise interest and thereby make bank deposit attractive. On the other hand, the long bull run of the stock market also ended with the start of the turbulence of government instability and skyrocketing international fuel price.

So as an individual – where do I put my money? Most banks are offering an attractive 10% annual interest rate. But is it long lasting? Despite forecast of an economic slowdown, businesses remain upbeat on long-term economic prospect of the country.

So the ideal way to invest your money is to divide your funds and put them into both the markets. While it is not guaranteed that bank rates will always remain the same, one can not also say for sure when the equity/stock market is going to recover! (continue reading…)