RBI Limits Private And Public Sector Banks For NRI Matters

NRI loan interest rate depends a lot on the reason of borrowing. When the reason is to invest in share or commercial immovable property market, the interest rate to be paid is higher than any loan borrowed by the NRI to be invested at an employment generating project.
The RBI has recently prohibited public and private sector banks from lending more than Rs 20 Lakh against the deposits of NRIs. This ban is imposed by the apex bank on doubt that a huge part of such loans is being diverted for speculation in shares and immovable property market. These cautious steps from the apex banking body are aimed at ensuring that bank credit is streamlined towards productive sectors other than the retail sector. It will definitely squeeze the extra investment flow particularly in commercial real estate and capital markets. The hike in standard assets provisioning will lead to a raise in retail lending rates.

This entry was written by rajani, posted on June 28, 2008 at 1:26 am, filed under Real Estate News and tagged Apex, Apex Bank, Assets, Capital Markets, Commercial Real Estate, Immovable property, Loan Interest Rate, Loans, Private Sector Banks, Productive Sectors, Public Sector Banks, Retail Lending, Retail Sector, Speculation. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Trackbacks are closed, but you can post a comment.

2 Comments

riathareja

Posted June 30, 2008 at 4:42 am | Permalink

Sensing a correction in the real estate sector, commercial banks have become selective in lending to new residential and commercial real estate projects. Besides increasing the lending rates, some banks have asked the promoters to increase their share in project funding in an attempt to mitigate the associated risks. Banks have already turned selective in taking up new funding proposals. The Reserve Bank of India has already declared the real estate space as a sensitive sector under its prudential norms. The sector thereby attracts higher risk weightage (banks have to set aside higher amount of capital for real estate exposure) and the lending is closely monitored. Keeping with the rising cost of funds and the need for additional capital for risky assets, the banks have increased the lending rates for real estate projects. The real estate companies are now paying prime lending rates (PLR) for new projects. The growth in loans to commercial real estate remained high, notwithstanding some moderation, RBI said in its macro-economy report for 2007-08.For more view- realtydigest.blogspot.com
Neeraj

Posted July 16, 2008 at 6:40 am | Permalink

But what will be the benefit after that policy ? Will it be in favour of both ?

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