Seven golden home loan rules

Rule # 1: Never choose a lender till the property is identified

Speak to your bank about home finance only after you have identified a property/home/flat you want to buy. While most banks will provide finance for ready-to-move-in properties, some banks do not readily finance a property which is being self-constructed or a property under construction.

Also, if the property is very old or is being developed by a relatively unknown builder, the bank might have an issue with providing a property loan. Take a sanction for the loan only after identifying the property. Banks are known to reserve the best deals for immediate disbursement cases.

Rule # 2: Get clarity about the loan amount eligibility

Banks have different ways to calculate loan eligibility. If loan eligibility based on your income is likely to be an issue, then talk to several banks to find out which bank can give you the maximum amount.

It may so happen that based on your own income, as well as your spouse's, you may still not be eligible to get the amount of loan that you require.

Then you must seek a bank that allows you to club the incomes of your other close relatives (parents, siblings, children etc) to increase your loan eligibility. Some banks may agree to club the incomes of two siblings for the purpose of calculating the loan eligibility.

Rule # 3: You must have 10-15 per cent funds of the house cost

If the house costs Rs 5 lakh, the bank expects you to pay at least Rs 50,000 to Rs 75,000 from your own sources, while the remaining Rs 4,50,000 to Rs 4,25,000 is provided as loan subject to your income based eligibility.

If the value of the house goes down in future, your down payment ensures that the bank's interest is protected by ensuring that outstanding loan amount is less than the realisable value of the property. Once you decide on your dream property, the bank will get the cost of the property evaluated by its own personnel.

Surprisingly, this evaluation can throw up a price different (in most cases lower) from the actual price you are paying for the property. In such cases, you will need to shell out the difference between the actual price and the bank's valuation as additional down payment.

So again, it makes sense to ask the bank to value the property (on payment of a small fee), especially if it is an old resale property. The small fee will be worth the while to avoid future hassles.

Rule # 4: Go window-shopping, bargain more & more

You should shortlist four or five banks and get the short listed banks to compete for your loan. The cost of your loan depends a lot on your ability to negotiate. Remember that all terms and conditions of a housing loan are negotiable.

Interest rates offered by banks take your income and repayment profile into consideration, apart from, of course, your negotiation skills. Apart from interest rates, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other hidden costs. Take all these factors into account before choosing your bank.

Rule # 5: Be prepared to lose your processing fee

Your lender will charge you a fee to get the loan proposal on roll. This fee is called the 'processing fee'. This fee varies from bank to bank, but is usually around 0.5 per cent to one per cent of the total housing loan amount.

Paying the fee doesn't mean that you will get the loan, but this is the fee to get the lender to even 'take a look' at your application. No matter what the bank representative informs you; the processing fee is 'NON-REFUNDABLE'.

Don't trust any verbal promises about not encashing the cheque if the sanction is not done or is not as per the promised terms. Get all such promises in writing. This means that if your loan application is rejected or is sanctioned for a lower amount or at a higher rate than promised, you cannot claim the processing fee back.

Rule # 6: Fixed or floating, there is no substitute for vigilance

Even when opting for 'fixed interest', remember that in some cases, it may remain fixed only for a certain period of time, as the bank may have the right to arbitrarily change even the so called 'fixed rate'. So, probe further and read the fine print before you sign on anything.

Like a majority of consumers, if you have signed a floating rate loan, check whether the rates of your chosen lender had floated down in the years when interest rates were dropping like a stone.

To know whether your lender offers 'transparent floating rates', ask for and check the bank's floating rate records from 2002-2003, when interest rates were going down. This is a fair indicator of what you can expect as (not if) and when the interest rates start moving down and the time comes for the bank to pass on the benefit to you.

Rule # 7: Let your family inherit the house, not the home loan

We know little what fate has in store for us. When you take a home loan, it is on the basis and assumption of continuing income. We run into all kinds of risks in our daily life. Accidents and health issues like heart attacks, strokes, paralysis, kidney failure and other physically crippling ailments can cause loss of income or in some cases, even your life.

Housing loans are a fairly long-term liability. This is why when you take a home loan it is advisable to take a life insurance and critical illness policy.

Life insurance policies provide monetary benefit in case of an unfortunate incident like death and ensure that your family members inherit your home not your home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to unforeseen, unavoidable circumstances which such conditions may create. That will be one less thing to worry about while you are anyway under severe stress.

Best of all, most banks will be happy to finance the one-time premium payable for both policies, enabling you to get this protection at a small addition to your regular premium.

(http://specials.rediff.com/getahead/2008/dec/15slid1-seven-golden-home-loan-rules.htm)

World Bank bars Satyam for 8 years

The World Bank has barred Satyam Computer Services from doing any business with it for the next eight years even as the share prices of India's fourth-largest IT firm tanked 13.5 per cent on rumours that B Ramalinga Raju, founder and chairman, has resigned.

 

Speculation was also high on news that Wipro Technologies, India's third-largest IT firm, might acquire Satyam, something both companies denied.

 

Foxnews.com on Tuesday reported that the World Bank ban started in September this year "due to alleged malpractice's including bribery". The news report said the World Bank debarment -- the harshest sanction ever made by the bank since 2004 -- was meted out for 'improper benefit to bank staff' and 'lack of documentation on invoices'.

 

"The information is true," Sudip Mozumder, a spokesman for the World Bank in New Delhi, told Reuters. Moreover, Robert Van Pulley, the information security official, admitted to the ban during a recent meeting with officials of the Government Accountability Project, a 30-year-old whistle-blowing organisation based in Washington.

 

When contacted, a Satyam spokesperson said that "the company does not comment on individual clients".

 

According to reports throughout 2003 to 2008, the World Bank has paid Satyam hundreds of millions of dollars to maintain and manage its software systems across global networks as well as look at back-office operations.

 

In 2005, the bank's chief information officer, Mohamed Muhsin, was asked to leave after being accused of improperly buying preferential stock options from Satyam, even as he awarded the firm major contracts. A top-secret investigation led to Muhsin being banned permanently from the bank in January 2007.

 

Satyam has been in the line of fire since it made an attempt to acquire Maytas Infra and Maytas Properties for $1.6 billion that are partially owned by the promoter family. Within 10 to12 hours of this announcement, the company retracted its decision due to investor outrage.

 

(http://us.rediff.com/money/2008/dec/24world-bank-bars-satyam-for-8-years.htm)

Anti-theft software for cell-phones

Own an expensive hi-end mobile phone? Petrified of losing it?

Police recently tracked down a mobile theft - a rare occurrence – but the moral of the case was it was better to be safe than sorry.

J. Vikram works as a Security Engineer with a top software firm in Chennai. A few months ago, Vikram lost his brand-new Nokia N 70 mobile phone. He registered a police complaint and in just two days the handset was back in his pocket. It was not just the swift action of the Cyber Crime Cell of the city police but it was Vikram’s prudence that gained him back his handset.

The ‘saviour’ was Guardian 2.1, a free mobile antitheft software installed in the phone. “The software when installed on the phone will ask for your International Mobile Equipment Identity (IMEI), International Mobile Subscriber Identity (IMSI) along with area code and a nominated mobile number to pass on automatic SMS alert when your handset is lost and used by someone else,” Vikram says.

Apparently, Vikram had nominated his sister’s mobile number. When his mobile got stolen and every time a new SIM card was inserted, the Guardian software in the phone started working. And as a result, Vikram’s sister got the warning message on her phone from the illegally inserted SIM.“Immediately I alerted the cops and they nabbed the culprit and got back my phone,” Vikram adds. The interesting element about the anti theft software apart from being free to download is that its presence inside the mobile phone can’t be detected.

Vikram is one of the few who managed to retrieve his mobile phone. According to M. Sudhakar, Assistant Commissioner, City Cyber Crime Cell, nearly 700 cases of missing mobile phones were registered with the city police last year. “But the recovery rate is 50 percent. People buy expensive mobile phones but don’t know how to safeguard them. A simple installation of an anti-theft software can prove effective when the handset goes missing,” stresses Sudhakar.

There are a number of mobile anti-theft softwares apart from Guardian, which can be downloaded to guard your expensive high end mobile phone. Sudhakar recommends softwares that primarily feature the following three options: a) Two mobile numbers can be nominated to receive alert SMS in case of loss of the phone b) Locks the stored data when a new SIM is inserted c) Exports all stored data to the nominated mobile numbers.
“High-end mobile phone users must make use of these softwares. In case of theft or loss of the handset, the software inside makes the police investigation less time consuming. The culprits can be nabbed quickly and in turn increases the percentage of recovery,” Sudhakar adds.

So if you own a high-end expensive handset, it is high time you protect it with some advanced technology that is easily accessible on the internet.

The software

Mobile phone anti theft software Guardian 2.1 can be downloaded for free from http://www.download.com/guardian/3000-11138_410612972.html or http://www.symbian-toys.com/ or http://www.symbian-toys.com/
guardian.aspx
Anti-theft softwares works well on Nokia models like the 6600, 7610, 6630, 6670, N 70, N 72, N 80, N 93, N 95 and also on a few models of other mobile makers.
Virtual Mobile Security (VMS) suite from Mumbai-based Innova Technologies is also an anti-theft software that would lock up the phones in case of unauthorised SIM card change or if the owner sends a text message alert to the culprit. The password-protected software would literally render the handset useless to anyone but the owner.
It would also forward the new SIM card number, the International Mobile Equipment Identity (IMEI) number of the handset and the cell phone number of the new user via an SMS to a mobile phone nominated by the user.

(http://www.goergo.in/?p=231)

How India is weathering the financial tsunami

The global financial turmoil has hit a number of financial institutions overseas, resulting in write-downs, bailouts and bankruptcies. In contrast, the Indian financial system has largely escaped unscathed, thanks to a stringent regulatory framework, which was  considered stifling in times of upturn.

Not that the Indian banking system has not had its share of worries during the recent crisis.

Four large Indian banks with significant foreign presence had to make provisions for potential losses due to their exposure to overseas financial institutions.

These are: ICICI Bank (international assets accounts for 22 per cent of total assets), State Bank of India (7 per cent), Bank of India (18 per cent) and Bank of Baroda (19 per cent).

But by and large, the Indian banking system has been left untouched by the unfolding crisis, not only due to regulatory restrictions, but also because of their limited exposure to US-mortgage backed securities.

The central bank's stranglehold has also ensured that the Indian financial system has a leverage of 13:1 -- small in comparison with the US investment banks' leverage of 30:1.

Another factor that provides succour during such times is the dominant role that government-owned banks play in the Indian banking sector. These banks hold financial assets worth 77.2 per cent.

Moreover, all banks, irrespective of ownership, need to invest over 32 per cent of their deposits with RBI or invest in sovereign bonds.

Reserve requirements set by RBI are among the highest in the world. This ensures that RBI and the banking system have enough muscle to support the economy when there is a slowdown or liquidity crisis.

Effectively, this also means that  banks have limited credit risk and the balance sheets have significant liquidity.

Consider these facts: Over 90 per cent of borrowing with the banks is in the form of deposits.

Almost 75 per cent of risk assets are in the form of loans rather than bonds or securities.

The industrial loan book is fairly diversified across sectors -- the top five sectors account for 58 per cent of industrial loans.

The consumer exposure, including mortgages, is less than 25 per cent of the system's loan book.

In the case of bank failures, the Indian regulator guarantees a payment of up to Rs 100,000 to each depositor. This guarantee extends to over 95 per cent of depositors.

Also, over 50 per cent of deposits by value are protected.

Indian banks have stronger balance sheets compared to the past, as net non-performing loans of Indian banks have fallen consistently over the last five years.

In fact, subsequent falls in government bond yields have translated into sufficient gains for banks, helping them clean up their books.

The best way of judging a bank's health is to look at some critical parameters such as capital adequacy ratio, asset quality and earnings, which define banks' ability to pay off their service depositors in times of crisis. On all these parameters, Indian banks meet the accepted norms.

State Bank of India has the highest net worth in capital and reserves among all Indian banks, followed by ICICI Bank. Each of the two has about four times the net worth of the third biggest bank, Punjab National Bank [Get Quote], in this category.

Most Indian banks have non-performing assets amounting to less than one per cent. The average NPA of all banks operating in India (including foreign banks) is around one per cent.

The reduction in NPAs has been primarily driven by higher write-offs earlier and higher recoveries done very recently.

The gross and net NPA ratios have improved from the 1994 levels of 19.5 per cent and 10.7 per cent to the current levels of 2.4 per cent and 1.1 per cent, respectively.

The marked improvement in asset quality is a result of tightened NPL recognition norms (from 180 days to 90 days) and provisioning norms having come into force from March 31, 2004.

The incremental slippage ratio has also trended down from 5.3 per cent in 2001-02 to the current level of 1.8 per cent.

Among the big Indian banks, ICICI Bank has the highest capital adequacy ratio of 13.97 per cent against the mandated 9 per cent. Four banks, all of which are smaller than ICICI, have higher CAR than ICICI Bank.

Overall, 28 Indian banks have a CAR of more than 12 per cent each. Not even a single bank has a CAR of less than 9 per cent. Under the norms, banks need capital worth Rs 9 for every unit of asset worth Rs 100.

Going by FY08 numbers, none of the Indian banks, big or small, can fail.

However, the current fiscal, beginning April, has brought with it some troubling signs of an economic slowdown. The rapid credit expansion in recent years has resulted in a jump in NPAs.

At the same time, a disproportionate rise in the unsecured books combined with the growing lending is a cause for concern.

This, in an economic downturn, could mean a higher probability of default, as well as a lower probability of recovery, if the loans get converted into NPAs.

Over the past six years, the ratio of unsecured loans to total loans has doubled from 10.8 per cent to that of 21.9 per cent.

This means that unsecured loans have compounded at a massive 49 per cent during these years.

For individual private sector banks, the ratio has increased from 6.7 per cent in 2001-02 to 23.4 per cent in 2007-08.

The top three banks in private sector have more than 15 per cent of their portfolios in unsecured loans and advances.

(http://us.rediff.com/money/2008/dec/22bcrisis-how-indiai-is-weathering-the-financial-tsunami.htm)

No lay-offs, no matter how bad it gets, assures HCL Tech

HCL Technologies one of India's leading Information Technology firm, will not fire its employees even if the economic situation gets worse over the coming months, the company's chief executive officer told Hindustan Times. The company, like other corporates is cutting costs through other 0measures like reducing transport and electricity bills amongst others.

"We have not and will not lay off no matter how bad it gets, even if recessionary trends get worse," said Vineet Nayar, CEO, HCL Technologies. HCL Technologies employs around 55,000 employs across 19 countries. Nayar said that the company's hiring plans were on track but declined to put a number to the target. On expected salary hikes for financial year 2010, Nayar said that the company will take a decision around June next year.

"We will take a decision around June and expect that most of the bad news will be behind us by then," said Nayar. "We will cut costs from all corners, through better utilisation of electricity, reducing cycle time from desire to implement of a project, controlling transportation and vendor bills," he said. He declined to comment on how much the company is likely to save through these initiatives.

(http://in.biz.yahoo.com/081221/32/6z7zo.html)