Hudco resets rates for state loans

Housing and Urban Development Corporation (Hudco) has reset interest rates with the state governments for loans worth Rs 843 crore. It has also reset interest rates with its lenders for more than Rs 1,300-crore loans.

While Hudco and its borrowers resorted to this mechanism to take advantage of the falling interest rates, the market is moving towards an increase in interest rates.

"The rates are now expected to harden but we do not see any immediate change," said a senior Hudco official.

The housing and urban infrastructure financier which borrows from the retail market and from other financial institutions has also prepaid loans to the tune of Rs 900 crore.

This included a Rs 500-crore loan taken at an interest rate of 13.43 per cent from the Small Industries Development Bank of India (Sidbi). The loan outstanding at the time of prepayment was Rs 121 crore.

Sources said that it also prepaid a Rs 400 crore loan to the National Housing Bank after the latter refused to reset the loan.

The institutions which agreed to reset loans included Punjab National Bank, General Insurance Corporation, Oriental Insurance, United India Insurance, New India Assurance, National Insurance and Bank of India.

Most of these loans were taken at a high interest rate of 13.09 per cent. They have been reset at less than half the rate of 6.25 per cent. Loans outstanding in such cases were about Rs 550 crore.

Another significant reduction in interest rate was achieved with Bank of India with which Hudco had Rs 236.49-crore outstanding. The loan was taken for Rs 250 crore at 12.25 per cent interest and has been reset at 8.05 per cent.

Hudco officials said resetting of loans with the state governments affected lowering down of the weighted average rate interest of 2.57 per cent.

The resetting has been allowed after recovering reset charges equivalent to half of one year's differential interest subject to a minimum of 1 per cent of outstanding loans in individual cases.