When looking at house price growth, we tend to ignore the effects of inflation.

However, if house prices are stagnant in a period of 10% inflation, this is

effectively a 10% fall in real terms. If house prices are stagnant with 0% inflation,
house prices maintain their real value.

Inflation has a big impact on the housing market.

Inflation reduces the value of mortgage. We tend to think of inflation as bad. It

certainly can create economic costs It can create uncertainty in the economy, and
reduce the value of savings (especially at moment with negative real interest rates).
However, rather quietly, mortgage owners can benefit from inflation. Inflation
means a mortgage loan reduces in real value. If real wages keep pace with inflation
(which isnt actually happening at the moment see: real wages in UK) then
mortgage payments as a % of income will fall. When you first get a mortgage,
mortgage payments may take a high % of income, but over time inflation reduces
this value. Assuming real wages rise, like in the post war period. Hopefully, this
current period of declining living standards will be temporary.

In a period of high inflation, buying a house is therefore a good investment. It

retains its value and helps reduce cost of mortgage payments. However, usually, a
spike in inflation leads to higher interest rates, so temporarily can cause higher
mortgage payments. The ideal solution is for a stable, and low inflation rate.
Volatile inflation (like for example in late 1980s can lead to a painful period of
higher rates which can be disastrous for homeowners.
Future Inflation

Yesterday, inflation increased to 4%. RPI was even higher the highest level since
1991. The story is complicated by the fact inflation is due to cost push factors
rather than an economic boom. Yet it does raise the prospect of higher rates sooner
rather than later. However, I dont see inflation getting out of hand, wage growth in
the UK is muted. With high unemployment and high spare capacity, inflation is
likely to fall closer to its target as these temporary factors fade away. But, higher
rates will still occur as 0.5% rates are something of an aberration. See: interest rate
predictions

Panjab national bank

Housing Loan

Regular Housing Finance Scheme for Public

PNB reaches out to you with fast, friendly and most convenient home loans under
Normal and Flexible variants (Details also available seperately) having
highlighting features :
1. Highlights
Option to choose between Floating and Fixed interest rates.
Longest Repayment period of 25 years
For Term loan component of flexible variant 0.25% lower interest rate than
under normal variant under all tenors of repayment
Flexible repayment option
No hidden charges
Quick and Fast processing

2. Purpose
Construction or purchase of new/old house/ flat/ plot (Finance for purchase
of plot is allowed only under Normal Scheme).
Purchase of house/ flat on First Power of Attorney basis from the original
 allottee.
Carrying out repairs/ renovations/ additions/ alterations/ furnishing.
After 3 years loan for personal needs allowed only under Flexible variant.
Borrowers are entitled for 20% increase in the original total limit sanctioned
after a lapse of five years under Flexible variant.

3. Eligibility
Under Normal variant Individuals & Joint owners (age group of 18-65 years)
having regular source of income. Income of spouse/children can also be
added.

Under Flexible variant: Customers who are below the age of 50 years and
existing Housing loan borrowers who have availed loan under our Housing
Loan scheme for public.
4. Loan Amount
For construction/purchase of house/flat:- Need based.
Cost of car parking upto the maximum extent of 5% of the cost of flat/house
can be considered in the cost of the project.
For carrying out repairs/ renovations/ additions/ alterations: - Maximum of
Rs. 20 lacs.
For furnishing of house Maximum Rs. 2 Lacs
For purchase of Land/ Plot - Maximum Rs. 20 Lacs.

5. Disbursement
Under Normal variant in the shape of a Term Loan

For purchase of Built-up house/ flat - In lump sum (Down Payment) .

For construction of house/ under construction flat - The loan amount will
be

disbursed in stages as per progress of construction/ demand by selling agency

Under Flexible variant 80% in the shape of Term Loan and 20% as
overdraft.

Overdraft limit can be enhanced maximum upto 50% of the total loan
amount sanctioned originally and first such enhancement is allowed after
three years

Extent of enhancement in overdraft limit will be equal to reduction in term

loan amount. These enhancement in overdraft limit are for personal needs
and allowed through esperate overdraft account.
6. Margin
Construction/ purchase/ repairs/ renovations/ additions/ alterations 25%

Land/ Plot 40%

7. Fee/Charges
For loans upto Rs. 300 lacs = 0.50% of the loan amount max. of Rs.
20,000/- + taxes
For loans above Rs. 300 lacs =0.90% of the loan amount + taxes
Documentation charges of Rs. 1350/- + taxes

8. Repayment
For Term Loan component under Normal or Flexible variant

For construction/purchase of house/flat - Maximum of 25 years or

borrowers attaining age of 65 years whichever is earlier (can be extended
upto the age of 70 years under banks discretion) to be repaid in equated
monthly installments inclusive of maximum moratorium period of 18
months.
For carrying out repairs/ renovations/ additions/ alterations - Maximum of
10 years inclusive of maximum moratorium period of Six months.

For Overdraft component of Flexible variant : Repayment shall be as under

For borrower below 55 years : Servicing of interest as and when charged

i.e.

on monthly basis.

For 55 years and above : On monthly reducing drawing power maximum

upto

the age of 65 years.

9. Moratorium/ Repayment Holiday
Moratorium or Repayment holiday where loan is allowed for construction - till
completion of construction or 18 months (6 months in case of repair/
renovation/ addition/ alteration) from the date of disbursement of first
installment of the loan, whichever is earlier.
10. Pre- Payment Charges
 Nil- where the loans is prepaid by the borrower from his/her own
sources
Nil- where the borrower shifts to other bank within 30 days from the
date of upward revision in the rate of interest to be charged in his/her
account or change in other terms of sanction.
2 % - where the account is taken over by some other Bank/ Financial
institutions.

11. Security
Mortgage of property for which finance is being given.

Interset Rate : Click Here

Apply Online Application : Click Here

For more details, please contact our nearest branch.

PNB FLEXIBLE HOUSING LOAN

This variant provides the borrowers advantage of substantial savings on the
interest component on

account of facility to:

I. Deposit their surplus funds in the overdraft account; and

II. Withdraw the same at their choice as per their needs.

1. Eligibility
Customers who are below the age of 50 years and existing Housing loan borrowers
who have availed loan under our Housing Loan scheme for public subject to
fulfillment of all terms & conditions of this variant :
2. Purpose
For all puposes as per details described under Housing Finance scheme except for
purpose of land/plot.
3. Nature of Facility
Term Loan - 80% and overdraft 20%
4. Extend of Loan
Borrowers are entitlement for 20% increase in the original total limit
sanctioned after a lapse of five years.
First enhancement allowed after 3 years, Overdraft limit can be enchanced
maximum upto 50% of the total loan amount sanctioned. Extent of
enchancement equal to reduction in Term Loan Amount.
Enchancement(s) is/are for personal needs is/are allowed in the shape of a
seperate Overdraft limit.

5. Rate of Interest
Term Loan Facility - 0.25% lower than the prescribed interest rate for all tenors of
repayment for normal variant.

Overdraft Facility - Bank rate + 3%

6. Margin
25%:
7. Repayment
Term Loan component: As per Housing Loan Scheme for Public.

Overdraft component:

- For Borrowers below 55 years: Servicing of Interest as and when charged i.e. on
Monthly Basis.

- For 55 years and above: On monthly reducing drawing power maximum upto the
age of 65 years.
8. Rate of Interest
Term Loan facility: 0.25% lower than the prescribed interest rate for all tenors of
repayment for traditional product.

Overdraft facility: @ Base Rate plus 3.00%.

9. Processing Fee & Documentation Charges:
As applicable under Bank's regular Housing Loan Scheme for public.

For more details, please contact our nearest branch.

Overdraft Facility to Existing Housing Loan Borrowers for Personal needs

1. Objective
Seeks to provide additional facility in the shape of Overdraft for personal use to
our existing Housing Loan borrowers.
2. Eligibility
All Housing Loan borrowers including existing / new / take over cases. Loan is not
permitted for any trade / business or for any other speculative purposes.
3. Purpose
For Personal needs/use.
4. Extent of Loan
Minimum Overdraft facility Rs. 50,000/-

Maximum of Rs. 5 Lacs or 75% of the realizable value of property, including the
Housing loan whichever is less.
5. Nature of Facility
In the shape of an Overdraft limit.
6. Margin
25% on realizable value of House / flat :
7. Repayment
Account to be renewed annually. :
8. Rate of Interest
Bank Rate + 3%
9. Security
By extension of charge on the existing immovable property mortgaged.
10. Processing Fee & Documentation Charges
Upfront fee - NIL

Documentation Charges - Rs. 450/- + Taxes.

What is Housing Finance?

Housing finance is a broad topic, the concept of which can vary across continents,
regions and countries, particularly in terms of the areas it covers. For example,
what is understood by the term housing finance in a developed country may be
very different to what is understood by the term in a developing country.

The International Union for Housing Finance, as a multinational networking

organisation, has no official position on what the best definition of housing finance
is. However, the selection of quotes below is offered as a snapshot of what housing
finance as a topic covers:

Housing finance brings together complex and multi-sector issues that are driven
by constantly changing local features, such as a countrys legal environment or
culture, economic makeup, regulatory environment, or political system

(2009) Loc Chiquier and Michael Lea, Housing Finance Policy in Emerging
Markets, p. xxx.

In addition, the concept of housing finance and housing finance systems has been
evolving over time. Looking at definitions from the mid-1980s, we see that
housing finance was defined primarily in terms of residential mortgage finance:

The purpose of a housing finance system is to provide the funds which home-
buyers need to purchase their homes. This is a simple objective, and the number of
ways in which it can be achieved is limited. Notwithstanding this basic simplicity,
in a number of countries, largely as a result of government action, very
complicated housing finance systems have been developed. However, the essential
feature of any system, that is, the ability to channel the funds of investors to those
purchasing their homes, must remain.

(1985) Mark Boleat, National Housing Finance Systems A Comparative Study,

p. 1.

However, in more recent years, a number of other much wider definitions have
appeared:

Put simply, housing finance is what allows for the production and consumption of
housing. It refers to the money we use to build and maintain the nations housing
stock. But it also refers to the money we need to pay for it, in the form of rents,
mortgage loans and repayments.

(2009) Peter King, Understanding Housing Finance Meeting Needs and Making
Choices, p.3.

or

There is recognition of other relevant forms of housing finance [apart from

residential mortgage finance] such as developer finance, rental finance, or
microfinance applied to housing. Developer finance is often in the form of
unregulated advance payments by buyers, and developers sometimes provide long-
term finance to buyers through instalments sales when mortgages markets are not
accessible. Microfinance for housing is typically used for home improvement or
progressive housing purposes. Loans are typically granted without pledging
properties. Although the overall impact of microfinance in housing remains
limited, this activity can represent an important source of funding for those in the
informal sector.

(2009) Loc Chiquier and Michael Lea, Housing Finance Policy in Emerging
Markets, p. xxxii.

PNB Housing Finance

PNB Housing Finance Limited is a wholly owned subsidiary of Punjab National

Bank, one of the leading nationalized banks of India. PNB Housing Finance offers
two types of housing finance for the customers. Apna Ghar Yojana is the housing
finance provided to individuals for construction or for acquisition/purchase of
house/flat from development authorities such as DDA/HUDA/PUDA/RHB etc.
and also from private builders/groups housing societies. Another PNB Home Loan
is called Ghar Sudhar Yojana which is meant for up gradation, renovation or repair
of house/flat. Internal and external repairs, water proofing, roofing, flooring,
electrical, woodwork, all are included in this scheme.

Individuals, resident or non-resident, who are in permanent service or having their

own business can avail both the PNB Housing Finance Schemes. The age of the
applicant should not exceed 60 years in case of service class and 65 years in case
of business or self employed. The loan amount is actually determined by the PNB
Housing Finance limited after taking into account of income, age, qualification
and occupation of the applicant.
PNB Housing Finance Corporation

The minimum loan amount is Rs. 50,000/- , where the maximum loan amount for
the Ghar Sudhar Yojana would be Rs. 10 lacs. The maximum loan amount for the
Apna Ghar Yojana depends entirely upon the repayment capacity of the borrower.
In case of joint application, the income of borrower and co-borrowers (such as
spouse, son, daughter living together) can be clubbed together for calculation of
load eligibility.

PNB Housing Finance Ltd

The Punjab National Bank housing finance ltd has come out with the Apna Ghar
Yojana where the minimum contribution from the applicant would be 20% of the
total project cost, including stamp duty and registration charges. The rate of
interest varies for different loan amount and repayment period. For loan amount up
to Rs. 10 lacs, the rate of interest varies from 11.25 percent to 11.50 percent in
floating rate of interest. For 3 years fixed rate of interest, the interest rate would be
12.75 percent. For loan amount of more than 10 lacs, the floating rate of interest
ranges between 11 percent to 11.25 percent, while the 3 years fixed rate of interest
stays on 12.50 percent. The fixed deposit rates charged by the bank are also
nominal.

PNB Housing Finance Noida

is the address of PNB housing finance in Noida.

PNB Housing Finance Ltd

208 Ocean Plaza,
Sector 18, Noida

In the Ghar Sudhar Yojana scheme from PNB Housing Finance, the interest rate
varies from 11 to 11.25 percent. Borrower's minimum contribution should be 25%
of the estimated cost of repairs/renovations. In order to learn more about housing
finance companies in India browse through the site.

PNB Housing Finance Ltd. provides housing loans and home loans all over .
Instantly check your eligibility for a Home Loan from India, apply for a PNB
Housing Finance Ltd. Loan Online. You can also find out your tax savings on the
home loan and plan the Loan tenure to maximize the tax saved. Loans from India
for home construction, PNB Housing Finance Ltd. loan for purchase of resale
home, PNB Housing Finance Ltd. home loan for purchase of under construction
flats, PNB Housing Finance Ltd. loans for purchase of a plot or land, PNB Housing
Finance Ltd. loans for purchase of office or commercial property, PNB Housing
Finance Ltd. home loan refinance facility, PNB Housing Finance Ltd. home
renovation loan, PNB Housing Finance Ltd. Home extension loan, PNB Housing
Finance Ltd. Home repairs loans.

PNB Housing Finance Ltd.

This is a wholly owned subsidiary of Punjab National Bank, is engaged in

providing housing loans for purchase, construction and upgradation of a dwelling
unit. The company offers Loans for construction or for purchase of house/flat from
development authorities and also from private builders/ group housing societies as
well as for renovation/ repairs. Company also provide finance for construction of
residential projects. Loans to NRIs are also provided for purchase/ construction of
house/ flat along with a resident/ non-resident co-borrower.

Products:

Home loans to both Indian and NRI customers at both fixed and floating rate of
interest.

Loans to construct / buy a new home

Loans for home extension
Loans for home repairs

This page allows you to find the following :

PNB Housing Finance Ltd. housing finance, PNB Housing Finance Ltd. Home
Loans, Home loans from India India, NRI loans from India, PNB Housing Finance
Ltd. EMI calculators, PNB Housing Finance Ltd. loans, PNB Housing Finance
Ltd. home finance, PNB Housing Finance Ltd. property finance, find interest rates
from India, PNB Housing Finance Ltd. loan application form, PNB Housing
Finance Ltd. apply online, PNB Housing Finance Ltd. refinance, PNB Housing
Finance Ltd. renovation loan, PNB Housing Finance Ltd. extension loan, PNB
Housing Finance Ltd. new construction loan, PNB Housing Finance Ltd.
residential commercial land loans

Interest rates are likely to remain high since inflation is high ... till such time
inflation is high, Reserve Bank finds it difficult to lower the interest, SBI
Chairman, Mr Pratip Chaudhuri, told newspersons on Thursday.

PREPAYMENT PENALTY

Describing prepayment penalty as an anti-customer step, the SBI chief said that the
bank had waived such penalty on floating loans two months back. We think it
(prepayment penalty) is an anti-customer step. We do not require treating our
customers as hostages and charging ransom from them (to allow them to move to
other bank where they get cheaper loan), he said.

The SBI Chairman exuded confidence that the bank would achieve pleasant rate of
growth in deposits and advances in the happening fiscal.

The bank should be doing well since the nation is growing at 8 per cent. We think
our deposits and loan growth should grow by 20 per cent in contemporary fiscal,
he said.

CHEAPER CAR LOAN

Amid rising lending rates regime, SBI has also decided to launch a new car loan
product, whereby it would charge Rs 1,700 as EMI on Rs 1 lakh loan with interest
rate of 11.5 per cent per annum.

Asked about its Rs 20,000-crore right issue to fund its expansion plans, Mr
Chaudhuri said, it is very much there and it should happen following month or
so.

SBI hikes lending rates by 25 bps

TNN Apr 20, 2011, 01.04am IST

MUMBAI: Home loans by the country's largest lender will no longer be the
cheapest. State Bank of India has increased its benchmark lending rates by 25 basis
points-a move which will make all loans, including home loans and most loans to
corporates, more expensive.

With effect from April 25, the country's largest bank will increase both its
benchmark prime lending rate and its base rate. The BPLR, which is the
benchmark for all its old floating rate loans, has been increased from 13% to
13.25%. The base rate, which is the benchmark for loans in recent months and for
future loans, has been increased from 8.25% to 8.5%. This means that home loans
will go up for both existing and new home loan customers.

A 25 basis point rise would result in the equated monthly instalment on a loan
rising by around Rs 17 for every Rs 1 lakh. SBI offers home loans up to Rs 30 lakh
at the rate of 10% and loans above Rs 30 lakh at 10.25%. However, under its
special rate scheme, loans up to Rs 30 lakh are available at 9% for year one, 9.75%
for year two and three and 10% for subsequent years. Similarly, loans above Rs 30
lakh are available at the same rates of 9% and 9.75% for the second and third year
and 10.25% for subsequent years.

Reuters) - India's PNB Housing Finance Ltd, a unit of Punjab National Bank , is
planning to raise 2 billion rupees via 10-year bonds at 9.50 percent semi annual
coupon, a source with direct knowledge of the deal told Reuters.

Axis Bank, A.K. Capital and Trust Capital are the arrangers to the deal, the source
said.

For news on debt issues, Reuters 3000 Xtra users can double click on one of the
following: Indian bond issuances Asia debt news India Corporate debt pages on
Reuters: Spreads over Indian federal bonds <0#AAAINBMK=> Indian secondary
corporate bond deals Secondary market Indian CP Prices India Certificates of
Deposit page (Reporting by Archana Narayanan)

Inflation impacts home loan rates

Inflation is one of the major causes of fluctuating interest rates. It has an impact on
home loans as well. A rising inflation rate tends to increase the rates on loans. The
cost of funds for banks rises. This leads to an increase in home loan interest rates,
among other loan rates, and consequently an increase in EMIs.

In order to contain the spiralling inflation rate, the Reserve Bank of India (RBI)
takes certain measures. These include hiking of the cash reserve ratio (CRR),
reducing the interest rate on the CRR, and hiking the repo are reverse repo rates.

Effect of higher CRR

A hike in the CRR draws out money from the banking system. This puts further
upward pressures on interest rates. The CRR is the portion of deposits (net demand
and time liabilities or NDTL) that is to be maintained by commercial banks with
the RBI. The CRR is a tool used by the RBI to control money supply and interest
rates.

A hike in the CRR will draw out excess money supply from the banking system
and check the rise in prices. The amount available in the kitty of a commercial
bank decreases.

In addition, to further supplement the move, the RBI cuts the rate of interest
payable on eligible cash balances maintained with it by banks. While a CRR hike
draws out money from the banking system, a reduction in interest rate also hits
banks.

Cumulatively, the lendable resources of banks shrink. These moves reduce the
amount resources available for lending with banks and lead to a rise in interest
rates. Banks interest income will be negatively impacted by a hike in the CRR and
reduction in interest rate.

Generally, this move indicates an increase in interest rates. Consequently, the

interest rates on various loans including housing loans go up. A few years ago,
a gradual reduction in the CRR in successive credit policies had been one of the
major contributors for the sustained reduction in interest rates on housing loans.

The changes in the CRR have to be consistent with the stance of the monetary
policy to meet credit growth, support investment and export demand, given the
liquidity conditions.

So, a persistent inflation has an impact on loans and interest rates.

Simultaneously, the measures taken to control inflation also lead to increase in
interest rates because of the increase in cost of funds or shortage of funds.

Effect of hike in repo and reverse repo rates

Then come the other instruments repo and reverse repo rates. The repo rate is the
rate at which the RBI lends to private and public sector banks. The reverse repo
rate is the rate at which the RBI borrows from banks.

These rates have a direct impact on interest rates. Any hike in these rates leads to
increase in cost of funds for banks. The banks then need to pass on the increased
cost of fund to the borrowers. This leads to increase in interest rates.

As such, home loans become more expensive. As a result, the EMIs on home loans
are increased. Alternatively, the EMIs may remain the same, but the loan tenure
may be stretched to a longer duration. These actions by the RBI are aimed at
containing inflation without hurting growth. Inflation in a fast growing economy is
one of the major factors in interest rate management.

What is a Personal loan?

Personal Loan is an unsecured loan for personal use which doesnt require any
security or collateral and can be availed for any purpose, be it a wedding
expenditure, a holiday or purchasing consumer durables, the personal loan is very
handy & caters to all your needs. The amount of loan can be ranged from Rs.
50,000 Rs. 20 lakh & the tenure for repaying the loan varies from 1 to 5 years.
More Information about personal loan section click articles about personal loan
and Personal loan must read.

Benefits of Personal loan

1. A Loan without security : A Personal Loan is not a secured loan (bank doesnt
ask for any security or collateral) as against a Secured Loan where one is required
to pledge a house or other security to acquire a loan.

2. Simple Documentation: A Personal Loan can be accessed with minimal

paperwork or documentation & doesnt take much time to procure as against a
Secured Loan.

3. No specification about the end use of the loan amount : You are not required
to disclose the end use of the money borrowed, Banks are concerned about the fact
that whether the borrower is able to pay back the loan with interest before the due
date or not and they confirm this by checking the income, employment or business
& other factors of the borrower.

4. Big Loan amount : Personal Loan is a means to fulfill bigger loan requirement,
you can take a loan ranging from Rs. 50,000 to Rs. 20 lakh.

Basis to Compare Personal Loans

Compare Interest Rates : Personal Loan can be compared primarily on the basis
of interest rates which vary across banks depending on your profile which is
further linked to your occupation, salary/income, credit history etc. The personal
loan interest rate ranges from 12% to 25%, you must go for that loan which is
offering you at the minimum rate.

Other Charges : You should also check on the other charges like processing fee,
pre-payment penalties and documentation fee because they increase the overall
loan cost and vary widely across banks.

Evaluation of various Loan offers : You should first calculate the entire loan
cost across banks which constitutes the rate of interest & banks other charges.
Evaluate offers keeping the tenure of the loan constant & compare the rate of
interest, EMIs & other charges. This process will help you get the Best Loan deal.

EMIs : EMI is the monthly equated installment which constitutes the principal
amount and the interest on the principal equally divided across each month in the
loan tenure. Use our EMI Calculator to compare EMIs across banks

Tenure : Tenure is the time frame for the personal loan payments to be paid back
to the bank; it ranges from 1 year to 5 years. If you have a longer tenure you will
end up paying more interest & will have lower EMI, on the other hand shorter loan
tenure will carry higher EMIs & the interest amount is less. You must compare the
loan offers by keeping the tenure constant.

Eligibility Check : Before taking a personal loan you must know the eligibility
criterias offered by various banks on the basis of which they offer loans and also
compare personal loan banks. Checking the eligibility parameters will help you
find the best loan deal. Check out your eligibility by various banks.

Turnaround time : It becomes one of the most important factors in evaluation of

your loan application when you are in a dire need of money. Turnaround time is
the time which banks take in processing your loan application; you must check this
parameter which varies from bank to bank.
Charges involved in Personal Loan
The Rate of interest alone should not be judged before you finalize your
application, apart from the rate of interest, Personal Loan also constitutes other
charges levied by the lender which affect the overall cost of your loan & should be
considered while comparing it across banks. Following are the lists of charges:

Processing fee : It is a fee charged by banks from the borrowers to process their
loan application; it is normally between 1-2 percentage of the loan amount.

Prepayment fee : Banks charge borrowers with a fee when they pay the loan
EMIs before the tenure which normally is between 2-5% of the outstanding loan
amount.

Late penalties : When there is a delay in paying your monthly EMIs of your
loan, banks charge a late payment fee with your EMIs. They normally range from
2-3% of the EMI.

Cheque bounce charges : Banks charge between Rs. 250-500 for every bounced
cheque given for the payment of the loan amount owing to the insufficient funds in
your account.

Documentation charges : These are the charges for verifying the borrowers
documents to processing the loan application. These vary from Rs. 500-Rs. 1000.

You should note that the above charges vary across different banks; you should
consider these charges before choosing the personal loan as they will determine its
real costs.

Documents required in Personal Loan

The documentation process in personal loan is very fast as against secured loans.
Following documents are required by financial institutions to process the loan
application:
Identity proof
3 to 6 months Bank statements
Residence proof
Salary slip
Guarantors & their same set of documents
In case of self-employed banks require balance sheets, profit & loss account,
partnership deed & other mandatory documents etc.
Personal Loan Criteria by various banks
Banks offer Personal Loan to borrowers depending on various factors such as
income, employment, continuity of business so as to make sure that they repay the
loan with interest before the due date. The eligibility criterion of a Personal Loan is
primarily based on the work profile of a loan seeker which is broadly divided into
the following two classes:
- Self-employed
- Salaried
In addition to the above factors banks also consider other aspects such as age, work
experience, existing relationship with the bank, repayment capacity etc.
To find your eligibility Criteria across various banks in accordance with the above
parameters; Deal4Loans has brought in the Eligibility Criteria Check for Personal
Loan seekers.

How does the Cibil Score affect your loan application?

This a norm wherein the banks before giving Personal Loan checks the database of
all loan borrowers in the country by the Credit Information Bureau of India
(CIBIL) which is called the Cibil Score. If there has been a default in your loan
payment; your loan application would certainly be rejected. Your Cibil score
ranges from 100 to 999, for instance if your credit score is 100 then your loan
application might be out rightly rejected. On other hand if it is higher say 800, then
your loan application would be processed faster & will be rewarded with lower
interest rates & discounts in processing fee & other charges.
You can improve your credit score by repaying your loan EMIs on time and
always pay the minimum payment on your credit card to avert from the bad credit
score.

Reducing Interest Rate or Flat Interest Rate, which is better?

The Personal loans Interest Rates vary between 14% and 25% depending on your
profile & payment ability. There are basically two types of interest Rates offered
by banks which are
1. Reducing Balance Interest Rate
2. Flat Interest Rate
In the Reducing Interest Rate calculation method, the interest on your loan keeps
on reducing as it is calculated on the reduced principle amount which gets reduced
daily, monthly, quarterly or annually.
Flat Interest Rate calculation method on other hand implies that your rate of
interest remains the same & is calculated over the entire loan period. The
outstanding loan amount is never reduced over the loan tenure.
It is always advised to take a loan at reducing balance interest rates as the Flat rate
calculation comes out to be really expensive.

Important pointers in Personal Loan

Increase your loan eligibility : You can increase your eligibility of the loan
amount by clubbing your income with your spouses income.

Relationships with banks : You can get discounts on interest rates if you take a
loan from a bank that you already deal with for your existing relationship, in this
case banks will consider your past records of credit repayments and your saving
account balance and you will be offered discounts on the basis of your current
relationship.

Cibil Score Check : You must know that your credit history play a very important
role in the acceptance of your loan application as CIBIL keeps a record of credit
history by collecting your credit data from various financial institutions. A decent
credit score not only gives a green signal to your loan application but also offers
you lower interest rates by the bank.

Penalties : If you think of closing your loan earlier, this will invite the pre-
payment charges levied by the bank which are upto 5% of the outstanding loan
amount. Some banks have this norm wherein you are not allowed to close your
loan within the first six months of your loan term. You should also know about the
charges taken by the bank for paying your EMI late.

Personal Loan Rate of Interest

( Last updated on : 01 October 2011 )

Interest
Bank Apply
Rates

Citibank 15%-18%

HDFC 15.75%-
Bank 22.25%

Fullerton
19%-28%
India

SBI 16.75%-22%
Standard
16%-22%
Chartered

Barclays
17%-20%
Finance
Which Factors Effect the Interest Rate on Your Home Loan

There are a number of factors that influence the rate you are being charged
on your Home Loan. We will look at what we call external factors, such as the
economy, and internal factors, such as your own risk profile. Unfortunately
the main impact comes from the external factors over which you and I have
no control; but, at least, we do have some control over the internal factors.

Just about everybody is feeling the effect of the current high interest rates and
the slowdown in the economy, so getting the lowest possible rate on your home
loan is vital.

External Factors

The repo rate is the rate the South African Reserve Bank charge commercial
banks when they borrow money from the Reserve Bank. The prime rate is the
current lending rate used by the commercial banks. Since September 2006 the
prime rate has increased from 11.5% to 15.5%. In December 2008 we saw the
first reduction of .5%; the first of hopefully many to follow.

The world has entered a period of food shortages and the price of food has
fuelled the inflation rate. The inflation rate plays a major role in the S.A.
Reserve banks decisions regarding rate changes. We saw the price of crude
oil climb to unknown heights, which of course increased the price of
everything else. Luckily that came down dramatically, and yet, from February
we will pay more for fuel again!

The strength of the South African rand against other currencies also impacts
on the inflation rate. Foreign investment has slowed down and Eskoms
increases are not making things any easier. So, these are all external factors
affecting the interest rate you pay on your home loan over which you simply
have no control.

Before you get totally depressed lets look at the factors you can influence:

Internal Factors
Your personal credit profile plays a major role in whether you will qualify for
a home loan or not; as well as the amount that the bank is prepared to lend
you. Before the new national credit act came into account the banks basically
worked on a repayment to income ratio of 30% - i.e. your home loan
repayments should not exceed 30% of your monthly income. Since the
implementation of the new national credit act the banks have to look at your
overall indebtedness to establish if you can afford to repay more credit. Your
credit records and credit rating is seen as the best indicator of whether you
pay your accounts regularly and on time, and also, if you can afford more
credit.

The loan-to-value ratio. This ratio calculates the loan amount as a percentage
of the value of the property. Before the worldwide economic crisis the banks
were prepared to grant loans of 108% of loan-to-value ratio to enable clients
to also borrow the money required for bond and registration costs. That type
of loan is not currently available, so anyone who wants to buy a house will
have to save sufficient money for the costs. If you want to negotiate a home
loan rate lower than the prime rate you will have a put down a deposit and the
bigger the deposit the better.

The size of the home loan. Home loans above R1 000 000 usually qualify for a
discounted rate.

How profitable are you to the bank? Banks are profit-driven organizations so
the more products you have with them, the more profit they make! They will
therefore, in most cases, be prepared to grant you a lower interest rate if you
have three or more products with them. Products could be accounts such as
current accounts, credit cards or personal loans.

Personal factors such as your age and job stability will also influence the
banks decision as to whether you qualify for a discounted rate or not.

The current value of your property: You may not be in the market for a new
home loan and have been paying off your loan for a number of years. If you
have your property revalued by the bank you may find that the loan-to-value
ratio has improved considerably and this may qualify you for a reduction in
rate as your risk profile has now improved.

Negotiate. Dont just accept the rate the bank is offering you, shop around or
use the services of a home loan originator to do the negotiation for you. Even a
.5% discount can make a huge difference to the total amount of capital and
interest you will eventually have paid on the loan. It will also reduce the loan
term considerably.

With all the uncertainty and fluctuations in the global economy no-one can
really predict what is going to happen with interest rates. The economists
predict a steady decline and we can only hope they got it right. The best
advice during these times is to save as much as you can and protect your
biggest investment your home.

his article is about a rise in the general price level. For the expansion of the early
universe, see Inflation (cosmology). For other uses, see Inflation (disambiguation).

Inflation rates around the world in 2007

In economics, inflation is a rise in the general level of prices of goods and services
in an economy over a period of time.[1] When the general price level rises, each
unit of currency buys fewer goods and services. Consequently, inflation also
reflects an erosion in the purchasing power of money a loss of real value in the
internal medium of exchange and unit of account in the economy.[2][3] A chief
measure of price inflation is the inflation rate, the annualized percentage change in
a general price index (normally the Consumer Price Index) over time.[4]

Inflation's effects on an economy are various and can be simultaneously positive

and negative. Negative effects of inflation include a decrease in the real value of
money and other monetary items over time, uncertainty over future inflation may
discourage investment and savings, and high inflation may lead to shortages of
goods if consumers begin hoarding out of concern that prices will increase in the
future. Positive effects include ensuring central banks can adjust nominal interest
rates (intended to mitigate recessions),[5] and encouraging investment in non-
monetary capital projects.

Economists generally agree that high rates of inflation and hyperinflation are
caused by an excessive growth of the money supply.[6] Views on which factors
determine low to moderate rates of inflation are more varied. Low or moderate
inflation may be attributed to fluctuations in real demand for goods and services, or
changes in available supplies such as during scarcities, as well as to growth in the
money supply. However, the consensus view is that a long sustained period of
inflation is caused by money supply growing faster than the rate of economic
growth.[7][8]

Today, most mainstream economists favor a low, steady rate of inflation.[9] Low
(as opposed to zero or negative) inflation may reduce the severity of economic
recessions by enabling the labor market to adjust more quickly in a downturn, and
reduce the risk that a liquidity trap prevents monetary policy from stabilizing the
economy.[10] The task of keeping the rate of inflation low and stable is usually
given to monetary authorities. Generally, these monetary authorities are the central
banks that control the size of the money supply through the setting of interest rates,
through open market operations, and through the setting of banking reserve
requirements.[11]

History

increases in the quantity of money or in the overall money supply (or debasement
of the means of exchange) have occurred in many different societies throughout
history, changing with different forms of money used.[12][13] For instance, when
gold was used as currency, the government could collect gold coins, melt them
down, mix them with other metals such as silver, copper or lead, and reissue them
at the same nominal value. By diluting the gold with other metals, the government
could issue more coins without also needing to increase the amount of gold used to
make them. When the cost of each coin is lowered in this way, the government
profits from an increase in seigniorage.[14] This practice would increase the
money supply but at the same time the relative value of each coin would be
lowered. As the relative value of the coins becomes less, consumers would need to
give more coins in exchange for the same goods and services as before. These
goods and services would experience a price increase as the value of each coin is
reduced.[15]

Historically, infusions of gold or silver into an economy also led to inflation. From
the second half of the 15th century to the first half of the 17th, Western Europe
experienced a major inflationary cycle referred to as the "price revolution",[16][17]
with prices on average rising perhaps sixfold over 150 years. This was largely
caused by the sudden influx of gold and silver from the New World into Habsburg
Spain.[18] The silver spread throughout a previously cash-starved Europe and
caused widespread inflation.[19][20] Demographic factors also contributed to
upward pressure on prices, with European population growth after depopulation
caused by the Black Death pandemic.

By the nineteenth century, economists categorized three separate factors that cause
a rise or fall in the price of goods: a change in the value or production costs of the
good, a change in the price of money which then was usually a fluctuation in the
commodity price of the metallic content in the currency, and currency depreciation
resulting from an increased supply of currency relative to the quantity of
redeemable metal backing the currency. Following the proliferation of private
banknote currency printed during the American Civil War, the term "inflation"
started to appear as a direct reference to the currency depreciation that occurred as
the quantity of redeemable banknotes outstripped the quantity of metal available
for their redemption. The term inflation then referred to the devaluation of the
currency, and not to a rise in the price of goods.[21]

This relationship between the over-supply of banknotes and a resulting

depreciation in their value was noted by earlier classical economists such as David
Hume and David Ricardo, who would go on to examine and debate what effect a
currency devaluation (later termed monetary inflation) has on the price of goods
(later termed price inflation, and eventually just inflation).[22]

The adoption of fiat currency (paper money) by many countries, from the 18th
century onwards, made much larger variations in the supply of money possible.
Since then, huge increases in the supply of paper money have taken place in a
number of countries, producing hyperinflations -- episodes of extreme inflation
rates much higher than those observed in earlier periods of commodity money. The
hyperinflation in the Weimar Republic of Germany is a notable example.

[edit] Related definitions

The term "inflation" originally referred to increases in the amount of money in

circulation, and some economists still use the word in this way. However, most
economists today use the term "inflation" to refer to a rise in the price level. An
increase in the money supply may be called monetary inflation, to distinguish it
from rising prices, which may also for clarity be called 'price inflation'.[23]
Economists generally agree that in the long run, inflation is caused by increases in
the money supply. However, in the short and medium term, inflation is largely
dependent on supply and demand pressures in the economy.[24]
Other economic concepts related to inflation include: deflation a fall in the
general price level; disinflation a decrease in the rate of inflation; hyperinflation
an out-of-control inflationary spiral; stagflation a combination of inflation,
slow economic growth and high unemployment; and reflation an attempt to raise
the general level of prices to counteract deflationary pressures.

Since there are many possible measures of the price level, there are many possible
measures of price inflation. Most frequently, the term "inflation" refers to a rise in
a broad price index representing the overall price level for goods and services in
the economy. The Consumer Price Index (CPI), the Personal Consumption
Expenditures Price Index (PCEPI) and the GDP deflator are some examples of
broad price indices. However, "inflation" may also be used to describe a rising
price level within a narrower set of assets, goods or services within the economy,
such as commodities (including food, fuel, metals), financial assets (such as stocks,
bonds and real estate), services (such as entertainment and health care), or labor.
The Reuters-CRB Index (CCI), the Producer Price Index, and Employment Cost
Index (ECI) are examples of narrow price indices used to measure price inflation in
particular sectors of the economy. Core inflation is a measure of inflation for a
subset of consumer prices that excludes food and energy prices, which rise and fall
more than other prices in the short term. The Federal Reserve Board pays
particular attention to the core inflation rate to get a better estimate of long-term
future inflation trends overall.[25]

[edit] Measures

CPI inflation (year-on-year) in the United States from 1914 to 2010.

Inflation is usually estimated by calculating the inflation rate of a price index,

usually the Consumer Price Index.[26] The Consumer Price Index measures prices
of a selection of goods and services purchased by a "typical consumer".[4] The
inflation rate is the percentage rate of change of a price index over time.

For instance, in January 2007, the U.S. Consumer Price Index was 202.416, and in
January 2008 it was 211.080. The formula for calculating the annual percentage
rate inflation in the CPI over the course of 2007 is

The resulting inflation rate for the CPI in this one year period is 4.28%, meaning
the general level of prices for typical U.S. consumers rose by approximately four
percent in 2007.[27]

Other widely used price indices for calculating price inflation include the
following:

Producer price indices (PPIs) which measures average changes in prices

received by domestic producers for their output. This differs from the CPI in
that price subsidization, profits, and taxes may cause the amount received by
the producer to differ from what the consumer paid. There is also typically a
delay between an increase in the PPI and any eventual increase in the CPI.
Producer price index measures the pressure being put on producers by the
costs of their raw materials. This could be "passed on" to consumers, or it
could be absorbed by profits, or offset by increasing productivity. In India
and the United States, an earlier version of the PPI was called the Wholesale
Price Index.
Commodity price indices, which measure the price of a selection of
commodities. In the present commodity price indices are weighted by the
relative importance of the components to the "all in" cost of an employee.
Core price indices: because food and oil prices can change quickly due to
changes in supply and demand conditions in the food and oil markets, it can
be difficult to detect the long run trend in price levels when those prices are
included. Therefore most statistical agencies also report a measure of 'core
inflation', which removes the most volatile components (such as food and
oil) from a broad price index like the CPI. Because core inflation is less
affected by short run supply and demand conditions in specific markets,
central banks rely on it to better measure the inflationary impact of current
monetary policy.
Other common measures of inflation are:

GDP deflator is a measure of the price of all the goods and services
included in gross domestic product (GDP). The US Commerce Department
publishes a deflator series for US GDP, defined as its nominal GDP measure
divided by its real GDP measure.
Regional inflation The Bureau of Labor Statistics breaks down CPI-U
calculations down to different regions of the US.
Historical inflation Before collecting consistent econometric data became
standard for governments, and for the purpose of comparing absolute, rather
than relative standards of living, various economists have calculated imputed
inflation figures. Most inflation data before the early 20th century is imputed
based on the known costs of goods, rather than compiled at the time. It is
also used to adjust for the differences in real standard of living for the
presence of technology.
Asset price inflation is an undue increase in the prices of real or financial
assets, such as stock (equity) and real estate. While there is no widely
accepted index of this type, some central bankers have suggested that it
would be better to aim at stabilizing a wider general price level inflation
measure that includes some asset prices, instead of stabilizing CPI or core
inflation only. The reason is that by raising interest rates when stock prices
or real estate prices rise, and lowering them when these asset prices fall,
central banks might be more successful in avoiding bubbles and crashes in
asset prices.[dubious discuss]

[edit] Issues in measuring

Measuring inflation in an economy requires objective means of differentiating

changes in nominal prices on a common set of goods and services, and
distinguishing them from those price shifts resulting from changes in value such as
volume, quality, or performance. For example, if the price of a 10 oz. can of corn
changes from $0.90 to $1.00 over the course of a year, with no change in quality,
then this price difference represents inflation. This single price change would not,
however, represent general inflation in an overall economy. To measure overall
inflation, the price change of a large "basket" of representative goods and services
is measured. This is the purpose of a price index, which is the combined price of a
"basket" of many goods and services. The combined price is the sum of the
weighted average prices of items in the "basket". A weighted price is calculated by
multiplying the unit price of an item to the number of those items the average
consumer purchases. Weighted pricing is a necessary means to measuring the
impact of individual unit price changes on the economy's overall inflation. The
Consumer Price Index, for example, uses data collected by surveying households
to determine what proportion of the typical consumer's overall spending is spent on
specific goods and services, and weights the average prices of those items
accordingly. Those weighted average prices are combined to calculate the overall
price. To better relate price changes over time, indexes typically choose a "base
year" price and assign it a value of 100. Index prices in subsequent years are then
expressed in relation to the base year price.[11] While comparing inflation
measures for various periods one has to take into consideration the base effect as
well.

Inflation measures are often modified over time, either for the relative weight of
goods in the basket, or in the way in which goods and services from the present are
compared with goods and services from the past. Over time, adjustments are made
to the type of goods and services selected in order to reflect changes in the sorts of
goods and services purchased by 'typical consumers'. New products may be
introduced, older products disappear, the quality of existing products may change,
and consumer preferences can shift. Both the sorts of goods and services which are
included in the "basket" and the weighted price used in inflation measures will be
changed over time in order to keep pace with the changing marketplace.[citation
needed]

Inflation numbers are often seasonally adjusted in order to differentiate expected

cyclical cost shifts. For example, home heating costs are expected to rise in colder
months, and seasonal adjustments are often used when measuring for inflation to
compensate for cyclical spikes in energy or fuel demand. Inflation numbers may be
averaged or otherwise subjected to statistical techniques in order to remove
statistical noise and volatility of individual prices.[citation needed]

When looking at inflation, economic institutions may focus only on certain kinds
of prices, or special indices, such as the core inflation index which is used by
central banks to formulate monetary policy.[citation needed]

Most inflation indices are calculated from weighted averages of selected price
changes. This necessarily introduces distortion, and can lead to legitimate disputes
about what the true inflation rate is. This problem can be overcome by including all
available price changes in the calculation, and then choosing the median value.[28]
[edit] Effects

[edit] General

An increase in the general level of prices implies a decrease in the purchasing

power of the currency. That is, when the general level of prices rises, each
monetary unit buys fewer goods and services.[29] The effect of inflation is not
distributed evenly in the economy, and as a consequence there are hidden costs to
some and benefits to others from this decrease in the purchasing power of money.
For example, with inflation, lenders or depositors who are paid a fixed rate of
interest on loans or deposits will lose purchasing power from their interest
earnings, while their borrowers benefit. Individuals or institutions with cash assets
will experience a decline in the purchasing power of their holdings. Increases in
payments to workers and pensioners often lag behind inflation, especially for those
with fixed payments.[11]

Increases in the price level (inflation) erode the real value of money (the functional
currency) and other items with an underlying monetary nature (e.g. loans and
bonds).

Debtors who have debts with a fixed nominal rate of interest will see a reduction in
the "real" interest rate as the inflation rate rises. The real interest on a loan is the
nominal rate minus the inflation rate (approximately [30] ). For example if you
take a loan where the stated interest rate is 6% and the inflation rate is at 3%, the
real interest rate that you are paying for the loan is 3%. It would also hold true that
if you had a loan at a fixed interest rate of 6% and the inflation rate jumped to 20%
you would have a real interest rate of -14%. Banks and other lenders adjust for this
inflation risk either by including an inflation premium in the costs of lending the
money by creating a higher initial stated interest rate or by setting the interest at a
variable rate. As the rate of inflation decreases, this has the opposite (negative)
effect on borrowers.

[edit] Negative

High or unpredictable inflation rates are regarded as harmful to an overall

economy. They add inefficiencies in the market, and make it difficult for
companies to budget or plan long-term. Inflation can act as a drag on productivity
as companies are forced to shift resources away from products and services in
order to focus on profit and losses from currency inflation.[11] Uncertainty about
the future purchasing power of money discourages investment and saving.[31] And
inflation can impose hidden tax increases, as inflated earnings push taxpayers into
higher income tax rates unless the tax brackets are indexed to inflation.

With high inflation, purchasing power is redistributed from those on fixed nominal
incomes, such as some pensioners whose pensions are not indexed to the price
level, towards those with variable incomes whose earnings may better keep pace
with the inflation.[11] This redistribution of purchasing power will also occur
between international trading partners. Where fixed exchange rates are imposed,
higher inflation in one economy than another will cause the first economy's exports
to become more expensive and affect the balance of trade. There can also be
negative impacts to trade from an increased instability in currency exchange prices
caused by unpredictable inflation.

Cost-push inflation

High inflation can prompt employees to demand rapid wage increases, to

keep up with consumer prices. In the cost-push theory of inflation, rising
wages in turn can help fuel inflation. In the case of collective bargaining,
wage growth will be set as a function of inflationary expectations, which
will be higher when inflation is high. This can cause a wage spiral.[32] In a
sense, inflation begets further inflationary expectations, which beget further
inflation.

Hoarding

People buy durable and/or non-perishable commodities and other goods as

stores of wealth, to avoid the losses expected from the declining purchasing
power of money, creating shortages of the hoarded goods.

Social unrest and revolts

Inflation can lead to massive demonstrations and revolutions. For example,

inflation and in particular food inflation is considered as one of the main
reasons that caused the 20102011 Tunisian revolution[33] and the 2011
Egyptian revolution,[34] according to many observators including Robert
Zoellick,[35] president of the World Bank. Tunisian president Zine El
Abidine Ben Ali was ousted, Egyptian President Hosni Mubarak was also
ousted after only 18 days of demonstrations, and protests soon spread in
many countries of North Africa and Middle East.
Hyperinflation

If inflation gets totally out of control (in the upward direction), it can grossly
interfere with the normal workings of the economy, hurting its ability to
supply goods. Hyperinflation can lead to the abandonment of the use of the
country's currency, leading to the inefficiencies of barter.

Allocative efficiency

A change in the supply or demand for a good will normally cause its relative
price to change, signaling to buyers and sellers that they should re-allocate
resources in response to the new market conditions. But when prices are
constantly changing due to inflation, price changes due to genuine relative
price signals are difficult to distinguish from price changes due to general
inflation, so agents are slow to respond to them. The result is a loss of
allocative efficiency.

Shoe leather cost

High inflation increases the opportunity cost of holding cash balances and
can induce people to hold a greater portion of their assets in interest paying
accounts. However, since cash is still needed in order to carry out
transactions this means that more "trips to the bank" are necessary in order
to make withdrawals, proverbially wearing out the "shoe leather" with each
trip.

Menu costs

With high inflation, firms must change their prices often in order to keep up
with economy-wide changes. But often changing prices is itself a costly
activity whether explicitly, as with the need to print new menus, or
implicitly.

Business cycles

According to the Austrian Business Cycle Theory, inflation sets off the
business cycle. Austrian economists hold this to be the most damaging effect
of inflation. According to Austrian theory, artificially low interest rates and
the associated increase in the money supply lead to reckless, speculative
 borrowing, resulting in clusters of malinvestments, which eventually have to
be liquidated as they become unsustainable.[36]

[edit] Positive
Labor-market adjustments

Keynesians believe that nominal wages are slow to adjust downwards. This
can lead to prolonged disequilibrium and high unemployment in the labor
market. Since inflation would lower the real wage if nominal wages are kept
constant, Keynesians argue that some inflation is good for the economy, as it
would allow labor markets to reach equilibrium faster.

Room to maneuver

The primary tools for controlling the money supply are the ability to set the
discount rate, the rate at which banks can borrow from the central bank, and
open market operations which are the central bank's interventions into the
bonds market with the aim of affecting the nominal interest rate. If an
economy finds itself in a recession with already low, or even zero, nominal
interest rates, then the bank cannot cut these rates further (since negative
nominal interest rates are impossible) in order to stimulate the economy -
this situation is known as a liquidity trap. A moderate level of inflation tends
to ensure that nominal interest rates stay sufficiently above zero so that if the
need arises the bank can cut the nominal interest rate.

Mundell-Tobin effect

The Nobel laureate Robert Mundell noted that moderate inflation would
induce savers to substitute lending for some money holding as a means to
finance future spending. That substitution would cause market clearing real
interest rates to fall.[37] The lower real rate of interest would induce more
borrowing to finance investment. In a similar vein, Nobel laureate James
Tobin noted that such inflation would cause businesses to substitute
investment in physical capital (plant, equipment, and inventories) for money
balances in their asset portfolios. That substitution would mean choosing the
making of investments with lower rates of real return. (The rates of return
are lower because the investments with higher rates of return were already
 being made before.)[38] The two related effects are known as the Mundell-
Tobin effect. Unless the economy is already overinvesting according to
models of economic growth theory, that extra investment resulting from the
effect would be seen as positive.

Instability with Deflation

Economist S.C. Tsaing noted that once substantial deflation is expected, two
important effects will appear; both a result of money holding substituting for
lending as a vehicle for saving.[39] The first was that continually falling
prices and the resulting incentive to hoard money will cause instability
resulting from the likely increasing fear, while money hoards grow in value,
that the value of those hoards are at risk, as people realize that a movement
to trade those money hoards for real goods and assets will quickly drive
those prices up. Any movement to spend those hoards "once started would
become a tremendous avalanche, which could rampage for a long time
before it would spend itself."[40] Thus, a regime of long-term deflation is
likely to be interrupted by periodic spikes of rapid inflation and consequent
real economic disruptions. Moderate and stable inflation would avoid such a
seesawing of price movements.

Financial Market Inefficiency with Deflation

The second effect noted by Tsaing is that when savers have substituted
money holding for lending on financial markets, the role of those markets in
channeling savings into investment is undermined. With nominal interest
rates driven to zero, or near zero, from the competition with a high return
money asset, there would be no price mechanism in whatever is left of those
markets. With financial markets effectively euthanized, the remaining goods
and physical asset prices would move in perverse directions. For example,
an increased desire to save could not push interest rates further down (and
thereby stimulate investment) but would instead cause additional money
hoarding, driving consumer prices further down and making investment in
consumer goods production thereby less attractive. Moderate inflation, once
its expectation is incorporated into nominal interest rates, would give those
interest rates room to go both up and down in response to shifting
 investment opportunities, or savers' preferences, and thus allow financial
markets to function in a more normal fashion.

[edit] Causes

The Bank of England, central bank of the United Kingdom, monitors causes and
attempts to control inflation.

Historically, a great deal of economic literature was concerned with the question of
what causes inflation and what effect it has. There were different schools of
thought as to the causes of inflation. Most can be divided into two broad areas:
quality theories of inflation and quantity theories of inflation. The quality theory of
inflation rests on the expectation of a seller accepting currency to be able to
exchange that currency at a later time for goods that are desirable as a buyer. The
quantity theory of inflation rests on the quantity equation of money, that relates the
money supply, its velocity, and the nominal value of exchanges. Adam Smith and
David Hume proposed a quantity theory of inflation for money, and a quality
theory of inflation for production.[citation needed]

Currently, the quantity theory of money is widely accepted as an accurate model of

inflation in the long run. Consequently, there is now broad agreement among
economists that in the long run, the inflation rate is essentially dependent on the
growth rate of money supply. However, in the short and medium term inflation
may be affected by supply and demand pressures in the economy, and influenced
by the relative elasticity of wages, prices and interest rates.[24] The question of
whether the short-term effects last long enough to be important is the central topic
of debate between monetarist and Keynesian economists. In monetarism prices and
wages adjust quickly enough to make other factors merely marginal behavior on a
general trend-line. In the Keynesian view, prices and wages adjust at different
rates, and these differences have enough effects on real output to be "long term" in
the view of people in an economy.

[edit] Keynesian view

Keynesian economic theory proposes that changes in money supply do not directly
affect prices, and that visible inflation is the result of pressures in the economy
expressing themselves in prices. The supply of money is a major, but not the only,
cause of inflation.

There are three major types of inflation, as part of what Robert J. Gordon calls the
"triangle model":[41]

Demand-pull inflation is caused by increases in aggregate demand due to

increased private and government spending, etc. Demand inflation is
constructive to a faster rate of economic growth since the excess demand
and favourable market conditions will stimulate investment and expansion.
Cost-push inflation, also called "supply shock inflation," is caused by a drop
in aggregate supply (potential output). This may be due to natural disasters,
or increased prices of inputs. For example, a sudden decrease in the supply
of oil, leading to increased oil prices, can cause cost-push inflation.
Producers for whom oil is a part of their costs could then pass this on to
consumers in the form of increased prices. Another example stems from
unexpectedly high Insured Losses, either legitimate (catastrophes) or
fraudulent (which might be particularly prevalent in times of
recession).[citation needed]
Built-in inflation is induced by adaptive expectations, and is often linked to
the "price/wage spiral". It involves workers trying to keep their wages up
with prices (above the rate of inflation), and firms passing these higher labor
costs on to their customers as higher prices, leading to a 'vicious circle'.
Built-in inflation reflects events in the past, and so might be seen as
hangover inflation.

Demand-pull theory states that the rate of inflation accelerates whenever aggregate
demand is increased beyond the ability of the economy to produce (its potential
output). Hence, any factor that increases aggregate demand can cause inflation.[42]
However, in the long run, aggregate demand can be held above productive capacity
only by increasing the quantity of money in circulation faster than the real growth
rate of the economy. Another (although much less common) cause can be a rapid
decline in the demand for money, as happened in Europe during the Black Death,
or in the Japanese occupied territories just before the defeat of Japan in 1945.

The effect of money on inflation is most obvious when governments finance

spending in a crisis, such as a civil war, by printing money excessively. This
sometimes leads to hyperinflation, a condition where prices can double in a month
or less. Money supply is also thought to play a major role in determining moderate
levels of inflation, although there are differences of opinion on how important it is.
For example, Monetarist economists believe that the link is very strong; Keynesian
economists, by contrast, typically emphasize the role of aggregate demand in the
economy rather than the money supply in determining inflation. That is, for
Keynesians, the money supply is only one determinant of aggregate demand.

Some Keynesian economists also disagree with the notion that central banks fully
control the money supply, arguing that central banks have little control, since the
money supply adapts to the demand for bank credit issued by commercial banks.
This is known as the theory of endogenous money, and has been advocated
strongly by post-Keynesians as far back as the 1960s. It has today become a central
focus of Taylor rule advocates. This position is not universally accepted banks
create money by making loans, but the aggregate volume of these loans diminishes
as real interest rates increase. Thus, central banks can influence the money supply
by making money cheaper or more expensive, thus increasing or decreasing its
production.

A fundamental concept in inflation analysis is the relationship between inflation

and unemployment, called the Phillips curve. This model suggests that there is a
trade-off between price stability and employment. Therefore, some level of
inflation could be considered desirable in order to minimize unemployment. The
Phillips curve model described the U.S. experience well in the 1960s but failed to
describe the combination of rising inflation and economic stagnation (sometimes
referred to as stagflation) experienced in the 1970s.

Thus, modern macroeconomics describes inflation using a Phillips curve that shifts
(so the trade-off between inflation and unemployment changes) because of such
matters as supply shocks and inflation becoming built into the normal workings of
the economy. The former refers to such events as the oil shocks of the 1970s, while
the latter refers to the price/wage spiral and inflationary expectations implying that
the economy "normally" suffers from inflation. Thus, the Phillips curve represents
only the demand-pull component of the triangle model.
Another concept of note is the potential output (sometimes called the "natural gross
domestic product"), a level of GDP, where the economy is at its optimal level of
production given institutional and natural constraints. (This level of output
corresponds to the Non-Accelerating Inflation Rate of Unemployment, NAIRU, or
the "natural" rate of unemployment or the full-employment unemployment rate.) If
GDP exceeds its potential (and unemployment is below the NAIRU), the theory
says that inflation will accelerate as suppliers increase their prices and built-in
inflation worsens. If GDP falls below its potential level (and unemployment is
above the NAIRU), inflation will decelerate as suppliers attempt to fill excess
capacity, cutting prices and undermining built-in inflation.[43]

However, one problem with this theory for policy-making purposes is that the
exact level of potential output (and of the NAIRU) is generally unknown and tends
to change over time. Inflation also seems to act in an asymmetric way, rising more
quickly than it falls. Worse, it can change because of policy: for example, high
unemployment under British Prime Minister Margaret Thatcher might have led to a
rise in the NAIRU (and a fall in potential) because many of the unemployed found
themselves as structurally unemployed (also see unemployment), unable to find
jobs that fit their skills. A rise in structural unemployment implies that a smaller
percentage of the labor force can find jobs at the NAIRU, where the economy
avoids crossing the threshold into the realm of accelerating inflation.

[edit] Monetarist view

CPI, Real GDP, M2 (log scale, indexed to 1960) and Money Velocity. Monetarism
posits that the growth rate of money is approximately equal to inflation plus real
GDP growth.
For more details on this topic, see Monetarism.

Monetarists believe the most significant factor influencing inflation or deflation is

how fast the money supply grows or shrinks. They consider fiscal policy, or
government spending and taxation, as ineffective in controlling inflation.[44]
According to the famous monetarist economist Milton Friedman, "Inflation is
always and everywhere a monetary phenomenon."[45] Some monetarists,
however, will qualify this by making an exception for very short-term
circumstances.

Monetarists assert that the empirical study of monetary history shows that inflation
has always been a monetary phenomenon. The quantity theory of money, simply
stated, says that any change in the amount of money in a system will change the
price level. This theory begins with the equation of exchange:

MV = PQ

where

M is the nominal quantity of money.

V is the velocity of money in final expenditures;

P is the general price level;

Q is an index of the real value of final expenditures;

In this formula, the general price level is related to the level of real economic
activity (Q), the quantity of money (M) and the velocity of money (V). The formula
is an identity because the velocity of money (V) is defined to be the ratio of final
nominal expenditure (PQ) to the quantity of money (M).

Monetarists assume that the velocity of money is unaffected by monetary policy (at
least in the long run), and the real value of output is determined in the long run by
the productive capacity of the economy. Under these assumptions, the primary
driver of the change in the general price level is changes in the quantity of money.
With exogenous velocity (that is, velocity being determined externally and not
being influenced by monetary policy), the money supply determines the value of
nominal output (which equals final expenditure) in the short run. In practice,
velocity is not exogenous in the short run, and so the formula does not necessarily
imply a stable short-run relationship between the money supply and nominal
output. However, in the long run, changes in velocity are assumed to be
determined by the evolution of the payments mechanism. If velocity is relatively
unaffected by monetary policy, the long-run rate of increase in prices (the inflation
rate) is equal to the long run growth rate of the money supply plus the exogenous
long-run rate of velocity growth minus the long run growth rate of real output.[7]

[edit] Unemployment

A connection between inflation and unemployment has been drawn since the
emergence of large scale unemployment in the 19th century, and connections
continue to be drawn today. In Marxian economics, the unemployed serve as a
reserve army of labour, which restrain wage inflation. In the 20th century, similar
concepts in Keynesian economics include the NAIRU (Non-Accelerating Inflation
Rate of Unemployment) and the Phillips curve.

[edit] Rational expectations theory

For more details on this topic, see Rational expectations theory.

Rational expectations theory holds that economic actors look rationally into the
future when trying to maximize their well-being, and do not respond solely to
immediate opportunity costs and pressures. In this view, while generally grounded
in monetarism, future expectations and strategies are important for inflation as
well.

A core assertion of rational expectations theory is that actors will seek to "head
off" central-bank decisions by acting in ways that fulfill predictions of higher
inflation. This means that central banks must establish their credibility in fighting
inflation, or economic actors will make bets that the central bank will expand the
money supply rapidly enough to prevent recession, even at the expense of
exacerbating inflation. Thus, if a central bank has a reputation as being "soft" on
inflation, when it announces a new policy of fighting inflation with restrictive
monetary growth economic agents will not believe that the policy will persist; their
inflationary expectations will remain high, and so will inflation. On the other hand,
if the central bank has a reputation of being "tough" on inflation, then such a policy
announcement will be believed and inflationary expectations will come down
rapidly, thus allowing inflation itself to come down rapidly with minimal economic
disruption.
[edit] Austrian view
For more details on this topic, see The Austrian view of inflation and
monetary inflation

The Austrian School asserts that inflation is an increase in the money supply, rising
prices are merely consequences and this semantic difference is important in
defining inflation.[46] Austrians stress that inflation affects prices in various
degree, i.e. that prices rise more sharply in some sectors than in other sectors of the
economy. The reason for the disparity is that excess money will be concentrated to
certain sectors, such as housing, stocks or health care. Because of this disparity,
Austrians argue that the aggregate price level can be very misleading when
observing the effects of inflation. Austrian economists measure inflation by
calculating the growth of new units of money that are available for immediate use
in exchange, that have been created over time.[47][48][49]

[edit] Real bills doctrine

Main article: Real bills doctrine

Within the context of a fixed specie basis for money, one important controversy
was between the quantity theory of money and the real bills doctrine (RBD).
Within this context, quantity theory applies to the level of fractional reserve
accounting allowed against specie, generally gold, held by a bank. Currency and
banking schools of economics argue the RBD, that banks should also be able to
issue currency against bills of trading, which is "real bills" that they buy from
merchants. This theory was important in the 19th century in debates between
"Banking" and "Currency" schools of monetary soundness, and in the formation of
the Federal Reserve. In the wake of the collapse of the international gold standard
post 1913, and the move towards deficit financing of government, RBD has
remained a minor topic, primarily of interest in limited contexts, such as currency
boards. It is generally held in ill repute today, with Frederic Mishkin, a governor of
the Federal Reserve going so far as to say it had been "completely discredited."

The debate between currency, or quantity theory, and banking schools in Britain
during the 19th century prefigures current questions about the credibility of money
in the present. In the 19th century the banking school had greater influence in
policy in the United States and Great Britain, while the currency school had more
influence "on the continent", that is in non-British countries, particularly in the
Latin Monetary Union and the earlier Scandinavia monetary union.
[edit] Anti-classical or backing theory

Another issue associated with classical political economy is the anti-classical

hypothesis of money, or "backing theory". The backing theory argues that the
value of money is determined by the assets and liabilities of the issuing
agency.[50] Unlike the Quantity Theory of classical political economy, the backing
theory argues that issuing authorities can issue money without causing inflation so
long as the money issuer has sufficient assets to cover redemptions. There are very
few backing theorists, making quantity theory the dominant theory explaining
inflation.[citation needed]

[edit] Controlling inflation

A variety of policies have been used to control inflation.

[edit] Monetary policy

The U.S. effective federal funds rate charted over fifty years.

Main article: Monetary policy

Today the primary tool for controlling inflation is monetary policy. Most central
banks are tasked with keeping the federal funds lending rate at a low level,
normally to a target rate around 2% to 3% per annum, and within a targeted low
inflation range, somewhere from about 2% to 6% per annum. A low positive
inflation is usually targeted, as deflationary conditions are seen as dangerous for
the health of the economy.

There are a number of methods that have been suggested to control inflation.
Central banks such as the U.S. Federal Reserve can affect inflation to a significant
extent through setting interest rates and through other operations. High interest
rates and slow growth of the money supply are the traditional ways through which
central banks fight or prevent inflation, though they have different approaches. For
instance, some follow a symmetrical inflation target while others only control
inflation when it rises above a target, whether express or implied.

Monetarists emphasize keeping the growth rate of money steady, and using
monetary policy to control inflation (increasing interest rates, slowing the rise in
the money supply). Keynesians emphasize reducing aggregate demand during
economic expansions and increasing demand during recessions to keep inflation
stable. Control of aggregate demand can be achieved using both monetary policy
and fiscal policy (increased taxation or reduced government spending to reduce
demand).

[edit] Fixed exchange rates

Main article: Fixed exchange rate

Under a fixed exchange rate currency regime, a country's currency is tied in value
to another single currency or to a basket of other currencies (or sometimes to
another measure of value, such as gold). A fixed exchange rate is usually used to
stabilize the value of a currency, vis-a-vis the currency it is pegged to. It can also
be used as a means to control inflation. However, as the value of the reference
currency rises and falls, so does the currency pegged to it. This essentially means
that the inflation rate in the fixed exchange rate country is determined by the
inflation rate of the country the currency is pegged to. In addition, a fixed
exchange rate prevents a government from using domestic monetary policy in
order to achieve macroeconomic stability.

Under the Bretton Woods agreement, most countries around the world had
currencies that were fixed to the US dollar. This limited inflation in those
countries, but also exposed them to the danger of speculative attacks. After the
Bretton Woods agreement broke down in the early 1970s, countries gradually
turned to floating exchange rates. However, in the later part of the 20th century,
some countries reverted to a fixed exchange rate as part of an attempt to control
inflation. This policy of using a fixed exchange rate to control inflation was used in
many countries in South America in the later part of the 20th century (e.g.
Argentina (1991-2002), Bolivia, Brazil, and Chile).

[edit] Gold standard

Main article: Gold standard
Under a gold standard, paper notes are convertible into pre-set, fixed quantities of
gold.

The gold standard is a monetary system in which a region's common media of

exchange are paper notes that are normally freely convertible into pre-set, fixed
quantities of gold. The standard specifies how the gold backing would be
implemented, including the amount of specie per currency unit. The currency itself
has no innate value, but is accepted by traders because it can be redeemed for the
equivalent specie. A U.S. silver certificate, for example, could be redeemed for an
actual piece of silver.

The gold standard was partially abandoned via the international adoption of the
Bretton Woods System. Under this system all other major currencies were tied at
fixed rates to the dollar, which itself was tied to gold at the rate of $35 per ounce.
The Bretton Woods system broke down in 1971, causing most countries to switch
to fiat money money backed only by the laws of the country.

Economies based on the gold standard rarely experience inflation above 2 percent
annually.[51] Under a gold standard, the long term rate of inflation (or deflation)
would be determined by the growth rate of the supply of gold relative to total
output.[52] Critics argue that this will cause arbitrary fluctuations in the inflation
rate, and that monetary policy would essentially be determined by gold
mining,[53][54] which some believe contributed to the Great
Depression.[54][55][56]

[edit] Wage and price controls

Main article: Incomes policies
Another method attempted in the past have been wage and price controls
("incomes policies"). Wage and price controls have been successful in wartime
environments in combination with rationing. However, their use in other contexts
is far more mixed. Notable failures of their use include the 1972 imposition of
wage and price controls by Richard Nixon. More successful examples include the
Prices and Incomes Accord in Australia and the Wassenaar Agreement in the
Netherlands.

In general wage and price controls are regarded as a temporary and exceptional
measure, only effective when coupled with policies designed to reduce the
underlying causes of inflation during the wage and price control regime, for
example, winning the war being fought. They often have perverse effects, due to
the distorted signals they send to the market. Artificially low prices often cause
rationing and shortages and discourage future investment, resulting in yet further
shortages. The usual economic analysis is that any product or service that is under-
priced is overconsumed. For example, if the official price of bread is too low, there
will be too little bread at official prices, and too little investment in bread making
by the market to satisfy future needs, thereby exacerbating the problem in the long
term.

Temporary controls may complement a recession as a way to fight inflation: the

controls make the recession more efficient as a way to fight inflation (reducing the
need to increase unemployment), while the recession prevents the kinds of
distortions that controls cause when demand is high. However, in general the
advice of economists is not to impose price controls but to liberalize prices by
assuming that the economy will adjust and abandon unprofitable economic
activity. The lower activity will place fewer demands on whatever commodities
were driving inflation, whether labor or resources, and inflation will fall with total
economic output. This often produces a severe recession, as productive capacity is
reallocated and is thus often very unpopular with the people whose livelihoods are
destroyed (see creative destruction).

[edit] Cost-of-living allowance

For more details on this topic, see Cost of living.

The real purchasing-power of fixed payments is eroded by inflation unless they are
inflation-adjusted to keep their real values constant. In many countries,
employment contracts, pension benefits, and government entitlements (such as
social security) are tied to a cost-of-living index, typically to the consumer price
index.[57] A cost-of-living allowance (COLA) adjusts salaries based on changes in
a cost-of-living index. Salaries are typically adjusted annually in low inflation
economies. During hyperinflation they are adjusted more often.[57] They may also
be tied to a cost-of-living index that varies by geographic location if the employee
moves.

Annual escalation clauses in employment contracts can specify retroactive or

future percentage increases in worker pay which are not tied to any index. These
negotiated increases in pay are colloquially referred to as cost-of-living
adjustments or cost-of-living increases because of their similarity to increases tied
to externally determined indexes. Many economists and compensation analysts
consider the idea of predetermined future "cost of living increases" to be
misleading for two reasons: (1) For most recent periods in the industrialized world,
average wages have increased faster than most calculated cost-of-living indexes,
reflecting the influence of rising productivity and worker bargaining power rather
than simply living costs, and (2) most cost-of-living indexes are not forward-
looking, but instead compare current or historical data.

[edit] Penalty units

If laws are written with actual monetary values, and inflation occurs, then those
values can fall behind, and make the values trivial. It would take a lot of effort to
rewrite all the laws to keep up with inflation. A better way is to define all fines in
terms of Penalty units, and redefine the that single PU value as required.

SBI home loans are cheaper even without teaser rates

Tania Kishore Jaleel / Mumbai April 26, 2011, 0:18 IST

State Bank of India (SBI) will discontinue its teaser home loan schemes from the
end of this month. The interest rates offered on its home loans will now be
replaced by floating interest rate schemes, which are comparable with those
offered by other commercial banks and housing finance companies.

All loans from May 1 will attract an interest rate of 9.5-10.25 per cent, depending
on the loan amount.

Loans up to Rs 30 lakh will be available at 9.5 per cent (one percentage point
above their base rate). Loans in the Rs 30-75 lakh bracket will be charged 9.75 per
cent (125 basis points above the base rate). And, those above Rs 75 lakh will be
charged 10.25 per cent (175 basis points above the base rate). However, these rates
would move in line with the changes in the banks base rate that is reviewed every
quarter.

Earlier, the Reserve Bank of India had asked banks to stop giving teaser loan rates,
since it believed such loans impacted the asset quality of the banks home loan
portfolio. Teaser loans offered advances at a comparatively lower rate of interest
for the first few years, after which rates were re-set at higher rates. SBI was the last
one to discontinue such special loans.

Under its SBI Easy Home Loan and SBI Advantage Home Loan products, one
could get loans for 8-8.75 per cent in the first three years. After the third year, the
rates would get reset at the then current floating rate structure.

At 8.75 per cent, a 20-year-old loan on Rs 30 lakh would come to Rs 884 a lakh.
At 9.5 per cent, you would now be paying Rs 932 a lakh.

The good news is that for those who have already availed SBIs teaser home loans
and are still in the initial three years, the old rates remain applicable. The new rates
will only apply to new applicants.

Among the housing finance companies, LIC Housing Finance still offers a fixed
interest rate of 9.9-10 per cent for the first five years and, thereafter, the then
prevailing rates are applicable. But a quick calculation on apnaloan.com showed
that the average rate for a 20-year period still works out in SBIs favour. The
average rate for SBI was 9.5 per cent, while that for LIC Housing was 10.5 per
cent for the same period.

SBI has also said there would be no prepayment penalty on home loans. The bank
used to charge customers a two per cent penalty on prepaying the home loan. It
will also introduce a graded processing fee, which it will increase according to the
loan amount.

ack home, in the meantime, SBI began addressing the technology gap that existed
between it and its foreign-backed competitors. Into the 1990s, SBI had yet to
establish an automated teller network; indeed, it had not even automated its
information systems. SBI responded by launching an ambitious technology drive,
rolling out its own ATM network, then teaming up with GE Capital to issue its
own credit card. In the early 2000s, the bank began cross-linking its banking
network with its ATM network and Internet and telephone access, rolling out
"anytime, anywhere" banking access. By 2002, the bank had succeeded in
networking its 3,000 most profitable branches.

Read more: http://www.answers.com/topic/state-bank-of-india#ixzz1Zc3o6BdJ

SBI Housing Loan

SBI Housing loan schemes are designed to make it

simple for you to make a choice at least as far as HOUSING FINANCE
financing goes! COMPANIES

'SBI-Home Loans' Public Sector

Unique features: BoB Housing Finance

No cap on maximum loan amount for Can Fin Homes

purchase/ construction of house/ flat
LIC Housing Finance

Ind Bank Housing

Option to club income of your spouse and PNB Housing Finance
children to compute eligible loan amount
SBI Home Finance

Private Institutions
Provision to club expected rent accruals from
HDFC
property proposed to compute eligible loan
amount ICICI

LIC

Provision to finance cost of furnishing and HUDCO

consumer durables as part of project cost
GE Money Home Loan

Sundaram Finance Group

Repayment permitted upto 70 years of age
 Free personal accident insurance cover

Optional Group Insurance from SBI Life at concessional premium (Upfront

premium financed as part of project cost)

Interest applied on daily diminishing balance basis

'Plus' schemes which offer attractive packages with concessional interest

rates to Govt. Employees, Teachers, Employees in Public Sector Oil
Companies.

Special scheme to grant loans to finance Earnest Money Deposits to be paid

to Urban Development Authority/ Housing Board, etc. in respect of
allotment of sites/ house/ flat

No Administrative Charges or application fee

Prepayment penalty is recovered only if the loan is pre-closed before half of

the original tenure (not recovered for bulk payments provided the loan is not
closed)

Provision for downward refixation of EMI in respect of floating rate

borrowers who avail Housing Loans of Rs.5 lacs and above, to avail the
benefit of downward revision of interest rate by 1% or more
 In-principle approval issued to give you flexibility while negotiating
purchase of a property

Option to avail loan at the place of employment or at the place of

construction

Attractive packages in respect of loans granted under tie-up with Central/

State Governments/ PSUs/ reputed corporates and tie-up with reputed
builders (Please contact your nearest branch for details)

Package of exclusive benefits:

Complimentary international ATM-Debit card

Complimentary SBI Classic/ International Credit Card with waiver of

joining and first year's fees

Option for E-banking

Concessional package under 'Credit Khazana' for prospective car loan

borrowers whose accounts are conducted satisfactorily

50% concession in charges in respect of all personal remittances/ collection

of outstation cheques

Purpose

Purchase/ Construction of new House/ Flat

 Purchase of an existing House/ Flat

Purchase of a plot of land for construction of House

Extension/ repair/ renovation/ alteration of an existing House/ Flat

Purchase of Furnishings and Consumer Durables as a part of the project cost

Takeover of an existing loan from other Banks/ Housing Finance Companies

Eligibility

Minimum age 18 years as on the date of sanction

Steady source of income

Loan Amount
Applicant/ any one of the applicants are aged over 21 years and upto 45 years - 60
times Net Monthly Income (NMI) or 5 times Net Annual Income (NAI), subject to
aggregate repayment obligations not exceeding 57.50% of NMI/ NAI
Applicant(s) aged over 45 years of age- 48 times NMI or 4 times NAI, subject to
aggregate repayment obligations not exceeding 50%of NMI/ NAI

To enhance loan eligibility you have option to add:

Income of your spouse

 Income of your son/ daughter living with you, provided they have a steady
income and his/ her salary account is maintained with SBI

Expected rent accruals (less taxes, cess, etc.) if the house/ flat being
purchased is proposed to be rented out

Regular income from all sources

Source: http://www.statebankofindia.com/

HOME LOAN TYPES

Owning a piece of land or property is a lifetime

dream for every individual. There are many home HOME LOAN TYPES
loans provider in the market to make your dream
come true. But before you opt for any home loan Home purchase loans
provider, you need to consider certain factors Home improvement loans
related to property that you are interested in buying
and also about the salient features offered by a Home construction loans
home loan provider and also study some Home
Loans and Home Insurance FAQs which helps in Home extension loans
applying a Home Loan in India.
Home equity loans
And the most important thing is you should know
about each and every term related with Home Loans Land purchase loans
before applying for a Loan. It is always advisable to Bridge loans
consult a home loan expert or consultant before
applying for a home loan or purchasing a property. Mortgage loans

You can take different types of home loans like

Bridge Loans, Home construction Loans, Home Equity Loans, Home Extension
Loans, Home Improvement Loans, Land Purchase Loans etc for different schemes
available in the market. There are different types of home loans tailored to meet
your needs.

Home Purchase Loans: These are the basic forms of home loans used for
purchasing of a new home.
 Home Improvement Loans: These loans are given for implementing repair
works, healing and renovations in a home that has already been purchased.
Home Construction Loans: These loans are available for the construction
of a new home.
Home Extension Loans: These loans are given for expanding or extending
an existing home. For eg: addition of an extra room etc.
Home Conversion Loans: These loans are available for those who have
financed the present home with a home loan and wish to purchase and move
to another home for which some extra funds are required. Through home
conversion loan, the existing loan is transferred to the new home including
the extra amount required, eliminating the need of pre-payment of the
previous loan.
Land Purchase Loans: These loans are available for purchasing land for
both construction and investment purposes.
Bridge Loans: Bridge loans are designed for people who wish to sell the
existing home and purchase another one. The bridge loans help finance the
new home, until a buyer is found for the home.

Why take a Home Loan?

What's an average middle class Indian's most cherished dream? A date in world
trips in islands with Aishwarya Rai in complete solitude. This would seem to be
the answer from the maximum number of episodes of Kaun Banega Crorepati
(KBC), despite recently of course, when she has decided to change her fortunes
first with Abhishek!

Jokes apart, purchasing and moving into a dream house would generally rank
among the top three things on the wish list of most people. After all its what been
proved by Maslows Law of Hierarchy as well. That entire house hunting every
few years, grumpy landlords, killing rents would be a thing of the past. Hey, you
even get to use nails to hang your favorite paintings and pictures. Dont you???

Taking a home loan nowadays has become very simpler. The RBI has been
regularly slashing interest rates, with the result that housing finance loans that
came at an interest rate of 16.5% to 18% four years ago are now available at 11.5%
to 13% or lower. Each year the Finance Minister's generosity during the Budget
seems to be solely concentrated for the housing sector and construction sector. The
Budget 2000's allowed interest payment up to Rs 1 lakh and principal payment of
Rs 20,000 to be exempted from income tax. To top it all, the Housing Finance
Companies (HFCs) are aggressively wooing customers. Now, when the sun shines,
its the best time to make hay. Isnt it?
State Bank Of India Home Loan

The Most Preferred Home Loan provider SBI Bank offers a Home Loan with
Attractive Interest Rates with Latest Schemes and Benefits. SBI also provides a
Housing loan with different schemes. Schemes Are:-
1. SBI Easy Home Loan
2. SBI Advantage Home Loan
3. SBI Housing Finance Scheme
4. SBI Happy Home Loans
5. SBI Life Style Loan
6. SBI Green Home Loan
7. SBI Home Plus
8. SBI Home Line
9. SBI MY HOME CAMPAIGN

Features & Benefits of SBI Home Loan

Purchase/ Construction of House/ Flat
Purchase of a plot of land for construction of House
Lowest Home Loan Interest Rate..
Extension/ repair/ renovation/ alteration of an existing House/ Flat
Purchase of Furnishings and Consumer Durables as a part of the project cost.
Takeover of an existing loan from other Banks/ Housing Finance Companies.
Interest charged on the daily reducing balance
No penalty on prepayments of home loan
No hidden costs
Option to club income of your spouse and children to compute eligible loan
amount
Provision to club depreciation, expected rent accruals from property proposed to
compute eligible loan amount
Provision to finance cost of furnishing and consumer durables as part of project
cost
Other Products from SBI (State bank of India)
1. SBI Home Loan
2. SBI Personal Loan
3. SBI Housing Loan
4. SBI Card

Eligibility
Minimum age 18 years as on the date of sanction
Maximum age limit for a Home Loan borrower is fixed at 70 years, i.e. the age
by which the loan should be fully repaid.

Availability of sufficient, regular and continuous source of income for servicing

the loan repayment.

Loan Amount
40 to 60 times of NMI, depending on repayment capacity as % of NMI as under

Net Annual Income EMI/NMI Ratio

Upto Rs.2 lacs 40%

Above Rs.2 lac to Rs. 5 lac 50%

Above Rs. 5 lacs 55%

Pre-closure Penalty
No penalty if the loan is precolsed from own savings/windfall gains for which
documentary evidence is produced by the customer.
In case, such proof is not produced by the borrower, penalty @2% on the amount
prepaid in excess of normal EMI dues shall be levied if the loan is preclosed within
3 years from the date of commencement of repayment.
Maximum Repayment Period
for applicants upto 45 years of age: 20 years
for applicants over 45 years of age: 15 years
Documents
Completed application form
Passport size photograph
Proof of Identity PAN Card/ Voters ID/ Passport/ Driving License
Proof of Residence Recent Telephone Bill/ Electricity Bill/ Property tax receipt/
Passport/ Voters ID
Proof of business address in respect of businessmen/ industrialists
Sale Deed, Agreement of Sale, Letter of Allotment, Non encumbrance certificate,
Land/ Building Tax paid receipt etc. (as applicable and subject to satisfaction
report from our empanelled lawyer)
Copy of approved plan and approval from the Local Body
Statement of Bank Account/ Pass Book for last 6 months

Purpose :
Purchase/ Construction of House/ Flat
Purchase of a plot of land for construction of House
Extension/ repair/ renovation/ alteration of an existing House/ Flat
Purchase of Furnishings and Consumer Durables as a part of the project cost.
Takeover of an existing loan from other Banks/ Housing Finance Companies

Features:
Interest charged on the daily reducing balance
No penalty for prepayments made
No hidden costs
All the features of our product, including interest rates, are in the public domain.
Loan sanctioned within 6 days of submission of required documents.
Option to club income of your spouse and children to compute eligible loan
amount
Provision to club depreciation, expected rent accruals from property proposed to
compute eligible loan amount
Provision to finance cost of furnishing and consumer durables as part of project
cost
Repayment permitted upto 70 years of age
 Free personal accident insurance cover upto Rs.40 Lac.
Optional Group Insurance from SBI Life at concessional premium (Upfront
premium financed as part of project cost)
Plus schemes which offer attractive packages with concessional interest rates to
Govt. Employees, Teachers, Employees in Public Sector Oil Companies.
Special scheme to grant loans to finance Earnest Money Deposits to be paid to
Urban Development Authority/ Housing Board, etc. in respect of allotment of sites/
house/ flat

Inflation

Definition
The overall general upward price movement of goods and services in an economy
(often caused by a increase in the supply of money), usually as measured by the
Consumer Price Index and the Producer Price Index. Over time, as the cost of
goods and services increase, the value of a dollar is going to fall because a person
won't be able to purchase as much with that dollar as he/she previously could.
While the annual rate of inflation has fluctuated greatly over the last half century,
ranging from nearly zero inflation to 23% inflation, the Fed actively tries to
maintain a specific rate of inflation, which is usually 2-3% but can vary depending
on circumstances. opposite of deflation.

Ads by Google

Read more: http://www.investorwords.com/2452/inflation.html#ixzz1Zirc1zeM

Question: What Is Inflation?

Answer: To understand inflation, we first must understand what the word means.
The Economics Glossary defines Inflation as:
 Inflation is an increase in the price of a basket of goods and services that is
representative of the economy as a whole.

A similar definition of inflation can be found in Economics by Parkin and Bade:

Inflation is an upward movement in the average level of prices. Its opposite

is deflation, a downward movement in the average level of prices. The
boundary between inflation and deflation is price stability.

The Link Between Inflation and Money

Because inflation is a rise in the general level of prices, it is intrinsically linked to
money, as captured by the often heard refrain "Inflation is too many dollars
chasing too few goods". To understand how this works, imagine a world that only
has two commodities: Oranges picked from orange trees, and paper money printed
by the government. In a year where there is a drought and oranges are scarce, we'd
expect to see the price of oranges rise, as there will be quite a few dollars chasing
very few oranges. Conversely, if there's a record crop or oranges, we'd expect to
see the price of oranges fall, as orange sellers will need to reduce their prices in
order to clear their inventory. These scenarios are inflation and deflation,
respectively, though in the real world inflation and deflation are changes in the
average price of all goods and services, not just one.

Inflation means a sustained increase in the aggregate or general price level in an

economy. Inflation means there is an increase in the cost of living.

inflation means that your money wont buy as much today as you could yesterday.

Definition of Inflatio

Definition of Inflation has been different in different dictionaries over the ages.
Dictionaries have given different versions of definition regarding inflation.
Inflation is an economic condition wherein the price of the goods and services
increase steadily measured against standard level of purchasing power, whereas the
supply of the goods and services decline along with the devaluation of money.

When the economy of a country faces inflation it brings bad news for the people
because the supply of goods decreases and this scarcity causes a predicament for
the people. The definition of inflation has undergone lot of changes since 1983
when it appeared in the dictionary for the first time. At that time inflation was
thought of as a cause but as time passed by the definition and its significance
changed. Economists from different schools differ in their opinion regarding the
genesis of inflation. However, it is agreed that inflation occurs due to an
unexpected rise in the supply of money which causes devaluation or a decrease in
the supply of goods and services.

Again, the inflation rate decreases with the increase in the production of goods and
with the decrease in the supply of money in the market.

The purview of inflation has narrowed in the present day since only the
phenomenon of increase in the price level is termed as inflation these days.
Previously, the devaluation of money was also considered to be a condition of
inflation. In the present day this phenomenon is known as a monetary inflation.

The inflation in price is measured against the purchasing power of the consumers
and is done by the Bureau of Labor Statistics in United States of America.

Factors Leading to Inflation

There are several factors which lead to inflationary circumstances in an
economy. These factors enable the demand to increase without maintaining
any balance with the supply. The factors are:

Increase in the supply of money

Price Controls
Expenditure of monetary reserves

personal loan

Definition
Consumer loan granted for personal (medical), family (education,
vacation), or household (extension, repairs, purchase of air conditioner,
computer, refrigerator, etc.) use, as opposed to business or commercial
use. Such loans are either unsecured, or secured by the asset purchased
or by a co-signor (guarantor). Unsecured loans (called signature loans)
are advanced on the basis of the borrower's credit-history and ability to
repay the loan from personal income. Repayment is usually through
fixed amount installments over a fixed term. Also called consumer loan.

Ads by Google

Punjab national bank

Personal Loan Scheme For Public

Purpose

To meet all types of personal needs.

Eligibility

i. All permanent Defence Personnel including officials of

Military Station Headquarters, BSF, CRPF, CISF, ITBP
ii. Confirmed/ permanent employees of Central/ State Govt/
PSUs and all reputed companies/ Institutions, who are
drawing their salary through accounts maintained with our
branches. OR Employer's of above categories agree
for check-off facility
iii. Professionally qualified Doctors viz. MBBS, BDS & above
having annual income of Rs.4.00 lac & above.
iv. Individual drawing salary through our Bank/availing loan
under check-of facility with net monthly incme:

Rs.15000 per month for eligible customers at Metro Centres;

Rs.12500 per month for eligible customers at Urban Centres; and
Rs.10000 per month for eligible customers at Semi-Urban and
 Rura Centres.

However, for Teachers, Army Jawans, other permanent

employees of Military Station Headquarters and Para Military
Personnel whose salary is being credited and disbursed
through our branches the minimum Net Monthly Income
criteria shall be Rs.7500/- at all Centres viz. Metro, Urban,
Semi-Urban and Rural.

(EMI should not exceed 50% of monthly salary/income)

Nature and Amount of Loan

Term Loan/ Overdraft Minimum amount of loan will be

Rs.50,000/- and maximum amount of loan Rs.4,00,000/- or 20
times monthly net salary, whichever is lower, depending upon the
repaying capacity.
Rs 5,00,000/- for those Salaried persons having completed
service of 3 years in the present organization & drawing net
monthly salary of nor less than Rs. 30,000/-

Margin

NIL

Security

Suitable guarantee acceptable to the Bank.

Rate of Interest

Click Here to view rate of interest

Repayment

Term Loan:
60 Equated Monthly Instalments (EMIs) OR remaining period of
service, whichever is earlier. Instalment to commence one month
after disbursement of loan.

Overdraft:
The overdraft limit shall be adjusted within a maximum period of
60 months by reducing Drawing Power(DP) equivalent to EMI
amount at the beginning of every month. However, loan allowed
to Army Jawans, other permanent employees of Military Station
Headquarters and Para Military Personnel shall be Repayable in
maximum 36 Equated Monthly Instalments or remaining period of
stay at the particular posting, whichever is lower.

Upfront Fee

1.8% of the loan amount + Service Tax & Education Cess

Documentation Charges

Rs.270/- upto Rs.2 Lac + Service Tax & Education Cess

 Rs.450/- over Rs.2 Lac + Service Tax & Education Cess
Upfront / documentation charges for defence personnel -
NIL
In Case of Employees of Govt./Institutions etc.

In case of employees of government/institution etc., irrevocable

letter of authority from the borrower to remit salary/installment and
other amount payable to bank. Post dated cheques towards
monthly installments be obtained from the borrower under the
cover of letter of deposit (Mandate of the borrower conveying
deposit of PDCs for appropriation in the loan account).
Where the employer agrees to check off facility, at least one PDC
to be obtained.

In case of Army Officers :

In case of Army Jawans, Other permanent employees of Military

Station Headquarters and Para Military Personnel (Undertaking to
be obtained from the Station Commandant/ Unit Incharge at the
time of retirement/death/transfer of a particular Jawan/Personnel
or on transfer of a unit, loan under the scheme will get adjusted.)

PERSONAL LOAN SCHEME FOR LIC AGENTS

LIC agents who receive regular commission from LIC of India and maintain accounts
with our Branches are eligible for Personal Loan on the terms and conditions as under:

I. Eligibility:

LIC agents aged below 60 years with more than FIVE YEARS of agency,
having regular and stable income and maintaining SF a/c with our branch.

II. Income Criteria:

 Renewable Average Commission (average of the commission received
during the preceding twelve months) must be at least Rs.10,000/- per
month. (Form 16 issued by LIC reflects the renewal commission).

III. Maximum amount of loan:

Rs.2.00 lac or equivalent to 15 times of average monthly commission

received during the preceding 12 months, whichever is lower.

IV. Rate of Interest: Base Rate + 5%

V. UPFRONT FEE & DOCUMENTATION CHARGES

Upfront Fee 1.80% + service tax
Documentation charges Rs. 2 lac: Rs.270+ service tax
IV. Security:
i) Suitable third party guarantee acceptable to the Bank and
assignment of LIC policy of self, with sum assured equivalent to
loan amount.
OR

ii) Tangible Collateral Security of the value of 100% of loan amount.

V. Repayment:

60 EMIs or upto 65 years of age of LIC agent, whichever is earlier.

Punjab National Bank Housing Loan

Any individual can avail Punjab National Bank Housing Loan for any of the following purpose:

For construction of house.

For purchase of house/ flat.
For purchase of house/ flat from the original allottee, i.e. on First Power of Attorney
basis.
For carrying out repairs/ renovation/ additions/ alterations in the existing house.

Approximately 80% of the cost of project is sanctioned by PNB Housing Finance, subject to a
maximum of Rs. 50 lac. In case of carrying out repairs/ renovation/ additions/ alterations in the
existing house, the ceiling is Rs. 5 lac. The loan is available for a period of 5 years to 20 years or
before the borrowers attain the age of 65.

Interest of Punjab National Bank Home Loan is charged on reducing balance and the amount to
be sanctioned depends upon the repaying capability of the borrower.

The following securities are required by the cell of PNB Housing Loan:

Mortgage of property for which finance is being given.

In case of purchase of house flat from housing board/ society where mortgage cannot be
created immediately, a tripartite agreement shall be executed amongst the housing
board/society, borrower and the Bank.

In case of purchase of house/ flat on first power of attorney, additional security by way of
mortgage of some other property or pledge of Bank's Fixed Deposit Receipt/ LIC policy/
Govt. securities has to be provided.

Suitable third party guarantee acceptable to the Bank which may include guarantee from
family members/ other relatives.
unjab National Bank (PNB Hindi: ) (BSE: 532461,
NSE: PNB), was founded in 1894 and today is the second largest state-owned
commercial bank in India with about 5000 branches across 764 cities. It serves over 37
million customers. The bank has been ranked 248th biggest bank in the world by the
Bankers Almanac, London. The bank's total assets for financial year 2007 were about
US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong
Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and
Shanghai.
Punjab National Bank is one of the Big Four banks of India, along with ICICI Bank, State
Bank of India and HDFC Bankits main competitors.[2]

History
Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act
with its office in Anarkali Bazaar Lahore. The founding board was drawn from different
parts of India professing different faiths and a varied back-ground with, however, the
common objective of providing country with a truly national bank which would further
the economic interest of the country. PNB's founders included several leaders of the
Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal,[3] Lala
Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi
Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the
management of the Bank in its early years. The board first met on 23 May 1894. Today,
ironically the PNB Website is distorting history by claiming Lala Lajpat Rai to be the
founding father, surpassing Rai Mul Raj and Dyal Singh Majithia.
PNB has the distinction of being the first Indian bank to have been started solely with
Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh
Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.)
PNB has had the privilege of maintaining accounts of national leaders such as Mahatma
Gandhi, Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi, as
well as the account of the famous Jalianwala Bagh Committee
Punjab National Bank Type Public
(BSE: 532461, NSE: PNB) Industry Banking
Financial services
Insurance Founded Lahore (1895) Headquarters New Delhi, India Key
people K.R.Kamath
(Chairman & MD) Products Investment Banking
Consumer Banking
Commercial Banking
Retail Banking
Private Banking
Asset Management
Pensions
Mortgage loans
Credit Cards
Life Insurance Revenue US$ 5.649 billion (2010)[1] Net income US$
882.4 million (2010)[1] Total assets US$ 67.422 billion (2010)[1] Total
equity US$ 4.204 billion (2010)[1] Employees 56,928 (2010)[1] Website
PNBIndia.com
State Bank of India (SBI) (NSE: SBIN, BSE: 500112, LSE: SBID) is the largest Indian banking
and financial services company (by turnover and total assets) with its headquarters in Mumbai,
India. It is state-owned. The bank traces its ancestry to British India, through the Imperial Bank
of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank
in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks, Bank of
Calcutta and Bank of Bombay to form Imperial Bank of India, which in turn became State Bank
of India. The government of India nationalised the Imperial Bank of India in 1955, with the
Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the
government took over the stake held by the Reserve Bank of India.

SBI provides a range of banking products through its vast network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group, with
over 16,000 branches, has the largest banking branch network in India. SBI has 14 Local Head
Offices and 57 Zonal Offices that are located at important cities throughout the country. It also
has around 130 branches overseas.
With an asset base of $352 billion and $285 billion in deposits, SBI is a regional banking
behemoth and is one of the largest financial institution in the world. It has a market share among
Indian commercial banks of about 20% in deposits and loans.[2] The State Bank of India is the
29th most reputed company in the world according to Forbes.[3] Also SBI is the only bank
featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand
Finance and The Economic Times in 2010.[4]

The State Bank of India is the largest of the Big Four banks of India, along with ICICI Bank,
Punjab National Bank and HDFC Bankits main competitors.[5]

Sbi personal loan

Q. What are my loan limits?

A. Your personal loan limit would be determined by your income and repayment capacity.
Normally you can avail a loan upto Rs.2.50 lacs. However, if in metros of NewDelhi, Mumbai,
Bangalore, Chennai, Hyderabad and Kolkata, salaried individuals or self-employed professionals
can avail Personal Loan upto Rs.5.00 lacs. If the salary of a salaried individual is credited to
his/her account with our Bank or a self-employed professional has been maintaining a
satisfactorily conducted account with us, a Personal Loan of up to Rs.10 lacs can be sanctioned.

Q. Can my spouses income be included for calculating the loan amount?

A. Yes, your spouse's income can be included provided he/she guarantees the loan or the loan is
taken jointly.

Q. What are the important documents that I need to provide?

A. You will need to furnish only the following documents if you are an existing customer of the
Bank:
- Passport size photograph
- Proof of official address for self employed individuals and professionals. This can include shop
and establishment certificate/Lease deed/Telephone Bill
- Latest Salary slip and Form 16, in the case of salaried persons
- IT returns for the last two financial years, in the case of self employed individuals and
professionals

If you are not an existing bank customer you would also need to establish your identity and give
proof of residence.

Q. Do I have to pledge some form of security?

A. No security is required.

Q. What is the repayment schedule like?

A. The minimum amount that you are expected to pay every month is the EMI. You are allowed
to pay more than the EMI if you wish to, and we do not charge any prepayment penalty.

Q. What is EMI?
A. EMI stands for Equated Monthly Installments. This installment comprises both principal and
interest components. Use the EMI calculator to find out your monthly payments based on the
loan amount, the rate of interest and the repayment period. Choose the combination that best
meets your financial resources and requirements.

Q. Can I prepay the loan? Are there any penalties?

A. Yes, you can prepay the loan partly or fully, at any stage, without any prepayment penalty.

Q. What is the processing fee? Are there any other charges?

A. Processing charges are 1 per cent of the loan amount. This is amongst the lowest fees in the
industry. Processing fees have to be paid upfront. There are no hidden costs or other
administrative charges.

Q. Do I have the option of choosing a fixed or floating rate for the loan?
A. You have the option to avail the loan with either a fixed interest rate or a floating one. In the
case of a fixed rate loan, the interest rate on the loan will remain fixed through the entire tenure
of the loan, whereas in the case of a floating rate loan, the interest rate could decline or rise in
line with the changes in the Bank's Medium Term Lending Rate (SBMTLR).

Q. How does SBI Personal loan compare with those offered by other banks?
A. There is total transparency with regard to the rate of interest and the fees charged by us.
- We offer personal loans at the cheapest rates of interest, with no security or collateral
- We offer loans for the longest tenors (48 months), with the flexibility provided to reduce the
tenor by prepaying the loan without any penalty.
- We provide finance for any personal need or requirement, the total amount being determined on
the basis of repaying capacity.
- With an SBI personal loan you can choose between fixed rates of interest and floating interest
rates.
- We levy interest based on daily/monthly reducing balance, unlike the annual reducing balance
method used by several other banks.

Q. How do I benefit if the interest is calculated on a daily/monthly reducing balance?

A. On an annual reducing balance method, you will continue to pay interest on amounts you
repay during the coming one year as the interest for the year is determined on the basis of the
balance outstanding at the beginning of the year.
In the case of the daily/monthly reducing balance, which is the methodology we employ, your
interest is calculated only on the outstanding loan amount, which reduces every time you pay off
your EMIs or make any prepayments. This in essence lowers your effective rate of interest
significantly.
What is Inflation?

One of the most important economic concepts is inflation. At its most

basic level, inflation is simply a rise in prices. Over time, as the cost of
goods and services increase, the value of a dollar is going to go down
because you won't be able to purchase as much with that dollar as you
could have last month or last year. Of course, it seems like the cost of
goods are always going up, at least to an extent, even when inflation is
thought to be in check. It is important to note that some amount of
inflation is considered normal (actually, as we explain below, because of
its relationship with unemployment, some inflation is actually desirable).
While the annual rate of inflation has fluctuated greatly over the last half
century, ranging from nearly zero inflation to 23% inflation, the Fed
actively tries to maintain a specific rate of inflation, which is usually 2-
3% but can vary depending on circumstances. Deflation (for example, -
1%) occurs when prices actually decrease over a period of time. Please
note that deflation is not the same as disinflation, which is when the rate
of inflation decreases but stays positive (for example, a change from a
3% rate to a 2% rate).

How Inflation is Measured

There are two main indices used to measure inflation. The first is the
Consumer Price Index, or the CPI . The CPI is a measure of the price of
a set group of goods and services. The "bundle," as the group is known,
contains items such as food, clothing, gasoline, and even computers. The
amount of inflation is measured by the change in the cost of the bundle:
if it costs 5% more to purchase the bundle than it did one year before,
there has been a 5% annual rate of inflation over that period based on the
CPI. You will also often hear about the "Core Rate" or the "Core CPI."
There are certain items in the bundle used to measure the CPI that are
extremely volatile, such as gasoline prices. By eliminating the items that
can significantly affect the cost of the bundle (in either direction) on a
month-to-month basis, the Core rate is thought to be a better indicator of
real inflation, the slow, but steady increase in the price of goods and
services.

The second measure of inflation is the Producer Price Index, or the PPI .
While the CPI indicates the change in the purchasing power of a
consumer, the PPI measures the change in the purchasing power of the
producers of those goods. The PPI measures how much producers of
products are getting on the wholesale level, i.e. the price at which a good
is sold to other businesses before the good is sold to a consumer. The
PPI actually combines a series
Ads by Google

Alpari (UK) Forex Trading Up To $4000 Credit Bonus.T&Cs Apply Download MT4 Now!
FSA Regulated.
alpari.co.uk/fsa-regulated

Find Personal Loan Rates Compare & Get Best Rates of Sep '11 Instant Eligibility from Top
Banks
BankBazaar.com/Personal-Loan

Online Personal Finance A Free, Safe & Simplified Tool for Managing Your Money. Try It
Now!
www.perfios.com/managingyourmoney

Course in Stock-Market Know Stock Market Step-by-Step. Join NSE Certification Program
Now!
ifbi.com/NSE_Certified_Program

of smaller indices that cross many industries and measure the prices for
three types of
Nine easy ways to beat inflation.

The new Consumer Price Index (CPI) numbers confirm what you already know: life is getting
more expensive by the minute. In May prices rose a larger-than-forecast 0.6 percent, driven by
everyday essentials like gas and food. That was the CPI's biggest increase in six months, and it
capped off a 12-month period in which prices rose 4.2 percent, up from the 2.9 percent they had
risen in the 12 months ending in April. In May fuel oil prices were up 10.4 percent, putting them
64 percent above where they had been a year ago. Milk prices have jumped 10.2 percent over
their year-ago level.

None of that is very surprising to consumers, who have been paying more at the grocery and
feeling the pain at the pump. Washington is worried, because inflation can snowball when fear of
rising prices gets everyone behaving in a way that pushes prices yet higher. Left untreated, it can
choke off economic growth. The Federal Reserve, which may have started that ball rolling when
it pumped market-saving liquidity into the economy earlier this year, now is expected to begin
raising interest rates soon to tamp down that feverish feeling.

So it could get worse before it gets better, as policymakers try to squeeze those inflationary
pressures out of the economy (and us). That's their job. Your job is to resist the squeeze play by
protecting your own purse from the inflation scourge. Here's how.

1) Hoard
Not to a degree that requires Oprah-like intervention, but act as if you expect everything from
toothpaste to toilet paper to cost more next month. It probably will. Stock up big when your
favorite brands are on sale.

2) Try to Bump Up Your Earnings

If it seems like the price of your time is the only thing that hasn't gone up, you're right. Median
household income has risen 16 percent since 2000; consumer prices are up 20 percent, so you are
going backward. Most economic policymakers want to keep it that way; they worry about wage-
driven inflation that spirals out of control. But the rest of us worry about salaries that can't keep
buying the gas and groceries they bought last week. Use the calculator at
http://www.bls.gov/CPI/ to see what your salary should be if it is to keep up with inflation. Bring
that figure into your next annual review. If the situation around the office is grim, consider other
means of bumping up your income. Look for a better-paying job, moonlight, start a side business
from your hobby or take the class that will make you more valuable next time you get a review.

3) Buy Protection for Your Protection

Make sure your homeowner's insurance and your long-term-care insurance carries some sort of
inflation protection. Many home insurers have dropped their "total replacement value"
guarantees, so you might have to call your insurance agent every year to see whether the
numbers need to be bumped up. If you're buying long-term-care insurance, make sure it includes
automatic benefit adjustments for rising health care costs.

4) Lock in Your Loans at Fixed Rates

It's still a good time to lock in a fixed-rate mortgage. If you're carrying a balance on a home
equity line, consider switching it to a fixed-rate second mortgage to limit your exposure to rising
rates. Between 1972 and 1980 short-term rates rose from 4 percent to 16 percent. "The coming
interest rate increases may need to be faster and bigger," suggests Bud Conrad, chief economist
of Casey Research, a company that specializes in commodities. If you have a variable-rate
mortgage and expect to stay in your home longer than three to five years, strongly consider
refinancing to a fixed-rate loan. If you already have a mortgage that is costing you 6 percent or
less in interest, don't be in a hurry to pay it off fast. It's a cheap loan.

5) Stop Lending at Low Fixed Rates

For the same reason that you want a low-rate fixed mortgage if rates rise, you don't want to have
a lot of money in long-term bonds. If rates rise by 1 percentage point, your 20-year Treasury
bond would be worth 10 percent less immediately. Keep the bond part of your portfolio in
shorter-term bonds and bond funds, suggests Harold Evensky, a Coral Gables, Fla., financial
adviser.

6) Continue to Buy Stocks

They usually do well during periods of moderate inflation, according to Morningstar, the
Chicago research firm. Focus on blue chips that are cash-rich and healthy and produce necessary
products, so they have room to raise prices when their costs go up, says analyst Chris Davis.
Invest some of your money in the companies that do well when inflation spikes. Oil companies
make more money when oil gets expensive, because they mark it up on a percentage basis. The
same can be expected of companies that produce food, metal, paper, gas and other commodities.
You can find them all in natural resources mutual funds, like the T. Rowe Price New Era Fund
favored by Bohemia, N.Y., financial planner Ron Rog.

7) Buy TIPS, Carefully and Sparingly

Treasury inflation-protected securities have built-in guarantees that the principal you invest in
them will keep pace with inflation, but their yields right now, at 1 percent, are quite low.
Accepting a low yield like that is a sacrifice that might be worth making for "insurance" against
inflation, says Evensky. "If we buy them and they're not that attractive, the yield is not that high,
we'll get a lousy return with a small part of the portfolio," he says. "But if inflation spikes and we
don't have that kind of hedge, it could be catastrophic." You can buy TIPS through a fund, such
as the Vanguard Inflation-Protected Securities Fund (VIPSX) or the Fidelity Inflation-Protected
Bond Fund (FINPX). They are best held in tax-advantaged retirement accounts, because of the
way they produce taxable income. Foreign inflation-protected bonds have been offering bigger
returns that U.S. TIPS. You can get them through a new exchange-traded fund, SPDR DB
International Government Inflation-Protected Bond ETF (WIP). Better returns and the same
inflation guarantees can also be found through corporate inflation-protected bonds.

8) Change Your Behavior

Think public transportation, smaller car, walking more often. Eat cheaper, too: have a nonmeat
night, popcorn (the old fashioned way, on the stove) instead of buying chips, and consider
growing some of your own food. Even a tomato plant in a patio pot will give you better flavor,
some grocery savings, and fewer salmonella worries.
9) Don't Go Overboard
Protecting yourself against inflation is smart, but remember that the Fed is also taking on that
challenge. The result could end up being a slower economy instead of an overheated one. In that
case, you wouldn't want all of your money in oil stocks and gold. But you'd still be able to use
the toilet paper you squirreled away.

Inflation is a major factor in the realm of personal finance; its a risk that affects investment
positively or negatively. In broad terms, inflation is the general increase in prices because of a
change in the money supply or the availability of goods. It is not merely a macro-economic
concept, since it is relevant to the finances of individuals in four primary ways:

Determining the real return of an investment

Evaluating the purchasing power risk
Interest rates for savings
Effect on financial instruments

The Great Super Cycle: Profit from the Coming Inflation Tidal
Wave and Dollar Devaluation
The Great Super Cycle: Profit from the Coming Inflation Tidal
Wave and Dollar Devaluation looks at what we can expect in
global economics by looking at the history of political shifts in
power. The underlying theme is that everything moves in
cyclesfrom the mega-cycle of world powers, to economic
cycles that can last decades, to mini-cycles that last ten to twenty
years.
Amazon Price: $14.41
List Price: $27.95

Survive the Great Inflation

Investment expert Michael Murphy is doing what few seem
willing to do: He's calling a spade a spade and stating the hard-to-
swallow truth. He presents easy-to-follow instructions on how to
 protect your assets, your family, and your future when it hits the
fan.
Amazon Price: $27.95

Ads by Google
Download Metatrader 5 www.4xp.com/Metatrader
The Revolutionary Forex Platform, $1,000 for Best Demo Trader!
Do You Own a Business? Google.com/places
Help Your Business Be Found Claim Your Free Google Place Page!
The real return of an investment

This concept refers to the discounted nominal interest rate (rate after inflation is discounted). In
the realm of investment, this effect is referred to as inflation risk. Although this risk has a
significant effect on investors, the combined risks of taxation and inflation are far more serious
than inflation risk on its own. A good example is the treatment of deferred annuities, where tax is
paid on annuitized payments and the payments are typically fixed. Even after discounting for
inflation, tax must be levied against the accumulated nominal returns (and not the discounted one
unfortunately). The real return is further eroded by the effect of inflation on the payments
received.

Purchasing power risk

Inflation is also influential in this aspect of investment risk. The loss of purchasing power on
investment returns is tied to the reduced purchasing power per dollar. Purchasing power risk
affects the capital invested significantly. With low-yield investment instruments, the purchasing
power of the principal declines rapidly.

Interest rates

In macro-economics, there is a link between inflation and interest rates; a link that filters down to
the individual. One of the methods of controlling inflation is to increase prime lending rates in an
attempt to discourage borrowing. High interest rates also make investing more attractive than
consumption, which reduces aggregate demand in the economy.

Financial instruments
Interestingly, inflation is not always a bad thing. Certain financial instruments benefit from high
inflation. Usually these are the types of investments that have intrinsic value, because such assets
remain in high demand regardless of the level of inflation. Examples of such assets include art,
real estate, gold and other commodities. High inflation increases the absolute returns on such
investments. Notice that the opposite happens with regard to cash/income instruments like
savings accounts and money market funds. When inflation is low, it is less risky to invest in cash
and income options.

While many persons who are risk averse are afraid to lose, inflation causes real loss for the
ultra-conservative investor. Portfolio diversification is not only important in managing market
risk, but can also mitigate inflation risk. While limiting investment in growth options reduces
market risk, increasing investment in them reduces inflation risk. It is a trade-off that emphasizes
the delicate balance of diversification. Such information can only redound to the benefit of a
prudent investor.

Facebook
Twitter
RSS
Types of Personal Loans

If youre seeking a personal loan, know that there several types to select from depending on your
situation and ability to repay.

Definition of a Personal Loan

A personal loan is a loan made for any purpose not specifically defined. It doesnt have to be
secured by any assets. In fact, personal loan recipients use the money for general purposes.

There are two main types of personal loans.

Secured Personal Loan

As this suggests, a secured personal loan is backed by collateral. This may be a home, a boat, a
car or another financial asset. Lack of repayment will result in repossession of the property. If
you secure a loan with a home and cant repay, you could lose your home to foreclosure.

An Unsecured Personal Loan

An unsecured personal loan is not secured by anything other than the signature of the recipient.
Its usually based on general creditworthiness.

Because its unsecured, the lender will charge a higher interest rate because of the additional
risk. If not repaid, the lender would resort to legal claims to make good on the loss.
Secured or unsecured personal loans can be obtained via banks, credit unions, loan companies at
brick and mortar places or online.

Following are eight personal loans you might be able to obtain on a secured or unsecured basis:

Home Equity Personal Loan

If you have enough equity on your home, you might be able to get a personal loan secured by
your home equity. Advantages of a home equity loan are:

The interest rates are lower because the money is secured by your
home
You may be able to borrow a larger amount
The payback term will be longer
The payments may be lower
A major disadvantage of using your homes equity as a personal loan, of course, is that if you
cannot repay, you could lose your home to foreclosure.

Home Equity Line of Credit

Again, if you have enough equity in your home and dont want or need all the money at once,
you might want to consider a personal line of credit secured by your home.

Major advantages of this approach are:

You only pay interest on the amount you borrow

You have control over how and when you use the money
The payments are interest only, so theyre usually lower
If you cant repay the line of credit, you could lose your home to foreclosure.

Short Term Personal Loans

Short term personal loans have the following two characteristics:

High interest rate- This is because repayment period is so short.

Small loan amounts- Many online companies will only loan up to

$1500 for a short term loan. Banks dont offer more than $15,000
or $20,000. Collateral may also be requested.
An example of a short term personal loan is a title loan where you borrow an amount secured by
the title to a vehicle you own. If you dont repay, the car will be repossessed.

Fast Cash Advance Loan

A cash advance or payday loan might be useful to take care of an unexpected expense.
Characteristics of these loans are:

Theyre easy to qualify for. Usually all you need are some
paycheck stubs.
They have a short term life. You usually have to pay it back within
two weeks.
The interest rates are very high. For example, you can pay up to
$30 to borrow $100 at some payday loan firms.
Military Payday Loans

These loans are offered by military loan companies to assist qualified members of the armed
forces in getting money when they need it. Some characteristics of these are:

Its specific for men and women of the military

It has a low rate of interest
A repayment schedule can be chosen by the borrower
The money can be obtained even if the applicant has bad credit
No Credit Personal Loan

These loans have the following characteristics:

Theyre designed specifically for people with no credit history

A credit check may not be required
The interest rates may be high
Make sure you read the fine print and comparison shop for these loans.

Second Chance Personal Loans

If youve run into an unforeseen financial crisis or a personal tragedy, you may be able to get a
second chance personal loan:

This can be a secured or unsecured loan

 Collateral (a home) will probably be involved
You will experience a higher rate of interest, shorter payback times
and limits on the amount that can be borrowed.
Christian Lending Personal Loans

Some Christian credit counseling organizations also offer debt consolidation loans. This is
designed to get the person out of debt:

Youll work with a financial counselor to total all you bills and
negotiate with your creditors to obtain the lowest monthly payment
You only have to make one payment a month
There are usually some flexible options and repayment plans
available
Shop and select carefully from these and other options available for personal loans.

. What are my loan limits?

A. Your personal loan limit would be determined by your income and repayment capacity.
Normally you can avail a loan upto Rs.2.50 lacs. However, if in metros of NewDelhi,
Mumbai, Bangalore, Chennai, Hyderabad and Kolkata, salaried individuals or self-employed
professionals can avail Personal Loan upto Rs.5.00 lacs. If the salary of a salaried individual
is credited to his/her account with our Bank or a self-employed professional has been
maintaining a satisfactorily conducted account with us, a Personal Loan of up to Rs.10 lacs
can be sanctioned.

Q. Can my spouses income be included for calculating the loan amount?

A. Yes, your spouse's income can be included provided he/she guarantees the loan or the
loan is taken jointly.

Q. What are the important documents that I need to provide?

A. You will need to furnish only the following documents if you are an existing customer of
the Bank:
- Passport size photograph
- Proof of official address for self employed individuals and professionals. This can include
shop and establishment certificate/Lease deed/Telephone Bill
- Latest Salary slip and Form 16, in the case of salaried persons
- IT returns for the last two financial years, in the case of self employed individuals and
professionals

If you are not an existing bank customer you would also need to establish your identity and
give proof of residence.

Q. Do I have to pledge some form of security?

A. No security is required.
Q. What is the repayment schedule like?
A. The minimum amount that you are expected to pay every month is the EMI. You are
allowed to pay more than the EMI if you wish to, and we do not charge any prepayment
penalty.

Q. What is EMI?
A. EMI stands for Equated Monthly Installments. This installment comprises both principal
and interest components. Use the EMI calculator to find out your monthly payments based
on the loan amount, the rate of interest and the repayment period. Choose the combination
that best meets your financial resources and requirements.

Q. Can I prepay the loan? Are there any penalties?

A. Yes, you can prepay the loan partly or fully, at any stage, without any prepayment
penalty.

Q. What is the processing fee? Are there any other charges?

A. Processing charges are 1 per cent of the loan amount. This is amongst the lowest fees in
the industry. Processing fees have to be paid upfront. There are no hidden costs or other
administrative charges.

Q. Do I have the option of choosing a fixed or floating rate for the loan?
A. You have the option to avail the loan with either a fixed interest rate or a floating one. In
the case of a fixed rate loan, the interest rate on the loan will remain fixed through the
entire tenure of the loan, whereas in the case of a floating rate loan, the interest rate could
decline or rise in line with the changes in the Bank's Medium Term Lending Rate (SBMTLR).

Q. How does SBI Personal loan compare with those offered by other banks?
A. There is total transparency with regard to the rate of interest and the fees charged by us.
- We offer personal loans at the cheapest rates of interest, with no security or collateral
- We offer loans for the longest tenors (48 months), with the flexibility provided to reduce
the tenor by prepaying the loan without any penalty.
- We provide finance for any personal need or requirement, the total amount being
determined on the basis of repaying capacity.
- With an SBI personal loan you can choose between fixed rates of interest and floating
interest rates.
- We levy interest based on daily/monthly reducing balance, unlike the annual reducing
balance method used by several other banks.

Q. How do I benefit if the interest is calculated on a daily/monthly reducing

balance?
A. On an annual reducing balance method, you will continue to pay interest on amounts you
repay during the coming one year as the interest for the year is determined on the basis of
the balance outstanding at the beginning of the year.
In the case of the daily/monthly reducing balance, which is the methodology we employ,
your interest is calculated only on the outstanding loan amount, which reduces every time
you pay off your EMIs or make any prepayments. This in essence lowers your effective rate
of interest significantly.
SBI and government helping RBI in inflation
control
Posted In Articles, Economy | No comments

Policy transmission has never been as fast

RBI does not have to tighten policy rates further in its quest to bring down inflation expectations.
The government and the SBI are helping bring down inflation expectations for the RBI. Policy
transmission has never been as effective as it has been in the last couple of weeks. Government
bond yields have gone up by 45bps over the last ten days on the back of the government
announcing a higher than budgeted borrowing and on the back of the credit rating downgrade of
SBI. Government bond yields are trading at the highest levels in over three years and the rise in
government bond yields will choke off credit in the economy.

The extra Rs 53,000 crores of borrowing, over and above the budgeted borrowing, for the second
half of fiscal 2011-12 has led to a deep worry in bond markets on the absorption of the bond
supply. The first auction of Rs 15,000 on the 7th of October 2011 saw high yield cut offs on the
bonds auctioned. The auctioned bonds, 8.07% 2017 bond, 8.08% 2022 bond, the 8.28% 2027
bond and the 8.30% 2040 bond saw cut offs at 8.64%, 8.70%, 8.87% and 8.92% respectively.
Yields on the auctioned bonds have gone up by 40bps to 50bps across the curve over the last ten
days. The market is expecting more pain in yields in the forthcoming bond auctions.
SBI, post the rating downgrade by Moodys, has pledged to keep its NPAs (Non Performing
Assets) under control and has also indicated that it will sell some of its government bond
holdings to improve its liquidity position. The bank has said that it will look to lend to highly
rated borrowers given pressures on its asset quality.

SBI going slow on lending to lower rated borrowers will push up borrowing costs in the system
as other state run banks will follow SBI in shunning lower rated credits. SBI selling its
government bond holding in the face of a larger than budgeted government borrowing program
will push up yields on government bonds. The system cannot absorb SBI selling of government
bonds and fresh supply from the government. The sharp rise in yields in the government bond
auctions is a testimony to the markets nervousness in absorbing bond supply.

The rise in government bond yields will push up borrowing costs across the system while SBIs
reluctance to lend to lower rated borrowers will push up borrowing costs for the needy. Triple A
rated corporate bonds trade at yields of 9.75% across maturities while lower rated corporate
bonds trade at yields of 11.5% to 12.5% across maturities. Rising government bond yields will
push up yields on AAA rated bonds by at least 25bps while lower rated bond yields will rise by
50bps to 100bps depending on the name.

The rise in yields in the system will bring down credit growth, as investment and consumption
will suffer due to higher borrowing costs. SBI has said its credit growth has been a paltry 5% for
this fiscal year to date and further rise in borrowing costs will bring down credit growth. RBI
data shows that credit growth has been around 19.5% year on year as of September 2011 and this
could come off from current levels if banks go slow on lending due to worries about rating
downgrades.

RBI has targeted a credit growth of 18% for the year 2011-12 to bring down inflation
expectations, which is trending at over 9.5% levels. RBI is looking to bring down aggregate
demand in the economy by raising policy rates and tightening liquidity. Given that the
government and SBI are acting in concert to push up borrowing costs, the RBI does not have to
raise policy rates further to bring down aggregate demand.

PNB to reduce personal loans, home finance

Punjab National Bank (PNB) to tighten personal loans, home finance
Apnaloan.com Research Bureau

10 Aug 2007

Punjab National Bank (PNB), the country's second-largest public sector bank, is planning to cut
exposure to personal loans and home finance, to bridge the gap between higher credit off-take
and lower deposits, report agency sources.

"The bank is concerned over the widening gap between resource mobilisation and credit
expansion and will soon take decisions on curtailing credit exposure by reducing personal
loans,\' PNB chief general manager US Bhargava said. The bank's asset liability committee
(ALCO) will meet later this week to decide on the issue, he added.

PNB's credit exposure is growing at 28% as against a growth of 20-22% in resource

mobilisation. The bank had earlier indicated an increase in prime lending rate (PLR) by 25 to 50
basis points and higher apnaloan.com/personal-loan-india/rates.html" id="f38o" style="font-
family: Arial;" target="_blank" title="\"click" here="" to="" fget="" the="" personal="" loan=""
interest="" rates\="">interest rates on all types of personal loans and housing loans.

At present, PNB charges a PLR of 12.25% and the interest rate on personal loans is between 12-
13%. A number of banks such as ICICI Bank and HDFC Bank have raised PLR by 100 basis
points, while Bank of Baroda had increased interest rates by 75 basis points.

Bhargava said that while loans for the first house of a borrower will be kept in the priority
segment, PNB will take steps to discourage buying a second or third house.

The steps taken by PNB followed the recent RBI measure to increase the repo rate (repurchase
rate) and the CRR (Cash reserve Ratio). The repo rate is the interest rate at which RBI lends to
banks, while CRR is the proportion of cash banks must keep with the RBI. The increase in CRR
and repo rate increases the cost of funds for banks, prompting them to hike lending rates. RBI
resorted to these measures to curb high inflation in the economy.