It asked them to pass on interest rate increases gradually and to take into account the impact on both existing and prospective borrowers at a meeting this week with chief executives of HFCs.

“We are sounding a note of caution to the HFCs. With interest rates moving up, most of the lenders are going to be impacted as almost 85% of the loans are on floating (interest) rate,” R.V. Verma, NHB chairman and managing director, said in an interview. “Lenders should closely watch the situation as the repayment capacity of the people, who are almost on the threshold, will be impacted.”

HFCs borrow from banks and the market to meet lending requirements. The Reserve Bank of India has raised rates 11 times since March 2010 to rein in inflation.

“HFCs can press their spreads, but it will not be easy as margins are already under pressure,” Verma said.

The regulator has asked the lenders to take a “calibrated” view on increasing interest rates as it may impact both new and old business. “Due to higher rates of interest, customers may postpone their property buying decision. That means no new incremental business for the HFCs,” Verma said.

“In terms of old business, the asset quality may be impacted. So, HFCs could be losing on both fronts.”

India’s 54 HFCs have a 35% share of the total housing loan portfolio. The average lending rate is 11%.

“Till now, the situation is contained,” Verma said. “So, from a systemic point of view, we don’t see any risk. But going forward, if there are a couple of more hikes, it’s possible delinquencies may start showing up in the companies’ books.”

The larger lenders are likely to face a greater impact than the small and medium ones, he said.

“The middle-level and smaller ones have very high capital adequacy and are still building their business,” Verma said. “But for larger companies, the impact will be more as they have a big portfolio of existing loans.”

Still, the companies have enough of a buffer, he said.

“The companies are fully cushioned, both in terms of capital adequacy and provisioning,” Verma said.

The ratio of non-performing assets to loans is around 1% for HFCs.

Rising interest rates haven’t had an impact on asset quality, said Anil Sachidanand, chief executive officer of Dewan Housing Finance Corp. Ltd.

“The quality of assets to a large extent depends on the quality of the origination,” he said. “We do adequate due diligence while sanctioning loans.”

Interest rates levied by HFCs have risen to 11-11.25% from 8.5% in the past year, raising monthly instalments, said Anil Kothuri, executive vice-president at Edelweiss Housing Finance Ltd, which entered the business recently.

“The impact will especially be felt in the lower segments, where the average ticket size is less than Rs. 10 lakh,” Kothuri said.

Rajnish Kumar, chief executive of British operations, says SBI’s commitment to its branch network is all about offering customers a choice of how they access their money and supporting communities.

SBI is bucking the trend among the High Street banking giants. More than 180 branches were closed last year by Lloyds TSB, Santander, Northern Rock, Royal Bank of Scotland and HSBC.

“We want to be a community-based bank where customers value our service and develop a long-term relationship with the brand. In Wolverhampton, where we will open this month, politicians and businesses have told us it is good news for the community and our presence will boost the High Street,” Kumar said.

“For us it is not an either/or situation when it comes to branches. We want to be available for our customers through all channels — the internet, ATMs and branches.”

SBI has focused its efforts on the retail savings market since opening up in Britain in 2002. It has an instant-access account paying two per cent and a one-year bond at three per cent.

The bank also offers a current account that allows free remittances to India and it hopes to move into mortgages and personal loan in the first quarter of next year.

SBI already has five branches in London, including its head office in the City and in East Ham, which was the last one to open in February.

It also has branches in Leicester, Birmingham and Manchester. The focus for future branches will be in areas with big Asian populations, but Kumar says SBI wants to be seen as welcoming for all.

Other challengers

Other smaller challengers are slowly but surely getting a foothold in the market with branch expansion. India’s ICICI bank and Bank of Baroda as well as Islamic Bank of Britain have targeted areas with big Asian populations. ICICI has 11 branches while Bank of Baroda has ten, mostly in London.

New entrant Metro Bank has opened eight branches since its British launch a year ago. Swedish-owned Handelsbanken has more than 100 branches in Britain.

Derek French of the Campaign for Community Banking, which lobbies against branch closures and supports moves to make banks share branches, says: ‘It is good to see State Bank of India opening more High Street branches. So many branch relocations have been in business parks and out-of-town retail centres.’

* 10: SBI branches in Britain by the month end
* 11: the number of ICICI branches in Britain
* 180: the bank branches closed last year in Britain

To soothe the borrowers’ frayed nerves, banks are once again rolling out short-term fixed rate home loans. Credit counselling centres, whose mandate is to help clients find realistic solutions to their debt problems and agree on achievable repayments, are the flavour of the season.

So what’s on offer? India Infoline Investment Services, a home finance provider, has announced a scheme, Mortgage SteadiLoan, where home loan rates are fixed for two years, starting at 10.99%. ICICI Bank is offering one- and two-year fixed rate home loans at 10.5-11.75%, depending on the loan amount. According to ICICI Bank, the fixed interest rates will shield customers from frequent changes in home loan interest rates and protect them from rising rates over the next couple of years, depending on the product chosen by the customer.

Make a calculated decision

“It makes no sense if you have to pay a premium on what you are getting at the floating rate,” he adds. What it boils down to is that you must calculate the rate differential between the prevalent floating rate and the fixed rate before opting for the offer.

In the case of the 10.5% offer on one-year loans of less than Rs 25 lakh from ICICI Bank (see Fixed and floating rates), the math works out in customer’s favour as the floating rate for the same loan amount is 10.25%. In contrast, the offer of 11% fixed rate for a loan between Rs 25 lakh and Rs 75 lakh doesn’t make sense as you may pay a higher interest rate than the market rate.

Similarly, the IIFL offer of almost 11% comes at a premium for two years. It is more of a guarantee to the lender than assurance to the borrower, according to Roongta, who says that though rates are not likely to drop in the coming 12 months, they may decline over two years.

There are many, like Vipul Patel, director at mortgage consultancy Home Loan Advisors, who believe that floating rate loans are actually safer. “From the consumer’s point of view, a variable rate works out better as the rates may go up once or twice in the future. For a person with a one-year perspective, there is an upward bias of 100 basis points (1%). However, there is a downward movement expectation of 200-300 bps over the next 12-24 months,” says Patel.

In a similar vein, a senior public sector bank official, says, “We don’t expect rates to go up much from here. We want our measures to be customer-centric, not just business-centric. From a customer’s perspective, fixed rate loans at this point in time are not favourable.”

The way out

The bottom line: if you must fix the home loan rates, do it for just a year. Before signing on the dotted line, make sure that you ask your bank about the EMI and interest rate after the fixed rate tenure ends. More often than not, when the tenure is over, the interest rate becomes floating and is linked to the bank’s base rate, with a margin tacked on. Calculate Ypur EMI’s with Home Loan EMI Calculator

The branch will also offer savings and transaction banking solutions for meeting local needs through fixed deposits, savings and current accounts, said a press release from the bank.

As a new initiative for its customers, ICICI Bank’s call and remit facility gives current account customers the convenience of transferring money to India over the phone through its call centre to pre-registered beneficiaries.

In addition, customers interested in procuring mortgage loans for properties based in India can be referred to ICICI Bank India.

ICICI Bank opened its first overseas branch in Singapore in 2003 and launched its first retail branch there in September 2010 after being granted the Full Bank Licence with Qualifying Full Banking privileges by the Monetary Authority of Singapore, the release said.

Maruti Suzuki India Ltd, the country’s largest car maker, reported a 13% fall in sales over a year ago to 91,442 vehicles in August, the company said in an statement. The disruption in production at its Manesar plant caused by labour unrest in end-August adversely impacted the sales numbers during the month, Maruti said.

“The inquiry levels are high. We are seeing footfalls in our showrooms, but they are not converting into sales. A turnaround will not be as fast as it was expected,” said Shashank Srivastava, chief general manager, marketing and sales, Maruti Suzuki.

At Hyundai Motor India Ltd, the country’s second largest car maker, sales inched up to 51,030 units in August from 50,633 a year ago. Tata Motors Ltd’s sales declined 2.84% to 64,078 units. Sales of its small car Nano, the world’s cheapest car, fell 85% to 1,202 units.

“The biggest problem is liquidity and interest rates. Financing is a concern,” said Abdul Majeed, auto practice leader, PricewaterhouseCoopers (PwC). “Banks and NBFCs (non-banking finance companies) have slowed down in giving loans, and this comes at a time when another round of rate hike is expected by RBI (Reserve Bank of India) later this month. Given these conditions, I think sales during upcoming festive season may not be on expected lines.”

Around 80% of car purchases in India on Car Loan.

RBI has raised policy rates 11 times since mid-March 2010 to rein in inflation. Besides, the government increased the price of petrol by Rs.5 a litre in May—the biggest hike since June 2008.

Car makers failed to boost sales despite offering hefty discounts. Discounts on Maruti and Hyundai models ranged between Rs.20,000 and Rs.40,000. Tata Motors, for the first time, offered a discount of up to Rs.25,000 on the Nano. Honda Siel Cars India Ltd offered a discount of Rs.1.75 lakh on its outgoing Jazz model.

Even new car launches—at least 13 were introduced in August—failed to enthuse buyers.

“The market continues to be tough and there are no signs of recovery in the immediate future. The rising fuel prices and interest rates have been instrumental in this sluggish market trend,” said Arvind Saxena, director (marketing and sales), Hyundai India​.

“The numbers were also down due to a higher base of last August,” said Majeed of PwC.

Volkswagen AG​ and Ford, though, bucked the trend. Volkswagen sold 6,091 vehicles in August, a growth of 72% over last year; sales at Ford grew 9% to 8,914 .

“It was bound to happen as companies like Ford, Volkswagen have introduced some products which are loaded with features and are highly price-competitive at the same time,” said an expert with a consultancy firm who did not want to be named.

Utility vehicle maker Mahindra and Mahindra Ltd also posted robust growth in sales, but mostly due to a low base last year. Its sales rose 30.38% to 37,684 units.

Source: Bloomberg

Therefore, it is best to steer clear of unsecured loans, like credit card debt, unless you have exhausted all your options. Of course, this doesn’t imply that you should be relaxed with respect to ‘good’ loans like home loans.

Given the current high interest rate regime and the possibility of yet another policy rate hike by the RBI in the coming weeks, the pressure on equated monthly installments (EMIs) is likely to be unrelenting. Therefore, it would make sense to stay away from the following traps to prevent debt burden weighing in on your monthly budget, adding to challenges borne out of stifling inflation and a bleak global scenario.

HOME LOANS BORROWING BEYOND YOUR REPAYMENT CAPACITY

This is a common, cardinal mistake while taking a loan and applicable to both home and credit card loans.

“Many borrowers overestimate their repayment capacity while availing of home loans. They look to stretch their budget to accommodate, say a 3-BHK apartment when it permits just a 2-BHK one,” points out VN Kulkarni, chief counsellor with the Bank of India-backed Abhay Credit Counselling Centre.

Since owning a house is a cherished dream of many Indians, stretching the budget is considered acceptable. They end up seeking a loan larger than required and the realisation dawns only when the EMIs start taking their toll on their finances. Ideally, one should estimate how much servicing capability one has and take loans accordingly.

“A ball park estimate for thiswould be 40-50% of take-home salary for home EMI. Over this, they will have to make arrangements for down payment as well as stamp duty, registration, any improvements to be done in this home, etc,” Kulkarni adds. People should consider buying houses only when they can put in their portion of the money required and be able to service the EMI easily. Calculate your Loan EMI with EMI Calculator

AVAILING OF TOP-UP LOANS

Similar is the case with furniture and furnishings – a house is deemed incomplete without interior decoration. Several banks offer home loan top-up facilities and many fall for them, ignoring its implications on the outgo later. These loans are typically closer to personal loans in structure, and thus carry high interest rate.

BANKING HEAVILY ON PAY HIKES

It is also not uncommon to see loan seekers overestimating potential salary hikes and bonuses while taking a loan. Ideally, repayment capacity should be ascertained primarily on the current earnings. After all, the economic scenario may take a turn for the worse, scuttling any chances of a pay raise or even leaving you jobless. Therefore, it is wise to be conservative rather than optimistic, and factor in only the present position while evaluating your EMI servicing capability.

“One should avoid being overleveraged during the good times. Once one gets into the habit, he is not able to change during stressed times. A thumb rule is that your overall debt service ratio should not exceed 2.5 times (or 40% of your income),” adds Jayant Pai, VP, Parag Parikh Financial Advisory Services.

CREDIT CARDS PAYING MINIMUM AMOUNT DUE

Extremely handy as a spending tool, it can spell doom when used as a borrowing avenue instead. Perhaps, the biggest mistake one can make while repaying credit card dues is to simply pay the minimum amount due every month specified by the credit card issuers and banks. The tendency is to assume that the overall outstanding amount will dwindle in due course. However, the perception is completely wrong. For, the outstanding will be treated as overdue amount and hefty interest and penal charges will come into the picture, hugely inflating your original amount.

Columbia Business School this year is asking applicants to respond in no more than 200 characters to the following question: “What is your post-MBA professional goal?” (The answer would be shorter than the length of this paragraph.)

Admissions officers review their application processes regularly, but have picked up the pace in recent years as they seek more creative responses via essays, PowerPoint presentations, Twitter and even in-person.

The hope is that these new components to the application process will help steer prospective students away from trying to anticipate what they think business schools want to hear, and will force those students out of their comfort zone.

Some business schools are tweaking their essay questions in hopes of getting more authentic responses from prospective students.

The New
‘Please describe a time when you had to make a decision without having all the information you needed.’ (Massachusetts Institute of Technology’s Sloan School of Management)

The Classic
‘People may be surprised to learn that I…’ (Northwestern University, Kellogg Graduate School of Management)

Admissions officers say they are looking for more authenticity and honesty, since essays can be carefully crafted, often with help from a professional MBA admissions consultant.

Beginning this winter, the University of Pennsylvania’s Wharton School will invite a random sampling of MBA applicants to participate in a staff-moderated on-campus group discussion with fellow applicants. They will be encouraged to discuss and debate current topics in business, as chosen by the school.

The method isn’t much different from a preschool screening, when a group of children are observed on the playground to see who plays nicely.

Ankur Kumar, director of M.B.A. admissions and financial aid at Wharton, said the purpose is to give applicants “a chance to demonstrate, not just talk about” their critical thinking skills and intellectual curiosity.

Though this year’s discussions won’t count toward the admission decision, if the pilot goes well, the exercise could show up as a regular component of future Wharton applications, alongside transcript, test scores and recommendations.

For the class entering in the fall of 2012, the University of California, Berkeley’s Haas School of Business began asking prospective students what gives them the greatest joy, a change from its prior “What are you most passionate about?” query. The school is hoping to tap into issues that excite applicants—the pleasure of a certain hobby, for example—rather than a self-impressed treatise on solving world hunger.

“There are many [applicants] who still think there is a formula to get into business school, who think there’s a certain type of response the admission people want to see,” said Stephanie Fujii, executive director of full-time M.B.A. admissions at Haas. According to Ms. Fujii, there isn’t.

The University of Chicago Booth School of Business was among the first business schools to branch out beyond the traditional essay. Since 2007, the school has asked MBA applicants, “What else should we know about you?” It requires an answer in no more than four slides of text or pictures.

The so-called PowerPoint question—which is posed alongside a few essay questions—is intended to gauge applicants’ creativity and comfort with the unknown, said Kurt Ahlm, associate dean of student recruitment and admissions for the school’s full-time M.B.A. program.

Schools like Booth aren’t necessarily using the new questions to recruit a different batch of students, but admissions officials say they want to tease out the more innovative and well-rounded applicants.

Harvard Business School this year began directing current applicants to “Answer a question you wish we’d asked,” an open-ended prompt that could be intimidating.

“It would be almost easier to have a bit more direction,” said one applicant, a 26-year-old who works in fixed-income sales at an investment bank in London. “At the same time, you can answer anything, so that’s a good opportunity to show them what you want.”

To be sure, some business schools have stuck with tried-and-true favorites. The Stanford Graduate School of Business still asks, “What matters to you most, and why?”—a question it has used as part of its essay section since the late 1990s.

Creative questions beget creative answers—at least, that’s the hope.

The University of Iowa’s Henry B. Tippie School of Management this summer offered a full scholarship valued at $37,240 to the applicant who best answered, “What makes you an exceptional Tippie full-time M.B.A. candidate and future MBA hire?” via a tweet.

Applicants had to respond to the question with a 140-character answer or link to other information, such as a video or Facebook page.

The winning tweet was a haiku, including syllable counts, written as a nod to the applicant’s extensive experience in East Asia: “Globally minded (5)/Innovative and driven (7)/ Tippie can sharpen (5).” The school said it admired the candidate’s use of an ancient form of poetry in a contemporary medium.

In one optional question new to this year’s application for admission in the fall of 2012, Columbia Business School draws attention to its annual A. Lorne Weil Outrageous Business Plan student competition by asking applicants for a short pitch for an “outrageous” business. The school refers to the competition—in which teams pitch ambitious social ventures and business plans, the best winning cash prizes—to highlight its expectation that students be entrepreneurial and innovative.

However, even the quirkiest questions can get uninspiring responses.

The Haas School, bringing back an old prompt, asked applicants for the class entering in fall 2008, “If you could have dinner with one individual in the past, present or future, who would it be and why?”

But Haas’s Ms. Fujii was underwhelmed by the answers. She believes an admissions consultant told clients to say “yourself, 30 years in the future,” a response that quickly cluttered her office.

The business school stopped asking that question the following year.
(Source: online.wsj.com)

Essentially a debit card, it functions as an overdraft facility, allowing the user to spend more than the balance in his/ her account up to a predetermined credit limit.

Features

According to the bank, the credit limit is a multiple of an individual’s salary which can go up to three times in accordance with the eligibility. For instance, if the account holder draws a salary of 50,000, he can get an overdraft credit limit of 50,000. So if the credit limit is 50,000, the account holder can spend the bank balance plus 50,000 credit amount.

The daily withdrawal limit has been fixed at 50,000. The salary received by you will be used by the bank to adjust the credit availed. Like credit card, you can earn reward points for using the card to make purchases. It also comes with an in-built insurance cover for lost, stolen or counterfeit card, which will come to your aid in case your card is misused by fraudsters.

Charges

The bank levies a charge of 14.75% per annum for PSU staffers and 15.75% for privatesector employees on the credit amount used by the card holder, while the processing fee is nil. Interest is calculated on the overdraft amount on a daily basis, but charged on a monthly basis.

The card does not entail a cash advance charge that other credit cards impose for cash withdrawal at ATMs. Also, it has done away with third-party ATM fee for using the card at other banks’ ATM more than five transactions a month.

While the interest rate levied is lower than what credit cards carry – up to 39-44% per annum – it is applicable from the day you use the credit limit unlike credit cards which offer a 30-45 day interest-free period. This USP of credit cards has made them popular and in this area, credit cards score over Magic Card. In this context, it is comparable to a personal loan rather than a credit card.

Upside

Apart from the convenience the card offers, lower charges, when compared to other credit cards, constitute a key advantage. Waiver of cash withdrawal charges is also a plus point.

Downside

While all credit cards offer an interest-free period of 30-45 days during which the amount used can be repaid, this card charges interest for the entire period of credit use.

Check out latest Cash Back and Others Offers on Credit Card

But a little foresight and some diligent planning can turn that dream into a reality. The idea is simple: Buy a plot today, preferably a little away from the city. Save some money over a few years and build the house a little later – closer to the time of your retirement.

If you have time to save and invest for the construction of the house, it will be a smooth exercise. However, make sure you do your due diligence while buying the land and, consider your financing options, to make sure that your retirement home would become a reality without glitches.

Due Diligence of the Plot

Check the plot’s title deed and ownership of land for the past 30 years. “The land should have a clear title deed and be free of dispute. The buyer needs to ensure that it does not fall in government-regulated zones. The seller should have complete rights to sell the land, and the property valuation should be in tune with the prevailing pricing trend in the area. Also, he should see to it that basic requirements like roads, water and electricity are available,” says Sanjay Dutt, CEO (business), Jones Lang LaSalle India.

The basic due diligence requires checking the property card, title records and to confirm the land use. If required, put an advertisement in newspapers to confirm the title of land.

Parameters to Consider

Whatever location the buyer selects to buy a plot, he needs to ensure the NA (non-agricultural) status of the plot. “If the conversion of a plot to NA status is still underway, it means that the local authorities still retain the right to make changes in the plan submitted to them. In other words, the status of land acquisition by the government (or any other authorities) for any purpose is not clear. The status of any particular plot number can change at any time within the plan. All this can be verified by using the services of a professional consultant or a lawyer specialising in property deals,” Dutt adds.

But there is a definite space crunch even in developed parts of smaller towns. “Most areas where land is affordable today will be on the outskirts or at remote locations.

Also, no plotted land would be available at prime locations. Hence, whatever land is being bought will be slightly futuristic. Some of the things to be kept in mind are development in and around the site, current and potential infrastructural development planned and currently underway, and most importantly, whether there is any plan of incorporation into the municipal limits if currently outside of the limit,” says Akshay Kulkarni, executive director (residential services), Cushman & Wakefield India.

‘Ideal’ Retirement Home

There is nothing wrong in choosing a far-flung suburb, provided some basic facilities are in place. The key factors to keep in mind are the convenience offered to the senior citizens and the availability of a convivial neighborhood supporting a stress-free lifestyle. It should be well connected to other cities and should have all basic facilities like hospital, medicine stores, banks, post and telegraph offices, internet, telecom, market, gymkhana, etc, in the vicinity.

Do Your Math

The actual cost of your dream house can be arrived at by adding the projected weight of inflation at the time of actual construction to the current estimated cost of construction.

Apply for Home Loans Online

In the latest ranking, IIM Bangalore was named the number one school in the country, making it to the top slot for the first time since 2002. In second place is IIM Calcutta, followed by IIM Ahmedabad. It is the first time in eight years that IIM-Ahmedabad has not held the top slot, the editors said.

The IIMs make up seven of the top ten business schools in the rankings, including IIM Indore, IIM Lucknow, and IIM Shillong. “In the context of business education in India, an MBA degree from an IIM has always been the key to riches, glory and recognition,” according to the Business Times’ article revealing the rankings.

The privately funded Indian School of Business (ISB) Hyderabad holds the eighth spot in the ranking, dropping one spot from last year. FMS Delhi and XLRI Jamshedpur both share the tenth spot.

IIM Bangalore has made its way to the number one position because of “its unmasked ambition for growth and an increased thrust on research,” according to the ranking editors’ note.

One big question the rankings editors raised is what impact the Foreign Education Bill will have on Indian business schools. The bill is being considered by India’s parliament and, if it passes, would allow the entry of foreign universities into India. Schools like Duke University’s Fuqua School of Business, York University’s Schulich School of Business (link) and Georgia Institute of Technology have expressed interest in setting up campuses in India.

Most leading Indian business schools do not appear to be worried, so far at least. “Yes, good institutions are likely to come, and we could all do with some healthy competition,” said IIM-Ahmedabad’s Director Samir K. Baura, in the Business Times’ ranking story.

I’ll be curious to see if there will be a more serious shakeup in the BT-Nielson rankings in the coming years when – and if – the Foreign Education Bill passes. Will Indian students want a degree from a brand name Western business school or an IIM, if given the choice? Only time will tell.