Banks cut interest rates on loans for exporters

Joint-stock banks have begun to offer loans to import and export businesses at preferential interest rates, following a period of inactivity in the financial services market.

At a time when the foreign exchange market is stabilising, several banks have made the move to accommodate growing demand from businesses.

The Government’s prime interest rate of 14 per cent per year, which has remained stable, was another factor behind the banks’ decision to offer better rates.

The State Bank of Viet Nam’s decision to pay 3.6 per cent per year for banks’ compulsory reserves in dong, up from 1.2 per cent, also had an impact on their decision to lower rates.

Truong Van Phuoc, general director of Viet Nam Import and Export Commercial Bank (Eximbank), said the bank had decided to raise the loan limit from VND2 trillion (US$119.8 million) to VND5 trillion ($299.58 million) to farm produce export companies.

Eximbank has also slashed lending rates to 6.6 per cent per year from the previous 8.4 per cent for exporters who have already signed contracts.

For importers who want to borrow US dollar loans with terms of less than six months, the lending rate is 6.6 per cent per year.

Recently, Asia Commercial Bank (ACB) raised its lending limit to $50 million from $30 million to support exports.

The bank has announced it will lend to four main export industries – seafood, woodwork, rice and rubber.

The Bank for Agriculture and Rural Development of Viet Nam (Agribank) has just announced an additional grant of VND3 trillion ($179.7 million) to its branches nationwide to promote coffee purchases, processing and exports.

Borrowers of the loans are companies that buy and process coffee on the condition that they meet Agribank’s requirements for borrowers and additional requirements, including export contracts, payments made via banks, and commitment to sell foreign currencies to Agribank, among others.

From the beginning of this year, Agribank has provided more than VND1 trillion ($59.9 million) in loans to promote buying and processing tra and basa catfish for exports; VND10 trillion ($599.16 million) to boost purchase of rice harvested in the summer-autumn crop for exports; and more than VND4 trillion ($239.7 million) for import of fertilizer and another VND5 trillion ($299.58 million) in preferential loans for exporters.

Viet Nam Technological and Commercial Joint Stock Bank (Techcombank) said it would set apart between VND4–VND5 trillion for lending to businesses involved in buying and processing rice, coffee, cassava and cashews for export at a preferential interest rate.

Techcombank has also cut its lending interest rate by 0.5-1 percentage points and by 2-2.5 percentage points on the Vietnamese dong and US dollar, respectively.

Tran Bac Ha, chairman of Bank for Investment and Development of Viet Nam (BIDV), said several banks were offering loans to import and export firms in an effort to boost economic development while still complying with the Government’s tightened credit policy.

Le Quoc An, chairman of Viet Nam Garment and Textile Association, said this was beneficial for textile enterprises in particular because most were in dire need of capital.

Banks Set New Interest Rates

Bank managers in Indonesia have agreed on a ceiling for interest rates, effective Monday last week. The ceiling is calculated at 12.5 percent for three-month deposits, and 12 percent for 6 or 12-month deposits.
National Banking Association chairman, Sigit Pramono, told Tempo yesterday that the step was taken to “control banks from going wild”. He said the competition between banks to obtain capita in order to maintain liquidity is getting more difficult and unhealthy, because it can cause an imbalance between capital funds and loan distribution.
He said the increase in the Bank Indonesia rate, was one of the reasons why banks are raising their own interest rates. Pressures caused by inflation and worsening bank liquidity problems helped boost savings.
Capital from third parties remains minimal. Loans disbursed have reached Rp 1.148.4 trillion, while bank capital stands at Rp 1.155.4 trillion. “It’s getting more difficult for banks to disburse their loans because of the low inflow of capital from third parties,” Sigit said.

Bank Indonesia deputy-governor, Budi Rochadi confirmed the agreement between banks, saying, ”Bank Indonesia does not have the right to manage market interest rates. That’s up to the banks.”
Lippo Bank treasury director, Gotfried Tampubolon, refused to comment, however he stressed that if the high interest rates continue, it is the bank customers who will benefit while the banks “will face difficulties.”
Bank Indonesia’s Research and Management director, Halim Alamsyah, said banks must review their credit plans and adjust them to their capacity to garner capital.
Until last July, the savings and loans ratio was 78 – 79 percent, with less than 4 percent in non-performing loans.

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Loan interest rate, reserve requirement ratio lowered

China's central bank said on Monday it would reduce the benchmark loan interest rate and the reserve requirement ratio for commercial banks to ensure a steady and rapid economic growth.

The benchmark interest rate for one year yuan denominated loans will be adjusted down 0.27 percentage points from Tuesday, its first downward movement since October 2004.
In addition, the ratio of deposit lenders are required to set aside will be down 1 percentage point from September 25, the People's Bank of China said.

However, the country's major lenders will be exempt from the reserve requirement ratio adjustment. They include the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, the China Construction Bank, the Bank of Communications and the Postal Savings Bank of China.

The reserve requirement ratio would be reduced by 2 percentage points for local financing institutions in areas badly hit by the May 12 Wenchuan earthquake, the central bank said.

After adjustment, the interest rate for one-year loans in the Chinese currency will be 7.20 percent. The overall reserve requirement ratio will be 16.5 percent, down from a record 17.5 percent after five consecutive increases this year.

The move reflected the government's concern over the slowing economy and was a result of long-time consideration, said Zhuang Jian, a senior economist with the Asian Development Bank Resident Mission in China.

"It showed the government was eager to maintain the economic growth as enterprises faced difficulties, especially funding strain. The eased inflationary pressure also provided more room and time for the adjustment."

China reported last week its consumer price index in August rose 4.9 percent from a year ago, down from the 12-year high of 8.7 percent in February and the lowest since July 2007.
There had been long debate in China on whether the government should loosen its tight monetary policy as its economy slowed, Zhuang said.

The country started to adopt a tight monetary policy from the second half of 2007 to curb inflation. Its gross domestic output posted a year-on-year growth of 10.4 percent in the first half of 2008, 1.8 percentage points lower from the same period last year.

"The news would bolster investor confidence in China's economy and somewhat offset the impact of the bad news in the US," Tang Min, the China Development Research Foundation deputy secretary, said.

He was referring to the Sunday reports that US investment bank Lehman Brothers had filed for bankruptcy protection while its rival Merrill Lynch agreed to be taken over.

"The central bank gave a big present," said Tang. "The lending rate was cut by 1 percentage point this time, much larger than the usual 0.5 or 0.25 percentage points in previous adjustments."

However, Tang said officials still intended to keep liquidity in check as the deposit interest rate would stay the same.

Zhuang said China was prudent in the policy adjustment. "The government still placed priority on controlling inflation as the deposit reserve ratio was not lowered for the top-four lenders."

That action would also give small- and mid-sized banks an advantage in extending loans and benefit small enterprises, which were the main customers of those banks and had suffered most in the past quarters, he said.

China's gross domestic product had decelerated for four consecutive quarters through June. Its export growth slowed 5.3 percentage points year on year to 22.4 percent in the first eight months of this year.

The central bank said its move was to "solve prominent problems in the current economic operation, implement the principle of giving different policies for different needs and optimizing the economic structure, and to ensure a steady, rapid and sustained development.

Payday loans: Should interest rates be capped

California isn’t one of those states. A bill here died in committee last session, and sponsor Assemblyman Dave Jones, D-Sacramento, hasn’t decided yet whether he will try again next year.

In 2006, Congress capped rates on payday loans, as they are commonly known, made to military personnel and their families. Authorities limited such loans to 36 percent, worried that the mounting debt of service men and women put national security at risk.

Without that cap, a loan that is not paid off at the end of two weeks can potentially generate fees that translate to triple-digit interest rates.

Asked if he favored an interest rate cap, local West Coast Cash customer Ricky Squires, 60, initially said yes.

But when told the industry says that would drive them out of business, Squires backed away.

“It’s probably a good idea, but if it puts them out of business, I don’t think they should do it,” he said.

Over the last two years, 15 states and the District of Columbia have limited interest on payday loans to civilians. They are Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Vermont and West Virginia.

In Arizona and Ohio, the caps have been challenged, and voters will have an opportunity to weigh in on whether the laws should stand.

HURTING THE POOR?

Critics of payday loans say they are money pits that prey on the poor.

“These loans totally trap people in a cycle of debt that they can’t get out of,” said Ginna Green, a spokeswoman for the nonprofit Center for Responsible Lending.

The Community Financial Services Association of America, a national payday loan industry trade group, argues that fees for the initial loan are reasonable, and people who pay on time don’t get into trouble.

Under current law, Californians pay a maximum fee of $17.65 per $100 borrowed for two weeks. That translates into annual interest of 460 percent.

It’s that annual figure that troubles opponents.

“Borrowers don’t pay them off on time,” Green said. “They carry them over, and the debt gets bigger and bigger. The industry says it’s about choice, but nobody chooses to owe $3,000 on a $300 loan.”

An average payday loan in California is 16 to 18 days, according to the California Financial Service Providers Association, the state’s payday loan industry trade group.

A WAY TO MANAGE

It’s easy for middle class bank customers to dismiss payday loans, but they provide a desperately needed service for low-income workers who don’t have a lot of options, said Mark Thomson, director of government relations and compliance officer for Moneytree.

“You have to realize that our relationship with debt is different,” said Thomson, who serves on the state trade association’s legislative committee. “You or I walk into a Best Buy, see a $1,700 flat-screen TV, and decide we don’t want to finance it. Without that loan, nothing changes in our daily life.

“For most of our customers, some adverse event is going to happen. They are going to bounce a check, or their utilities are going to get shut off, or they have to get a car out of the shop so they can get to work.

“There’s already something about to happen to them, and they’re trying to find the cheapest way they can to manage it.”

Payday loans are one way to do that. For some, it’s the only way, because they don’t have good credit and can’t access a credit card or a loan from a traditional bank, Thomson said.

If payday lenders go out of business, subprime borrowers will have nowhere to turn, and with a 36 percent cap, California’s payday loan industry will die, Thomson said.

Profit margins are low already, he insisted. Fees are just high enough to cover loan defaults and the cost of doing business.

Consumer Credit Counseling Service of Kern and Tulare Counties is a nonprofit organization that helps borrowers get out of debt and offers budget management classes.

CCCS doesn’t have an official position on capping payday loan interest rates, but it advises clients not to borrow from payday lenders, said president and chief executive Katy Hudson.

Lower home loan interest rates, make process easier

Speakers at a roundtable discussion yesterday called for bringing down the home loan interest rates so that common people could avail the opportunities of building their own homes without difficulties.

They also called to make home loan getting procedures easier.

The meeting was addressed, among others, by Abu Alam Chowdhury, Vice-President of Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), Shahidullah Osmani, Managing Director of SD Properties and Ershad Mazumdar, Chief Editor of Monthly Gharbari.

Mentioning shelter as basic rights of people, Abu Alam Chowdhury said, "Political parties, whichever wins in the forthcoming election should ensure habitation rights of the people."

He urged the banks and financial institutions of the country to provide common people with house building loans at lower rate of interest.

The FBCCI VP also urged the home loan recipients to pay off their respective loans.

Emphasizing on providing low rate of interest and introducing easy loan process, Abu Alam Chowdhury also raised the crucial issue of land grabbing in the city.

He called for launching a united movement against the land grabbers.

Ershad Majumdar called for introducing five per cent registration cost and five per cent interest rate for a house of 500 to 700 square feet in the capital. The registration charge for a house of 700 to 1500 square feet should be fixed at eight per cent where normal interest rate and registration charge should be introduced for the house of over 1500 feet.

He also asked to make house-building loan sanctioning procedures easier.

Ershad Majumdar informed that they would submit their demands before Bangladesh Bank soon.

Using credit cards to pay loans, bills attracts interest

With more Americans struggling to pay for basic living expenses, a small but growing segment of the finance industry is encouraging consumers to pay their mortgages, car notes, student loans — and even alimony — online by credit card.

Those who pay their card charges in full each month may find that the practice provides a slew of card incentives while buying extra time to come up with the cash.

Paying recurring monthly bills with plastic however, could drive the debt-ravaged consumers who may be tempted by the option deeper into debt and push the sub-prime loan crisis onto the credit card industry.

"Given the current economic situation, we'd advise anybody who really depends on occasional credit to avoid this service, because it's an accident waiting to happen," said Travis Plunkett, the legislative director of the Consumer Federation of America.

Using a credit card — which is essentially borrowed money — to repay borrowed money violates a basic tenet of financial well-being: Never borrow from Peter to pay Paul.

Over the last year, however, the credit card industry and a small group of entrepreneurs have been working to punch holes in that widely held wisdom.

For a fee of $4.95 per transaction and 2.3 percent of the bill amount, ChargeSmart, a new online bill-payment company headquartered in San Francisco, allows consumers to pay mortgages, auto loans and leases, student loans and utility payments by credit card.

ChargeSmart isn't targeting distressed borrowers, Chief Operating Officer Philip Mikal said. Of the 1,000-plus transactions that have been processed since the company launched in July, only 1 or 2 percent involved delinquent accounts, Mikal said. Some lenders, he said, are refusing payments without first talking to customers whose accounts are many months behind.

Mikal said the bulk of ChargeSmart customers were savvy spenders who were looking to maximize their card-reward programs. Some use zero-interest-rate cards; some are salespeople or small-business owners with irregular incomes, who see ChargeSmart.com as a way to manage their cash flow better, Mikal said.

ChargeSmart's main competitor, BillCharger of New York, offered similar online services but also provided card payments for insurance premiums, rent, alimony, property taxes and other bills that traditionally don't accept plastic.

After launching in April as the "only service of its kind," BillCharger quietly suspended operations earlier this month "while we work on tweaking the business model," company founder Andrew Fisher said.

BillCharger's rocky start "is indicative of the challenges faced in bringing a new payment service to market," Mikal said.

He should know. Last year, Mikal co-founded CardIt, another start-up that permitted mortgage payments by credit card. CardIt folded three months after its September debut because of funding problems.

American Express, which OKd card payments of luxury rentals in 2003 and luxury condominium down payments in 2006, was the first card issuer to embrace mortgage payments when its Express Rewards Mortgage program began in May 2007.

Qualified cardholders paid $395 one-time fees for the chance to charge monthly mortgage payments, which could earn card incentives such as membership rewards, cash back and airline and hotel points.

Unfortunately, the first lenders to offer the option were American Home Mortgage and IndyMac Bank, both of which became casualties of the sub-prime mortgage crisis.

American Express is working to "carefully evaluate the future of the Express Rewards Mortgage program and determine next steps," said Sarah Beron, a company spokeswoman.

These setbacks may have slowed the expansion of credit card payments into nontraditional areas, but experts say they won't stop the migration.

Earlier this year, MasterCard lowered its merchant rate structure for the insurance, rental and utilities fields after noting increased consumer and business demand for card acceptance.

"We're very pleased with the merchant reaction. We're bringing on new acceptors all the time," said Stephen Carnevale, the vice president of U.S. commerce development at MasterCard Worldwide.

With the U.S. credit-card market relatively mature, card issuers that are looking for growth areas have targeted bill payment as one of the least explored, said Ed Kountz, a senior analyst at Jupiter Research.

A Jupiter survey last year found that among consumers who regularly pay monthly bills online, 31 percent preferred one-time direct transfers from a bank account compared with 12 percent who preferred using credit cards. The top reason for using credit cards was to earn card rewards and avoid late fees, Kountz said.

On its Web site, ChargeSmart.com uses a creative math calculation involving a fictitious customer named "Greg" to show the potential benefits of using the card payment service.

It estimates that after making a $6,574 mortgage payment on ChargeSmart for a charge of $152.87, "Greg" will "see a monthly gain of $21.39" after estimating the monetary value of airline reward miles and of delaying his cash payment.

After reviewing the calculation, Ken McEldowney, the executive director of Consumer Action, a San Francisco-based watchdog agency, said the calculation was confusing and overstated the value of the airline miles and the benefits of the transaction.

"I'm having a lot of trouble with the math," McEldowney said. "Unless I'm missing something, the only type of consumer that would see any worth in this is someone who is totally strapped and desperate and willing to pay a really high fee to charge a mortgage payment or utility bills as sort of a last-gasp effort."

Mikal said, however, "That is not the kind of customer that we're targeting."

Interest rates to dip for some student loans

Starting today, the interest rate on some newly disbursed student loans will begin to fall. But the rate cut, which partially fulfills a pledge made by House Democrats, has more footnotes than a college term paper.

Not all student borrowers will qualify. Those who do will save, at best, around $14 to $19 a month when they begin repaying their loans, according to two estimates.

In the months leading up to the 2006 congressional elections, House Democrats promised to "cut student loan interest rates in half" for federally guaranteed parent and student loans. What they settled for was substantially less.

The rate cut applies only to new subsidized Stafford loans for undergraduates, which go to students with financial need. On a subsidized loan, the government pays interest while the student is in school, so the rate cut will have no impact until the student leaves school and starts repaying the loan.

The interest rate on this particular loan will fall by half - from 6.8 percent to 3.4 percent - in stages over five years. After that, the rate goes back to 6.8 percent.

When the student starts repaying loans, the rate on each loan will depend on when it was taken out. The rate will be:

-- 6 percent on loans disbursed between today and June 30, 2009.

-- 5.6 percent on loans disbursed from July 1, 2009, to June 30, 2010.

-- 4.5 percent on loans disbursed from July 1, 2010, to June 30, 2011.

-- 3.4 percent on loans disbursed from July 1, 2011, to June 30, 2012.

-- 6.8 percent on loans disbursed after July 1, 2012.

Students who start college this fall and qualify for subsidized loans all four years will save the most. Students who are already in college will get smaller benefits because their existing loans will remain at their old rates.

Home loan and tax benefits

There are some tax benefits available on home loans. The tax benefits can be claimed on both the principal and interest components of a home loan as per the Income Tax Act. These deductions are available to assessees who have taken a loan to either buy or build a house, under Section 24(b).

Tax benefits on interest component
If these conditions are met, interest on borrowed capital is deductible up to Rs 1.5 lakhs
Loan is taken on or after April 1, 1999 to buy or build a property. The purchase or construction should be completed within three years from the end of the financial year in which the loan was taken. The bank extending the loan should certify that interest is payable against the loan advanced to buy or construct a house.
If these conditions are not met, the interest on the loan is deductible up to Rs 30,000 only. However, these conditions have to be fulfilled then:
The loan should have been taken before April 1, 1999 to purchase or construct the house. It could have been taken on or after April 1, 1999 if for reconstruction, repairs or renewals of a house. If the loan was taken after April 1, 1999, but the construction is not completed within three years from the end of the year in which capital is borrowed. In addition to these, the principal component of the loan is eligible for a deduction of up to Rs 1 lakh under Section 80C from assessment year 2006-07 .
The maximum deduction permissible in a financial year on the original loan plus on any additional loans taken is Rs 1.5 lakhs. Hence, if your deduction on the existing loan is less than Rs 1.5 lakhs, you can claim further benefits from an additional loan, subject to an upper limit of Rs 1.5 lakhs in a financial year.

It is to be noted that the tax benefits under Section 24 and deductions under Section 80C of the Income Tax Act can be claimed only when the payment is made. If a person fails to make EMI payments, he cannot claim tax benefits on the amount supposed to have been paid. If a person buys a house and sells it within the same year or after three years, and if any profit is made, a capital gains tax liability arises on the profits. For example, if a person purchases a house for Rs 55 lakhs with a loan and sells it in the same year for Rs 75 lakhs, he makes a profit of Rs 20 lakhs.
On this profit, he will be liable to pay short-term capital gains tax since the sale took place in the same year. But, if the sale had taken place after three years, a long-term capital gains tax liability would have arisen. Long-term capital gains are exempt from tax if the profit amount (after factoring in the indexation benefits) is invested in capital gains tax-saving bonds or in a house as specified under Section 54. According to the Income Tax Act, only the person who has taken the loan can claim tax rebates.
Tax deductions can be claimed on home loan interest payments, subject to an upper limit of Rs 1.5 lakhs for a financial year. Interest on a fresh loan can be claimed as a deduction, subject to the upper limit. The interest on a loan, taken for repairs, renewals or reconstruction, also qualifies for the deduction of Rs 1.5 lakhs.
A husband and wife, both of whom are taxpayers with independent income sources, can get tax deduction benefits on the same housing loan. In this case, the tax benefits can be shared to the extent of the amount of loan taken against their names.
If it is proved that a home loan is simply an arrangement between the loan-seeker and the builder or with a third party for the purpose of claiming tax benefits, the tax benefits will not be allowed, and benefits previously claimed will be clubbed to the income and taxed accordingly.

NAB increases home loan interest rates

NATIONAL Australia Bank has become the latest bank to turn the screws on homeowners, hiking its standard variable rate by 15 basis points to 9.61 per cent.

The new rate, which takes effect from tomorrow, will add just over $7 to the weekly repayments on a $300,000 mortgage taken out over 30 years.

NAB is playing catch-up to other major lenders who have already pushed through rate hikes.

On Friday the Commonwealth Bank of Australia lifted its rates by 14 basis points, pushing up its standard variable rate home loan to 9.58 per cent per annum and its basic variable rate to 9.07 per cent.

ANZ also pushed through a sneaky 15 basis point rate rise late on Friday afternoon, after the share market closed. ANZ’s new standard variable rate of 9.62 per cent came into effect today.

St George was the first major lender to move in this latest bout of rate hikes, raising its standard variable rate by 20 basis point to 9.67 per cent on July 4.

Meanwhile, AMP Bank also said it would increase its standard variable home loan interest rate for existing customers by 0.20 per cent, to 9.67 per cent. The standard variable rate for new customers will increase by 0.11 per cent to 9.67 per cent per annum. The changes take effect this week.

The banks have once again moved independently of the Reserve Bank of Australia, which opted to keep official rates steady at a 12-year high of 7.25 per cent when it met on July 2.

The banks have all cited higher borrowing costs as the main reason for raising rates. Banks are finding it more expensive to source money for borrowers.The sub-prime crisis - which was sparked when US lenders lost billions of dollars on bad loans - means banks have pay more for the money they borrow to lend to consumers.

Durbin seeks cap on loan interest

U.S. Sen. Dick Durbin (D-Ill.) has taken aim at the high-interest-loan industry, introducing a bill proposing to cap rates charged for payday loans, car title loans and other forms of consumer credit at 36 percent annual interest.

Payday lenders typically charge anywhere from 200 percent annually to five times that figure depending on laws in states in which loans are obtained.

In effect, the bill would sweep aside rates higher than 36 percent annually in states where higher percentages now apply, but would not affect those with lower rates.

Under a 2005 Illinois law payday loans are capped at about 400 percent annual interest, but the law applies only to loans spanning 120 days. Payday loan firms get around the cap by offering loans of 121 days or longer, which allows them to charge whatever they want, in some cases as high as 1,000 percent.
An effort to close the gap in the 2005 law recently bogged down in the state legislature as payday loan firms and other lenders rallied to preserve interest rates that do not exist in a number of other states.

"It won't help consumers or the payday loan industry," said Steve Brubaker, a lobbyist for payday loan firms in Illinois, referring to Durbin's proposal.

If loans are capped at 36 percent annual interest, Brubaker said, many firms will "have to close the lights and go out of business."

The payday loan industry has swelled to over 25,000 stores across the U.S. in the past decade, and it has also branched onto the Internet, including operating Web sites outside the U.S.

In describing problems faced by consumers, Durbin pointed to a Tribune story about a 66-year-old retiree whose $1,000 car title loan ballooned to $4,000 over time. Her loan was at 300 percent.

"These excessive rates are often hidden and can have crippling effects on those individuals who can least afford it," Durbin said in a statement. "Congress must enact protections against predatory lending."

The Tribune series noted that as payday lenders have shifted to longer-term loans, Illinois officials have no idea what the lenders are charging, leaving the industry virtually unregulated.

Illinois is one of a few states that allow auto title loans and, according to consumer advocates, is the only state with no basic protections for people who put their cars up as collateral.

The Tribune's series detailed a major increase in consumers' complaints about debt collectors who purchase old debts, mostly from credit card companies, and file lawsuits against consumers to garnish their wages with the goal of collecting on the debt. The story showed that in some cases people were sued even though their debt had long been paid off.

Durbin pointed out that Congress several years ago imposed a 36 percent annual interest cap on most loans for military personnel and their families.

Lawmakers acted amid complaints that lenders were targeting members of the military services and their families who were struggling under high interest loans.

His effort is likely to encounter fierce opposition from lenders who have faced increased efforts by states to lower payday loan rates. After Oregon's lawmakers lowered the rate there several years ago, most payday loan companies have closed their business in the state.

Consumer advocates praised Durbin's move. "It sets the bar," said Lynda De Laforgue, co-director of Citizen Action/Illinois. "It is really important because it says that this is the direction we are headed."

Durbin's effort coincides with a drive in Congress and from federal regulators to impose new rules over credit cards used by millions of Americans.

The credit card industry has indicated that it intends to fight changes that it says could slash its revenues.

Senators Push for Low-Interest Loans

Sept 23, 2008 /PRNewswire-USNewswire via COMTEX/ -- - Sens. John Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship, Olympia Snowe (R-Maine), Ranking Member, Tom Harkin (D-Iowa), Committee member, and Chuck Grassley (R-Iowa) sent a letter to the Small Business Administration (SBA) today urging the Administration to review its new standards for credit elsewhere and ensure that the requirements enable current and future disaster victims to obtain assistance. This call comes after the SBA altered its standards to determine which victims would be eligible for low-interest loans, which significantly raised the number of applicants offered loans at a higher rate.

After Katrina, all but 2 percent of applicants received low-interest loans capped at 4 percent to help them rebuild their homes and businesses. But reports from the Midwest floods show that the SBA is determining that a higher percentage of disaster victims are being offered loans at the higher rate. The victims in the Midwest are being offered more expensive loans -- with rates capped at 8 percent and shorter repayment periods -- at a rate fifteen times as great as after Katrina. This is due to changes made by the SBA to the standards for determining if victims are able to receive credit elsewhere. Victims who can receive credit elsewhere are given loans with the higher rates. The SBA must review these standards and ensure that they are not unnecessarily hurting disaster victims and slowing recovery efforts.

"The goal of the SBA in times of disaster should be to facilitate a quick economic recovery," Kerry said. "But with this change, many of the small businesses vital to our economy could close at a time when their continued prosperity is more essential than ever. This standard must be reconsidered so victims will have the resources they need to rebuild their businesses and their lives."

"With small businesses and homeowners struggling to recover from disasters in the Midwest and Gulf Coast, it is imperative that SBA offer loans at reasonable interest rates to those seeking to rebuild," said Senator Snowe. "Entrepreneurs working to restart operations and create jobs, as well as families trying to restore their homes, should be subject to a fair credit elsewhere test that truly determines whether they can access affordable credit in the private market. The SBA must stand ready to quickly provide low-cost credit under the widest possible set of transparent standards when private lenders are unwilling to do so at competitive rates. I urge the SBA to review its current rules and ensure that they do exactly that."

"Across Iowa, businesses and individuals are still reeling from the devastating floods and they need access to these loans to facilitate their recovery," said Harkin. "The mission of the SBA is to assist with economic recovery after a disaster occurs, and the change they made in their lending criteria is counterintuitive to that."

"Iowans are doing all they can to rebuild their lives, homes and businesses. Iowans are hurting and the Small Business Administration's high loan rates are like kicking somebody when their down. People expect help from their government in times of need. Iowans aren't asking for a free ride, just the same treatment and low rates as those given to victims of Hurricane Katrina," Grassley said.

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loans at three percent interest for Chhattisgarh farmers

Thousands of farmers on the occasion of the country’s 62nd Independence Day, Chhattisgarh government Friday declared that it would provide agriculture loans at three percent interest rate. Chhattisgarh farmers will now get loan at just three percent from cooperative societies as against the existing rate of six percent. This is the the lowest interest rate being provided in any state,” Chief Minister Raman Singh said in his Independence Day speech at Police Parade ground here.

Earlier the farmers were able to get just Rs.200-250 crore (Rs.2-2.5 billion) loan annually but last year they received Rs.588 crore (Rs.5.88 billion) as government brought down the interest rate to six percent from 14 percent,” Singh said.

He added that government hoped to provide about Rs.805 crore (Rs.8.05 billion) agriculture loan this financial year due to further slashing of the rates. The chief minister also announced that nearly 4,500 youths recruited as special police officers (SPOs) for anti-Maoist operations will get a pay hike. The SPOs are currently paid Rs.1,500 per month which has been raised to to Rs.2,150 per month.

GHB and SMC unveil 5 year fixed-interest loans

Government Housing Bank (GHB) has joined hands with the Secondary Mortgage Corporation (SMC) to launch their loan-for-housing programs with up to 5 year fixed-interest rates. The move aims to help members of the public with their financial difficulties.

The GHB President, Mr. Khan Prachuabmaoh , disclosed that borrowers who are granted 1 year fixed-interest loan are subjected to pay back their loans at an interest rate of 3.99 while borrowers who choose a 2 year loan will be subjected to a fixed-interest rate of 4.99 %; 5 year loans will have a fixed rate of 6.99 %.

Mr. Khan said after the promotion ends, eligible borrowers are subject to provide minimum retail rate (MRR) of 0.25% to the bank. The maximum loan period is 30 years within the extension of 500 million baht loan.

The loans will be introduced to prospective borrowers in Bangkok and vicinities, beginning from September 1st, 2008. Loaners and mortgage redeemers with a loan of 300,000 to 10 million baht from their existing financial institutions are also eligible. They can have the highest loan of 85% of their existing assets at their existing financial institutions.

Lower interest rates make homes more affordable

Falling interest rates have improved housing affordability in July to its best level since February 2007, the Wizard Home Loans Affordability report shows.

The national median house price was steady in July, but prices are falling in most of the big cities. Tax cuts on October 1 and further falls in interest rates are expected to improve affordability significantly over the rest of 2008 and through the spring when many home sellers put their houses on the market.

This monthly report measures the proportion of a median after tax income needed in each part of New Zealand to service an 80 per cent mortgage on the median house price in that region.

The home loans affordability report shows it took 77.4 per cent of the median take-home pay to service the mortgage on the median house in July, down from 78.3 per cent in June and down from a peak of 83.8 per cent in November last year.

Affordability is now back near the levels it was at in February last year and not far off its levels of 70 per cent seen in the spring of 2006.

Affordability looks set to improve through the rest of 2008 as interest rates fall at the same time as house prices keep falling. Tax cuts due from October 1 are also expected to improve affordability ratios as take-home pay rises slightly for most home-buyers. Nominal wages are also rising relatively fast.

"This coming spring will be the best for home loan affordability in two years," said John Grant of Wizard Home Loans.

"Home buyers are in a much stronger position than they have been for a long time. It is a buyer's market and falling interest rates, rising wages and lower tax rates are all working in favour of home buyers as we head back into summer," Grant said.

However, housing affordability remains much worse than before the housing boom took off in late 2003 and before interest rates rose from under 7 per cent in 2003 to over 9 per cent in 2008. House prices rose 64 per cent between November 2003 and November 2007. In July 2003 the affordability ratio stood at 43.9 per cent.

Central Bank of Samoa’s has moves to drop loan interest rates to ease high cost of living

Samoa’s Central Bank has eased its monetary policy stance by urging commercial banks and government loan institutions to reduce loan interest rates and increase lending for business development in order to bring down the cost of living.

The move is expected to apply for manufacturing, tourism, renewable energy, and agricultural sectors to help with the policy’s objectives of reducing Samoa’s demand for imported food items that have continued to increase in prices.

The Central Bank’s Governor Leasi Papalii Tommy Scanlan, is predicting that the current interest rate of 12-point-7 per cent will be reduced to 12-percent.

On the House: Yes, the tax credit is really a loan

an angry reader who complains that the Housing and Economic Recovery Act's $7,500 tax credit to first-time buyers is a sham. It's just a zero-interest loan!" the fellow shouts loudly into the receiver, as if I'm responsible for the actions of Congress. "The least they could have done was given us a gift!"

Yes, the tax credit technically is a zero-interest loan that you will repay to the government over 15 years, starting two years after the credit is claimed, at $500 a year.

If you sell the house, you repay the entire amount if there was enough profit to do so. If not, the amount that you don't repay is forgiven.

Why isn't it a gift? You already got a gift this year with the economic-stimulus payment. You think the federal government has a lot of money to spare? Look at the record deficit and tell me Uncle Sam has deep pockets.

Farah Jiminez, executive director of the community development corporation Mount Airy USA, explained it best: If the money didn't have to be repaid or the credit were made a permanent feature of the market, the asking price of houses would be driven up $7,500 by sellers who knew the buyers would be getting it back anyway.

The law is designed to stabilize prices so that values will rise naturally.

I spent a recent afternoon listening to an explanation of the tax credit by some officials from the National Association of Home Builders, and, with some added insight from my cadre of economists and other experts, I offer this:

The $7,500 tax credit is available to first-time buyers (defined as those not having owned a primary residence for three years before the purchase) who close on the sale of a house between April 9, 2008, and July 1, 2009. The house must be the buyer's principal residence.

If you are married and file jointly, the credit is available only if neither you nor your spouse owned a primary residence in the previous three years.

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Falls Church Firm Rolls Out Tool to Keep Up With Loan Modifications

As homeowners have battled to keep up with their mortgages, lenders and their call centers have struggled to handle the number of people hoping to bargain for lower interest rates, principal reductions and longer payment plans.
Borrower Inquiry, lets homeowners who have applied for a loan modification track the status of their requests online. Three major lenders are negotiating contracts to use the software, said Kevin Schlumpf, CSC's managing director of early resolution. He declined to name them or disclose how much they would pay for the service.

"To track the package you go to the Web site, click it and see where it is," he said. "This Borrower Inquiry tool lets you do the same thing."
According to Hope Now, the lenders' initiative meant to address the mortgage crisis, lenders processed 181,000 mortgage workouts in June and a total of 522,000 in the second quarter. That's a major uptick from the beginning of the year, and according to industry members, most loan servicers are having trouble handling the workload.
So I think everybody throughout the system realizes that technology is a pretty important tool to streamline what has been a pretty cumbersome process."

That overload has been a boon for some of CSC's services. Nine major lenders representing 20 percent of the prime mortgage market now use its core software for loan modifications, the company said. Several lenders, including Wells Fargo and bank of america, have also started using its counseling portal, which debuted this year and lets credit counselors instantly estimate the terms that borrowers can renegotiate for.

Rangers defender Andy joins Bristol City on loan

The defender, 26, has been allowed to leave Ibrox in search of first-team football after suffering a series of injuries since his arrival on loan from Wigan in January 2007.
Webster signed a three-year deal with Rangers earlier this summer and manager Walter Smith believes the short-term move to England will help him get his career back on track.
SPL side Motherwell had also confirmed their interest in the former Hearts player, but he will now spend the next six months south of the border instead.

Smith told www.rangers.co.uk: "We have allowed Andy to go on loan to Bristol City until the January transfer window.
"We feel it will be beneficial for him to get first-team football there and we hope he can return to the level we all know he is capable of.
"Andy has had a torrid time since he arrived at Rangers and it will be good for him to get games every week in another environment."

Interest hike of 1% may push home loan repayment by one-fifth

Repayments may increase by over Rs 3.5 lakh over a 20-year period on a Rs 20 lakh home loan, if the bankers hike interest rates by up to one per cent in the wake to tight monetary measures announced by RBI on Tuesday.

Consumers may have to fork out up to Rs 1,500 more every month for a home loan of Rs 20 lakh, as bankers say that interest rates could go up by 0.5-1 per cent after RBI's hawkish policy aimed at containing inflation.

As such private and public sector bank are offering home loans for interest up to 14.75 per cent per cent depending on the quantum and tenure of the credit period. At the lower end of the band, the interest rates start at 9.75 per cent.

An analysis of the repayment computation tables used by banks suggests that the EMI would rise by up to Rs 75 per lakh for a 20-year loan tenure after a one per cent interest rate hike.

This additional burden in the EMI would increase the overall interest cost for a loan taken for a period of 20 years, by a whopping Rs 3,60,000 crore.

After the Reserve Bank today asked the banks to park more cash with it and also increased its short-term key lending rates for them, the bankers across the board said that they would have to increase the lending rates for commercial and consumer loans, including for cars and housing.

The rates could rise by between 0.5-1.0 per cent, the bankers said, after RBI increased the cash reserve ratio by 0.25 per cent and the repo rate by 0.50 per cent.

The floating home loan intrest currently vary between 9.75 per cent to 12.5 per cent, while that for fixed rates are 11.25 per cent to 14.75 per cent for a 20-year loan.

HDFC Bank net rises 45% on interest income

The country’s second largest private sector lender HDFC Bank on Monday announced a 44.55 per cent jump in its net profit at Rs 464.35 crore for the quarter ended June 30, 2008, as against Rs 321.23 crore during April-June last year. The bank’s total income for the quarter rose 59.6 per cent to Rs 4,215.2 crore from Rs 2,641.7 crore in the first quarter of 2007-08.

HDFC Bank, which merged Centurion Bank of Punjab in May this year, reported a dip in its net interest margin (NIM) to about 4.1 per cent at the end of the June 2008 quarter, compared with 4.4 per cent in the corresponding period last year. The bank said the reduction in NIM was a result of the merger with CBoP, that recorded an NIM of 3.6 per cent.

“We have been able to pass on the increasing interest rates to our loan book, and if the rates go up further, we may not see our margins under pressure. Our NIM is likely to be in the range of 3.9 per cent and 4.2 per cent for the coming 14-15 months,” said the bank’s executive director Paresh Sukhtankar.

The net interest income rose to Rs 1,723.5 crore in the first quarter, registering a growth of 74.9 per cent on a year-on-year basis.

HDFC Bank reported a 12 per cent rise in provisions at Rs 344.5 crore during the quarter, as against Rs 307.12 crore during April-June last year. During the first quarter this year, the bank made a provisioning of Rs 324.4 crore towards non-performing assets (NPAs) and standard assets, compared with Rs 299.7 crore in the corresponding period last year.

During the quarter, the bank took a mark-to-market (MTM) hit of about Rs 72 crore on its investment portfolio. “About 80 per cent of our assets are in the held-to-maturity (HTM) category and the remaining are in available for sale (AFS). Therefore, the MTM numbers might not go up significantly from these levels unless the central bank makes a huge hike in policy rates,” Sukhtankar said.

The bank earned Rs 2,636.38 crore from interest on advances during the first quarter, about 81 per cent higher from Rs 1,453.62 crore for the same period last year.

Iran's c.bank sees no need to change rial rate policy

Iran's central bank sees no need to change the country's managed floating exchange rate policy, media reported on Monday, after a minister said the government was studying strengthening the rial against the dollar.

The remarks by Governor Tahmasb Mazaheri suggest another policy rift between the central bank and government, already at odds over interest rates. Rates were kept steady this month well below inflation, despite the bank's call for raising them.

Acting Economy Minister Hossein Samsami said in comments published on Sunday Iran was considering strengthening the rial against the dollar, possibly to a rate of about 4,500 rials to the greenback compared with the current level of 9,211 rials.

Central Bank Governor Tahmasb Mazaheri said the existing exchange rate system was working well.

"The rate for foreign exchange has enjoyed relative stability in recent years and has contributed to market stability," he said in comments carried by the economic daily Donya-ye Eqtesad.

"Iran's foreign exchange rate system has been managed on a floating basis, in which the interests of groups such as exporters and manufacturers are taken into consideration, and one must not unreasonably disrupt the stability of this market," the newspaper quoted the governor as telling reporters.

Asked about the idea of strengthening the rial to around 4,500 rials to the dollar, the governor said: "This rate pertains to years ago, and the determination of the dollar rate under the present conditions would require extensive studies."

Differences between Mazaheri and the government have become increasingly public. The evening edition of a leading newspaper was shut last week on the grounds that it had harmed the economy by reporting a row between ministers and the governor.

Mazaheri has been calling for higher interest rates to tackle inflation, now running at about 26 percent, but has run into opposition from ministers who say this would hurt job creation and stifle investment.

Interest rates were kept at 12 percent for the year 2008-09, media reported on Saturday. Although not the rate rise Mazaheri sought, one analyst said it was a relative success that he had managed to block the president's previous calls to lower rates.

Economists say rates need to rise sharply and the government must rein in spending of petrodollars if prices rises are to be brought under control.

The last central bank governor quit last year, also following differences with the president over rate policy.

Ahmadinejad, whose government is under Western pressure over Iran's disputed nuclear programme, has blamed rising inflation on factors including Iran's dependence on imports, the dollar's global weakness and plots by the Islamic Republic's enemies.

The rial exchange rate has stayed relatively stable against the dollar, tending to hover around 9,200 rials or so, although it has weakened against the euro in line with the greenback.

Some of Iran's biggest trading partners are European, making those imports more expensive and feeding into inflation.

Mazaheri was quoted as saying that only 3 percentage points of Iran's inflation rate was being imported.

(Reporting by Hashem Kalantari and Edmund Blair; Editing by Ruth Pitchford)

The home loans interest rate story: The wait for the fall

Since 2004, India has been in a booming economy. The retail and housing sector has seen the most of these good times. The property rates and demand for houses has always been high, keeping the brokers and the banks very happy. The banks have responded to the increase in the demand for home loans by increasing home loan interest rates. This did have an effect on the home loan borrowers in the recent past, but the booming economy had also lead to an increase in the economic activity, and hence their incomes.

However, the past some months has seen a complete reversal in trends. The inflation rate of 11.63 percent and the corresponding stringent monetary rules by the Reserve Bank of India have left many borrowers seeing their financial burden increased by as much as 25%.

On 24th June, the RBI had hiked the repo rate and the cash reserve ratio by 50 basis points each. Repo rate is the rate which the RBI charges the banks, hence, in a way; a higher interest rate makes it costlier for banks to borrow money from the central bank. Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down.

This article outlines the precautions existing home buyers should take. It also tries to answer the queries which appear on the mind of every individual who wishes to buy home loans.