General

More money for college: Congress reaches deal

Steven — Mon, 17 Sep 2007 18:11:47 GMT

Congress reaches deal to boost college aid

House, Senate negotiators agree on bill that would boost Pell grant maximum, cut $20 billion in subsidies to banks that issue student loans.

September 7 2007: 3:18 PM EDT

House and Senate negotiators reached an agreement Wednesday to boost aid to college students, a deal that calls for slashing roughly $20 billion in government subsidies to banks that issue student loans.

Under an agreement reconciling differences between House and Senate bills, the maximum Pell grant, which goes to the poorest students, would increase from $4,310 to $5,400 by 2012.

The legislation also would cut interest rates on federally backed student loans to poor and middle-class students from 6.8 to 3.4 percent over the next four years.

House Democrats pushed for an interest-rate cut, following up on campaign promises. Such a provision had not been included in the Senate-passed version of the bill.

Democratic lawmakers said the $20 billion in cuts were aimed at excessive government subsidies to the industry. The subsidies were established to ensure banks enter the college loan business.

College savings: Minimizing risk

Joe Belew, president of the Consumer Bankers Association, issued a statement Wednesday criticizing the legislation. He said services to borrowers would be affected. "Inevitable cuts in critical customer support will mean less service, more confusion and more difficulty for students and parents when applying for financial aid," he said.

Nearly all of the cuts would go toward making college cheaper, but $750 million would be spent on federal budget deficit reduction. The legislation is attached to a must-pass bill needed to meet spending targets in the federal budget.

Under the House-Senate agreement, the government would provide loan forgiveness for college graduates who go into public service professions, such as teaching.

It also would cap annual payments for students at a percentage of their income, which is aimed at preventing people from having to pay back more than they can afford.

The full House and Senate are expected to vote on the legislation soon.

Student loan scandal: Effects on consolidation

Steven — Tue, 04 Sep 2007 17:10:17 GMT

Student loan scandal: Effects on consolidation

Deciding whether to consolidate federal student loans is never easy. Here's what you need to know.

By Jeanne Sahadi, CNNMoney.com senior writer

May 29 2007: 2:23 PM EDT

NEW YORK (CNNMoney.com) -- It's a good thing you got that college education. You can put it to good use navigating the complex maze that is the student loan industry as you consider whether to consolidate your federal student loans.

For those who have never done it, it's a question that comes up every year in anticipation of the rate change on July 1 of the variable federal student loans.

But this year, there's a twist. News of student lenders offering perks and kickbacks to colleges and alumni associations to include them on preferred lender lists have, understandably, made consumers wary.

But that actually may be one good thing to come out of the scandal. The advice about deciding whether and with whom to consolidate hasn't changed. It's just become even more relevant.

"The current scandal reinforces the need to be a savvy consumer and examine carefully any offer you receive no matter where it comes from," said Lauren Asher, associate director of Project Student Debt and the Institute for College Access and Success.

Indeed, said Mark Kantrowitz, publisher of FinAid.org, "even when a school's preferred lender list is unbiased, you still have to identify which loans are best for you."

The question of whether to consolidate your federal loans depends on the type of loans you have, their rate (variable or fixed) and your goal: Do you want to reduce the interest you pay long-term? Lower your monthly payment? Pay just one bill instead of several? Get better discounts?

It also depends on whether you've already consolidated the loans in question before. By law, you may not consolidate the same loans twice.

Here's what to consider if you have:

Stafford loans

If your Stafford loans were issued before July 1, 2006 they are variable-rate loans.

What determines the change in the variable rate every July is the yield on the 3-month Treasury bill during the last T-bill auction in May. This year that yield was only .076 percentage points above where it was during the same auction in 2006. So payments on your Stafford loans are not likely to go up much at all after July 1, and the rate for consolidation won't change at all.

So there's little reason to consolidate if your sole goal is to lock in a lower rate this year.

But there is one exception: if you're still in your so-called grace period, defined as up to six months after your graduation. That's because you still are enjoying the "in-school" rate, which is about 0.6 percentage points less than it will be when your grace period ends and you go into repayment. Consolidating before your grace period ends lets you to lock in that lower rate. Technically, you may lose out on some of your grace period because you will need to begin repayment within 60 days of consolidating. But if you apply for consolidation before July 1, a lot of lenders can set it up so that the clock on that 60 days doesn't start until close to the last two months of your grace period, Kantrowitz said.

There's also little reason to consolidate if you want to lock in a lower rate and you got your Stafford loan after July 1, 2006. That's because those loans are fixed rate loans at 6.8 percent and won't change.

Whether you have variable or fixed rate Staffords, however, you might consider consolidating if you want to reduce your monthly payments. You can do so by combining your loans into one loan and extending the repayment term. But by doing so you greatly increase the amount of interest you'll pay. By changing your repayment term from 10 years to 20, you'll cut your monthly payment by a third, but you'll double the amount of interest you pay long-term, Kantrowitz said.

A 30-year term is even more expensive. Say you have $20,000 in fixed-rate Stafford loans. Asher notes that you'll pay $7,619 in interest on them over 10 years. But if you consolidate and extend the repayment term to 30 years, you'll lower your monthly payment by $100 but you'll end up paying $26,935 in interest.

Besides rates and monthly payments, weigh discount incentives when considering consolidation. Many lenders offer breaks if, say, you direct debit your payments or pay on-time for 36 consecutive months. Compare not only consolidation discounts offered by different lenders, compare them to the discounts you're currently enjoying. Sometimes, Kantrowitz said, "discounts for consolidated loans are inferior to those on unconsolidated loans."

(Here's a good table for comparing specific discounts at FinAid.org. For a more general look at which discounts are more valuable than others, see this table from the Project on Student Debt.)

Once you have loan consolidation offers in hand, you can see which offers the better deal by using FinAid.org's loan consolidation calculator.

Perkins loans

These are fixed-rate federal loans at 5 percent. Student loan experts caution against consolidating them because doing so makes you ineligible for loan forgiveness programs. (Here's more information on the types of loan forgiveness programs available.)

Private loans

Private student loans are much costlier loans than those guaranteed by the federal government and borrowers don't enjoy the same protections as with federal student loans.

If you're among the minority of borrowers who have taken out private loans, and lenders send you offers to refinance your private loans, Asher's best advice: "Be even more careful (than you'd be with federal loan consolidation offers)." That's in part because the rates on these loans are based on your credit and can be as volatile as credit card rates.

Here are good questions to ask before taking out or refinancing private student loans.

And for both federal and private student-loan related questions, Kantrowitz's FinAid.org student loan page is an excellent resource.

Student loan company agrees to cut alumni ties

Steven — Tue, 04 Sep 2007 17:04:04 GMT

Nelnet one of the largest U.S. student loan companies will stop paying alumni associations for student referrals; will contribute $2M to educate students, parents about loans.

By Althea Chang

July 31 2007: 3:05 PM EDT

NEW YORK (CNNMoney.com) -- Student loan company Nelnet reached a $2 million settlement with New York Attorney General Andrew Cuomo stemming from investigations into the company's student loan practices.

Nelnet also agreed to stop paying alumni associations to refer students to their consolidated loans.

Under the settlement, Nelnet agreed to follow a code of conduct outlined by the Attorney General and will contribute $2 million to a fund to help educate college-bound students and parents about their loan options.

Student loan scandal: Effects on consolidation

In April, Nelnet agreed to contribute $1 million to a similar fund as part of a settlement with the Attorney General of Nebraska. Under that settlement, the company agreed to post a review of its business practices on its Web site but was not required to end its relationships with alumni groups.

Recently, Nelnet agreed to terminate relationships with all alumni groups, according to company spokesman Eric Solomon.

"The New York Attorney General's Code of Conduct effectively reiterates actions the company has already taken with respect to its student loan business," the company said in a prepared statement Tuesday.

"Although Nelnet strongly believes that the outsourcing and alumni consolidation services are valuable services for our customers, proposed federal regulations and legislation also call for the elimination of these programs," the company said.

In a number of agreements with college and university alumni associations, Nelnet paid for the use of school logos in their advertisements, and for placement of company materials on college web sites.

Columbia fires financial aid director

"Alumni associations recommended Nelnet loans because they were being paid to do so, not because the loans necessarily offered the best terms to students and alumni," according to a statement from the New York Attorney General's office.

Nelnet (down $2.24 to $17.48, Charts), one of the largest holders of federal loans, paid the organizations an annual fee or payments for every loan consolidation application an association directed to them.

The company, covered travel and hotel costs for school employees to participate in sponsored marketing events, paid for school financial aid personnel to attend luncheons, dinners, retreats, and gave school employees tickets to sporting events, shows and spa treatments, according to Cuomo's office

Mortgage rates move back up

Steven — Tue, 22 May 2007 11:31:32 GMT

Mortgage rates move back up

Remarks about inflation in the Fed's most recent statement push up rates, Freddie Mac reports.

Mortgage rates climbed this week after trending lower recently, Freddie Mac said Thursday, after Federal Reserve said it continues to worry about the threat of inflation.

The average rate on 30-year fixed-rate loans was 6.21 percent for the week ending May 16, up from 6.15 the previous week, the mortgage finance firm said. Last year at this time, 30-year mortgage rates averaged 6.60 percent.

"Mortgage rates inched up this week following the Federal Open Market Committee statement reiterating that the predominant concern remains the risk that inflation will fail to moderate as expected," Frank Nothaft, Freddie Mac vice president and chief economist, said in a prepared statement.

"However, as long as core inflation continues to trend downward and economic growth remains sub-par it is unlikely that we will see any big movement in mortgage rates."

Last week the Federal Reserve held interest rates steady for the seventh straight time, but indicated in its statement it was concerned about slower economic growth as well as inflation, suggesting that the central bank will not raise interest rates time soon.

Consumer prices rose less than expected in April, the government reported earlier this week, but core prices of the Consumer Price Index rose at faster pace.

The rate on 15-year loans averaged 5.92 percent, up from 5.87 the previous week, Freddie Mac (Charts, Fortune 500) said. A year ago, the 15-year rate averaged 6.20 percent.

Five-year adjustable-rate mortgages rose to 5.92 percent up from 5.89 percent last week. The five-year ARM averaged 6.23 percent a year ago.

The average one-year adjustable-rate mortgage averaged 5.48 percent, unchanged from the previous week. At this time last year, the loan averaged 5.62 percent.

Student loan crackdown bill

Steven — Thu, 10 May 2007 02:40:20 GMT

House passes

student loan crackdown bill

The bill tackles conflicts of interest in the $85 billion student loan market amid widening scandals.

The U.S. House of Representatives overwhelmingly passed a bill Wednesday cracking down on conflicts of interest in the $85 billion student loan market amid a widening scandal.

Adopted by a 414-3 vote, the bill would require colleges and lenders to abide by new codes of conduct; ban gifts from lenders to college aid officers; require disclosure of college-lender relationships; and protect students from aggressive marketing practices.

Investigations by Congress and New York Attorney General Andrew Cuomo have accused lending institutions of providing pay and perks to college financial aid officers in return for being put on "preferred lender" lists shown to students looking to borrow money for their education.

Allegations have also emerged of questionable stock dealings involving lenders, financial aid officers and one employee of the U.S. Department of Education, which oversees the nation's complex student financial aid system.

"Corrupt practices among lenders, schools, and public officials have undermined our student loan programs," said House Speaker Nancy Pelosi in a statement, calling the bill a needed action to clean up the student loan industry.

Under the measure, "preferred lender" lists would not be banned but would be more tightly regulated, while ensuring students have access to lenders not on the lists, as well.

House Education Committee Chairman George Miller told reporters after the vote that the bill - known as the Student Loan Sunshine Act - will help restore student loan ethics.

Miller said he hoped the Senate will move swiftly to adopt a similar bill so a measure can be sent to the White House. If the Senate moves slowly, he said, "I would be concerned" because of continuing revelations of student loan misconduct.

California Rep. Buck McKeon, senior Republican on the House Education Committee, said, "We do need to reaffirm our trust in the system. I believe this bill does just that ... I'm hopeful the other body will pick up this legislation."

Edward Kennedy, chairman of the Senate Education Committee, said there is bipartisan agreement on a Senate package of student loan industry reforms that he expects to include in an upcoming Higher Education Act reauthorization bill.

"These reforms will include many of the measures included in the version of the Sunshine Act I introduced in February, including a ban on lender gifts, reform of 'preferred lender lists,' and disclosures to make ... education loans more transparent," said the Massachusetts Democrat in a statement.

In the House, Texas Democrat Ruben Hinojosa called the passage of the Sunshine Act "a very important first step."

Some congressional Democrats want further reforms, including a measure to channel more students into direct government loans and away from federally guaranteed loans.

Real estate: Home price decline first ever since 1968

Steven — Wed, 09 May 2007 03:49:00 GMT

Home-price forecast: First ever decline

National Association of Realtors cuts 2007 forecast; would mark first drop since it began tracking values in 1968.

Home prices are expected to finish down for the year, the National Association of Realtors (NAR) said Tuesday, which would mark the first drop since the group started tracking values in 1968.

NAR projects a 1 percent decline in the median price of an existing single-family home, to $219,800. The group, in a forecast made a month ago, had previously been expecting a 0.7 percent decline. Prior to that, it had expected a gain of 1.2 percent.

The number of home sales is also expected to dip from 6.48 million in 2006 to 6.29 million in 2007, a drop of 2.7 percent.

Prices of new homes, at a median of $246,400, are expected to remain steady.

According to Lawrence Yun, a senior economist for NAR, speculative investing in real estate, which contributed to abnormal price growth for several years, has all but disappeared in the present market.

"Home buyers today are purchasing for the long-term, generally with a realistic expectation of modest gains over time," Yun said.

NAR is predicting that sales will recover gradually over the second half of the year and prices will begin to edge up again sometime after that. In 2008, NAR is forecasting price gains of 1.4 percent for existing homes and 2.2 percent for new homes.

According to Walter Molony, a spokesman for NAR, the statistics may exaggerate the drop because sales have slowed more in high-priced areas than in moderately-priced ones.

Also affecting home prices is a crisis in the subprime lending industry. A rash of foreclosures and forced sales that will add to already lengthening inventories is expected to hurt housing markets throughout the year.

Loan originators are tightening up lending standards this year in response to increasing defaults among subprime borrowers.

That will make it more difficult for many credit-damaged house hunters to obtain financing, subtracting demand from already weakening housing markets.

NAR expects interest rates, currently at about 6.16 percent for a 30-year fixed-rate loan, to rise gradually to about 6.5 percent by the fourth quarter, which should also have a dampening impact on home prices

WaMu mortgage will combine fixed, adjustable

Steven — Sat, 05 May 2007 06:50:36 GMT

Homeowners can, for a fee, switch back between rates twice a year.

Washington Mutual Inc. has begun offering a new mortgage and home equity line of credit bundled into a single loan that allows customers to reset interest rates or switch between fixed and adjustable rates up to twice a year without having to refinance.

The Seattle-based thrift said WaMu Mortgage Plus is designed to help consumers take advantage of changes in their financial needs or market conditions without having to bother with mounds of refinancing paperwork or steep fees.

“We constructed this product with an eye toward what we think is a very large group of customers ... looking for more control and flexibility,” Steve Rotella, Washington Mutual’s president and chief operating officer, told The Associated Press.

Washington Mutual, the country’s largest savings and loan, began offering WaMu Mortgage Plus in mid-March and is kicking off a nationwide marketing push Thursday.

The company will charge customers $250 each time they reset terms of their mortgage-home equity loan, up to twice a year, though the first reset will be free. It won’t cost anything to switch from a fixed rate — generally viewed as the safer option — to an adjustable rate.

Borrowers have to put 10 percent down, but Washington Mutual charges no origination fees and waives various other costs home buyers typically pay, such as appraisal and title fees.

Once borrowers begin paying down their mortgage, they’ll be able to tap into their equity with a check, cash advance or, in most states, a credit card. That available line of credit will grow as they pay down their mortgage.

Rotella said that by giving customers a simpler way to get cash for remodeling projects, college tuition and the like, Washington Mutual should be able to retain customers who might otherwise refinance with another lender.

Rotella acknowledged that some banks offer products with similar features, but he predicted that Washington Mutual “will grab market share from our competitors” because it’s the only one offering the features as an all-in-one package.

WaMu Mortgage Plus is not available to subprime consumers, those who pay higher interest rates because of sketchy credit histories or low income.

Customers who get the new loan can choose between the conventional method of paying both interest and principal or making interest-only payments.

Washington Mutual’s home loan group has suffered amid a stumbling housing market, losing more than $250 million in the past three fiscal quarters.

The company places much of the blame on rising delinquencies and defaults among subprime borrowers. It has reined in its subprime business, and expects an improving economy and strength in prime lending — including its latest offering — to boost the home loan unit back to profitability.

“As the home loans organization continues to improve, this is just going to accelerate the momentum we believe we’re building in that business,” Rotella said.

Without disclosing how many customers have signed up for WaMu Mortgage Plus since it was first offered, Rotella said the company is pleased so far. “It’s been above our early expectations by a fair amount,” he said.

Real estate sales plunge

Steven — Thu, 03 May 2007 15:14:17 GMT

House sales plunge

Latest forward look at existing home sales show sharp drop in sellers finding buyers for home, according to Realtors.

By Chris Isidore, CNNMoney.com senior writer

May 1 2007: 10:47 AM EDT

NEW YORK (CNNMoney.com) -- Problems in subprime mortgages caused a sharp drop in home sellers being able to find buyers for their homes in March, according to a trade group report Tuesday that showed the battered real estate market was much weaker than expected.

The National Association of Realtors' Pending Home Sales Index fell 4.9 percent in March, following a 1.1 percent increase in February. The index was down 10.5 percent from the March 2006 reading.

Economists surveyed by Briefing.com had been looking for a 0.4 percent rise in the index, which tracks the number of existing homes for which a sales contract has been signed but a closing has not yet taken place.

Type	Avg
30 yr fixed mtg	5.76%
15 yr fixed mtg	5.49%
30 yr fixed jumbo mtg	6.10%
5/1 ARM	5.51%
5/1 jumbo ARM	5.74%

"Although the weather improved in March, we're starting to see the effects of a decline in subprime lending and tighter lending standards," said a statement from David Lereah, the chief economist for the trade group. "Home sales will be relatively sluggish in the second quarter, but a modest uptrend should resume during the second half of this year."

Subprime mortgages, which are the types of home loans made to potential buyers with less than top credit, have become a significant problem in recent months, with rising deliquencies and defaults by borrowers and a number of lenders pulling out of the market. That, in turn, has choked off the supply of credit to some potential home buyers.

The Pending Home Sales Index, which started in 2001, is considered a more forward-looking indicator of market strength than the traditional existing home sales report, which records sales at the time of closing.

The Realtors' existing home sales report and the government's new home sales reading have both shown tremendous weakness in the pace of sales in recent months, along with a glut of both types of homes on the market, which has depressed prices. The Pending Home Sales Index does not contain any home price measure.

A reading of 100 in the index is equal to the average level of contract activity during 2001, the first year of the index, which coincidentally was the start of the home sale and home building boom in the country that extended into 2006. But the market softened significantly in the later part of last year and has been battered by the subprime mortgage problems so far this year.

The weak real estate market has badly hurt results of the nation's largest builders. Monday Centex (Charts, Fortune 500), the nation's No. 3 builder, reported a larger-than-forecast loss in the most recent quarter, its second straight quarter in the red. No. 4 builder Pulte Homes (Charts, Fortune 500) also reported its second straight losing quarter Wednesday. Also in April No. 2 home builder D.R. Horton (Charts, Fortune 500) reported the typical start to the spring home buying season hasn't begun.

The nation's largest home builder Lennar (Charts, Fortune 500) and No. 5 KB Home (Charts, Fortune 500) both reported losses in their quarters ending in November before returning to the black in the most recent period.

Private equity and the job cut myth

Steven — Thu, 03 May 2007 15:09:57 GMT

Private equity and the job cut myth

Private equity firms have a reputation for destroying jobs, but it isn't clear how they impact employment in the long term.

By Grace Wong, CNNMoney.com staff writer

May 2 2007: 3:55 PM EDT

NEW YORK (CNNMoney.com) -- Amid all the criticism of private equity, none perhaps has been as scathing as this: Buyout firms above all want to enrich themselves and their investors - and often cut thousands of jobs in the process.

The Service Employees International Union, which represents about 1.8 million workers in the U.S. and Canada, published a report last week that criticized the private equity industry for not doing more to measure the impact buyouts have on jobs and communities.

United Auto Workers union President Ron Gettelfinger has blasted the buyout firms circling Chrysler, criticizing them for "stripping and flipping" companies.

Private equity firms, which buy mature companies and typically load them up with debt, are notorious for slashing jobs. In order to make their debt payments, they have to increase revenue or cut costs, or both.

"Typically it's easier to decrease costs quickly by cutting heads, which is why buyouts have typically been accompanied by layoffs," said John Adler of the SEIU.

The SEIU report pointed to the buyout of Warner Music Group (Charts) as an example. When a group of private equity firms bought the company from Time Warner (Charts, Fortune 500) in 2004, it cut 1,000 workers, or about a fifth of its work force, the report said. (CNNMoney.com is a unit of Time Warner.)

But Scott Sperling, co-president of Thomas H. Lee Partners - one of the private equity firms involved in the deal - defended the buyout. Speaking at a conference last week, he said Warner Music was burdened with an "unsustainable business model" and had too many layers of decision makers.

Industry groups like the Private Equity Council argue that buyouts generate, rather than destroy, employment over the long term and point to reports like the one recently issued by consulting firm A.T. Kearney, which found that private equity created about 600,000 jobs in the United States between 2000 to 2003.

No good numbers

Private equity's impact on employment has become a hot-button issue as buyouts have boomed. Private equity firms have been on a buying spree, inking deals of unprecedented scale at quick-fire pace.

But private equity scholars say it's difficult to gauge the impact of buyouts on employment, largely because there's a lack of good numbers. Once companies are taken private, they aren't required to disclose details of their operations.

"It's very hard to get a good answer because it's virtually impossible to get data on firms once they've gone private," said Steven Kaplan, a professor at the University of Chicago's Graduate School of Business who studies private equity.

Some studies, like the one from A.T. Kearney, have to be weighed carefully because they use a broad definition of private equity that includes venture capital and doesn't focus solely on buyouts, experts say.

One study that does track the impact of buyouts on jobs was conducted by the Center for Management Buyout Research at the Nottingham University Business School in the United Kingdom.

That study, one of the few larger-scale studies that tracked 1,350 buyouts in the U.K., found that employment dips in the first year after a management buyout. But four years afterward, employment levels rise above to where they were the year before the buyout.

Similar data isn't available for the U.S., but the evidence from Europe suggests that while employment may fall initially after a buyout, it increases over time, said Douglas Cumming, a professor of finance at Rensselaer Polytechnic Institute and an author of the study.

But it's tricky to draw inferences from the research because it's difficult to know what employment levels would have been at the company if there were no buyout. "You just don't know whether the company would be doing better or worse if the buyout didn't occur," Cumming said.

Unions like the SEIU are pushing the private equity industry to provide more information on the deals they do. They want data to track how buyouts are affecting the lives of everyday workers.

But that isn't necessary, according to the University of Chicago's Kaplan, who said private equity's impact on jobs may be an emotional issue, but it's largely a moot point.

"Private equity is both a job creator and job destroyer," Kaplan said. "Part of what private equity does is make companies more efficient - which may mean cutting jobs. But you can create value by growing faster or doing things better, which can increase jobs."

Bank rates may have peaked

Steven — Sun, 29 Apr 2007 00:01:56 GMT

Interest rates on bank deposits seem to have peaked for the time being. With Reserve Bank of India (RBI) deciding to maintain status quo on key interest rates and keeping the inflation target at 4-4.5% in the medium-term, there is apparently no pressure on the banking industry to raise deposit rates further from current levels.

According to a cross-section of bankers, chances of deposit rates rising any further is lot less than them actually dropping from current levels. Bankers, therefore, feel this is the best time for small depositors to lock in their monies at the current available rates. Fortunately, there is no dearth of innovative deposit schemes to suit individual depositors. Some offer 9-9.5% rates for a one-year period, while monies can also be locked in for longer terms at slightly lower rates.

Senior citizens get another 0.25-0.5 percentage point higher rates over the card rates, making these deposits more lucrative compared to several postal savings deposit schemes. “For quite sometime, deposit rates have been moving in just one direction: northward. At the current level, deposit rates are attractive by any standard.

Going forward, if we see inflation easing from the current level, one may come to a conclusion that chances of deposit rates going down from current levels are higher than going up,” ICICI Bank’s head for liability products Maninder Singh Juneja told ET. Although inflation moved up again to 6.09% in the first week of April after hovering below the 6% mark in the two consecutive weeks prior to April, RBI expects inflation to ease to below 5% level in the medium term.

Toeing the RBI line, Centurion Bank of Punjab managing director & chief executive officer Shailendra Bhandari said on Wednesday: “Both inflation and credit growth are likely to be within the target during April-June quarter. Therefore, no altercation in deposit rates is expected till June.

The scenario may change post-September when the busy credit season kicks in.” United Bank of India’s chairman and managing director PK Gupta agreed. “For the moment , there is no pressure for banks to increase deposit rates further. Inflation is likely to be under control. We also expect a moderate credit growth this year. Therefore, we don’t feel a further rise in deposit rates is necessary at this point in time. At least till June 2007, there may not be any change in interest rates,” Mr Gupta said.

Incidentally, days ahead of the RBI policy announcement, UBI has announced a new deposit scheme whereby depositor get 9.5% interest (0.5 percentage point more for senior) if they park their monies for 500 days. This scheme will be available for up to May 31, 2005.