Festive cheer: Banks may offer cheaper loans Travellers opt for shorter foreign trips to beat fall

EASY MONEY Low rates, zero processing fee may be offered for short duration

NEW DELHI: The economic turmoil may throw up an unusual bounty for home, auto and corporate loan borrowers as banks try to keep growth buzzing -- following a nudge from the finance minister.

Despite a severe credit crunch and with little room available to reduce interest rates, several government-controlled banks are looking at ways to boost retail credit to aid the domestic economy. Banks are in the process of firming up plans to provide a window of a few weeks during which they may offer loans for houses and cars at cheaper and discounted rates to customers. They are also looking to offer concessions on loans during the coming festive season.

With the benchmark 10-year yield on government securities (g-secs) hitting a five-year high of 9.27% per annum, there was little scope for rate cuts, said bankers. Since banks usually fix their lending rates based on the g-secs, as it is considered risk-free, this signals hardening interest rates or high loans for retail customers.

“So most banks are just looking at providing a short window with cheaper loans to garner customers,” a senior banking analyst who did not wish to be identified said.

The goodies may not be for long. “We have initiated a special scheme wherein we are offering NEW DELHI: Brace for a sharp rise in petrol and diesel prices, as the fall in the value of the rupee against the dollar, and the strengthening global oil prices, have sent up India’s crude oil import bill shooting.

Top officials confirmed that that the government is under pressure from state-owned oil companies for a one-time hike in diesel prices by R2-2.50 per litre. Petrol could go up by R1.50 a litre. “With the rupee breaching the 64 mark against the dollar, it is only a matter of time before we bite the bullet on diesel prices,” a petroleum ministry official said.

Any increase in diesel prices over the agreed monthly hike of 50 paise a litre would have to be cleared by the Cabinet, he added. “Losses on diesel are hovering at close to R11 a litre... a call on a one-time rise in diesel prices by R2.50 to 3 a litre needs to be taken,” an official of a leading state-owned oil company said.

The government had in January allowed oil companies to raise diesel rates by up to 50 paise per month till the price reached a level where the losses on account of underrecoveries on diesel sales are wiped out.

The loss on diesel sales had come down to below R3 a litre in May, but fall in the rupee since April has sent underrecoveries climbing again, and it is R11 per litre at present.

Rating agency Moody’s has raised a red flag over oil companies, saying the falling rupee would inflate the fuel subsidy bill, weaken the credit quality of oil companies and put pressure on the fiscal deficit.

A report by the agency said the rupee fall will weaken the credit quality of state-owned oil marketing and upstream oil companies in the current fiscal if the government continues to ask them to share a higher fuel subsidy burden.

“We now expect fuel subsidies for 2013-2014 at R1.41.5 lakh crore, up from the R1.3 lakh crore expected in June 2013,” said Vikas Halan, Moody’s vice-president and senior analyst. “The currency will remain under pressure until the current account deficit narrows.” NEW DELHI: With the rupee suffering its worst month in decades, the foreign travel plans of Indians have been hit — but with a little help from tour operators, they are managing to keep the flag flying.

Indian tourists are opting to shorten the duration of their stay, switching to cheaper destinations and downgrading their hotels to more economical ones, rather than call off their travel plans entirely.

According to a survey by travel portal Yatra.com, 63% of the respondents were positive that they would go ahead with their foreign holiday plans despite the rupee depreciation pushing up costs. The survey was conducted among 6,000 individuals, mostly professionals, half of them in the age group of 25 to 45.

Asked if they would wait for the rupee to rise before travelling abroad, 43% said they would not, while 38% said they would wait for it to stabilise. The rest (19%) said they would go on holiday anyway. Global online travel company Expedia said it was getting a huge number of requests from clients to alter itineraries to fit budgets. “Many travelers are looking at shortening the duration or downgrading accommodation options. Instead of choosing five-star hotels, they are looking at premium mid-segment properties, and bringing down a seven-day trip to four or five days,” said Vikram Malhi, GM, South and Southeast Asia, Expedia.

“The depreciation of the rupee has hit the tourism industry, but we are trying to offer bargain deals,” said Rajji Rai of the Travel Agents Association of India. “People earlier planning to visit the US are now opting for Europe because of lower costs. Those with even lower budgets are opting for eastern Europe or southeast Asia.”

Travel portals are also offering tailor-made holidays to suit all budgets. “We are offering great discounts and offers, such as a three-day, two-night package for Dubai starting at R28,000 per person,” Malhi said.

According to the Yatra. com survey, southeast Asia is the destination of choice, followed by Europe and the US. Some 43% of respondents said they would like to travel within India, while 45% said the location would depend on the expenses involved. A full 12% said it doesn’t matter, showing that there is a big segment of well-heeled travellers for whom costs do not really matter.