The normal rule is that banks and housing finance companies easily provide NRI home loans up-to 85% of the cost of the residential property. However, the upper limit of the loan amount sanctioned and the down payment will depend on various factors and can also vary from lender to lender.

For example if you take a NRI housing loan for purchase, construction, extension or renovation of a new house or flat from ICICI Bank, it will happily finance 85% of the total cost of the property. However, if you take a NRI home loan for purchase of a plot of land for residential use, the maximum amount of home loan financed will be 75% of the total cost of the property.

Again there are special schemes offered by banks, which break all the rules, like the one from Citibank, which provides a NRI home loan up to 89% of the property value if the loan value is less than or equal to Rs. 50 lakhs.

Here is a roundup of the maximum and minimum loan amounts offered by various banks for their NRI home loans:

Minimum loan amount
SBI offers a NRI Home Loan for a minimum of Rs. 3 lakhs ICICI Bank gives a NRI home loan for a minimum of Rs 5 lakh. ICICI bank offers a minimum of Rs. 10 Lakh for loan against property Citibank offers a NRI home loan for a minimum of Rs. 2.1 lakhs

Maximum loan amount
SBI offers a NRI housing loan for a maximum of 60 times NMI ( Net Monthly Income) or 5 times NAI (Net Annual Income) for applicants below 45 years of age and 48 times NMI or 4 times NAI for applicants above 45 years of age SBI special maximum loan amount terms:
Maximum loan amount for repairs and renovation: Rs.10 lacs Maximum loan amount for purchase of plot for construction of house : Rs.20 lacs Aggregate repayment obligations should not exceed 50% of NMI or NAI
ICICI Bank gives a NRI home loan for a maximum amount of Rs. 1 crore. Citibank provides a NRI home loan for a maximum of Rs. 5 crore. This amount is available for a loan of 15 years tenure. The maximum amount for 20 year NRI home loan from Citibank is Rs. 1 crore.

As per a circular issued by the RBI on 31st January, 2007, if the loan is against the NRI’s NRE and FCNR accounts, the maximum loan amount cannot exceed Rs. 20 lakhs.

Constant news that these accounts are used for illegal money dealings scares us away. Hollywood has done its fair share of publicity portraying offshore banking in a negative way.

Actually offshore bank accounts are legal and more than half the world’s wealth is owned through them. However if an individual or a corporation uses this facility for illegal purposes then it becomes illegal. Just like on shore accounts!

Banks that are located in another foreign country are known as offshore banks and offshore banking is done by these banks. You cannot have an offshore bank in your own country but a bank of your country can be termed as an offshore bank for others who are not residents of your country.

For offshore bank accounts Switzerland happens to be one of the oldest and most preferred countries with its legendary bank privacy laws. There are many advantages associated with offshore banking that attracts people.

- It offers privacy and stability and helps increase savings.
- Individuals who have offshore bank accounts do not access it often; rather they spend money from their accounts in a local bank.
- Offshore deposits are kept for future or emergency uses and as such these accumulate considerably over a period of time.
- One more advantage of offshore banking is that anyone irrespective of wealth can open an account. There may be certain regulations regarding the amount of money required to open an offshore account but contrary to belief it is not a massive sum. Along with the wealthy clients even a small business owner or a middle class individual can have offshore bank accounts.

Offshore banking also provides other advantages such as offshore credit cards processing services. Businessmen can accept and process payments and multiple currencies through this offshore credit card and thereby reach out to a worldwide clientele.

Offshore banking with its offshore credit card facility results in sales increase for clients and this process features zero taxation. The reason for this is that in an offshore destination normal tax rules do not apply and thus gives an extra benefit to clients. With speedy processing and a constant support system offshore credit cards makes your business work 24/7 and gives it an edge while striving to make business transactions easier.

Similarly offshore debit card transactions are also faster, authorization is quick and clients receive confirmations at the same time. The processing charges are also less and feature various online security and fraud screening. Often clients do not have to pay any gateway fee for processing.

Considering these various advantages offshore debit card processing has become all the more popular throughout the world. Increasingly, with new businesses looking for competitive innovation and focusing on maximizing customer attention, offshore banking has become an important business tool to further business interests and profits.

Businessmen are opting for offshore banking to develop their existing business and no doubt the credit/debit card facilities of offshore banks offer high security to them, and not just for savings!

The US markets closed lower on Friday on getting disappointing jobs data, a closely watched monthly employment survey from the Labor Department confirmed the investors apprehension that the US economic recovery is weakening.Private job growth was just 71,000 in July, below what analysts had expected while the unemployment rate remained steady at 9.5 percent. The monthly jobs report from the Labor Department is a key indicator on the health of the economy and is closely watched by investors and economists so it turned the sentiment of the investors cautious and the stocks sank for most of the day but pared their losses in late afternoon trading.

Equities pared losses as the Federal Housing Administration said it will begin to accept applications for a program to help struggling mortgage borrowers. Though, the dollar slumped to an eight-month low against the yen and decreased against 13 of 16 major peers.

The Dow Jones industrial average was down by 21.42 points, or 0.20%, at 10,653.56. The Standard & Poor’s 500 index fell by 4.17 points, or 0.37%, to 1,121.64, while the Nasdaq composite index closed lower by 4.59 points, or 0.20%, to 2,288.47.

The Indian ADRs closed mostly in red on Friday, Infosys was down by 0.55%, HDFC Bank was down by 0.46%, ICICI Bank was down by 0.27% and MTNL down by 1.67%.

On the other hand Tata Motors was up by 4.19% and Wipro was up by 1.46%.

Public sector lender Bank of Baroda today hiked its benchmark prime lending rate (PLR) by 50 basis points to 12.50 per cent.

The hike takes the bank’s PLR from the existing 12 per cent to 12.50 per cent, the bank informed the Bombay Stock Exchange (BSE).

The hike is with effect from today, the bank said.

Earlier in the week, another lender, IDBI Bank, had hiked its PLR by 0.50 per cent to 13.25 per cent.

A clutch of banks have also upped their deposit rates in recent days while the country’s largest lender State Bank of India’s Chairman O P Bhatt has said that there is an upward bias in deposit rates.

Kotak Mahindra Bank, ICICI Bank, Union Bank of India and Punjab National Bank are amongst the banks that have raised their deposit rates.

The increase in PLR and deposit rates was widely expected after the Reserve Bank of India increased its key short-term rates–repo and reverse repo–on July 27 with a view to combat the prevailing high inflation.

The repo rate was hiked by 0.25 per cent to 5.75 per cent while the reverse repo rate has been upped by 0.50 per cent to 4.5 per cent, sparking-off the present round of hikes by banks.

HDFC Bank, Lakshmi Vilas Bank and Central Bank set off a round of deposit rate hikes to attract funds to meet accelerating investment and consumption, but lending rates may stay where they are, at least for now, as banks’ high profitability provides a cushion.

Rates are being raised between 25 basis points and 75 basis points across maturities. A basis point is 0.01 percentage point.

The increases come a day after the Reserve Bank of India raised key policy rates and sent signals that it is on course to keep it going until it manages to temper the demand pull price increase, which forced it to raise inflation forecast for the year to 6% from 5.5%.

“Considering that liquidity in the system has moved into a negative terrain and that there is a strong potential for loan growth, we think it is the appropriate time to raise deposit rates,” said Paresh Sukthankar, executive director at HDFC Bank. “The transmission to base rate will take a few weeks.”

Base rate is the minimum at which a bank can lend. The second-largest private bank said it will pay 25 basis points more for two-year deposits at 7.5%, and 7% for one year. These are effective July 30. The sharpest increase of 75 basis points, to 5.25%, is for six months, where temporary factors may keep the market tight.

Lenders are raising deposit rates as loan growth is higher than deposit rates, absorbing the excess funds that banks had. To keep the business going smooth, they need to constantly attract funds, which are finding their way into higher-yielding investments such as real estate and stocks. But lending rates are not rising since banks benefited from cheap funds after the credit crisis, instead of passing it on to customers.

Borrowing costs for home owners and aspiring car buyers may not rise as fast since banks can refrain from doing for fear of reduced demand. Their profitability would not be crimped substantially, since they did not pass on all the cheap funds they got from RBI after Lehman Brothers collapsed.

The central bank cut the repo rate, the rate at which it lends to banks, by 425 basis points, to 4.75% from 9%, between October 2008 and February this year. The banks’ response was not proportionate, especially in lending.

During the period, banks cut 1-3 year deposit rates by 400 basis points to a low of 6%. But the benchmark lending rates hardly moved by 100 basis points between 14.25% and 13.25%. This action by banks boosted their profitability, leaving the customer poorer.

Net interest margins of banks got a boost. Axis Bank’s is at 3.7%, Punjab National Bank’s 3.9% and HDFC Bank’s 4.2%.
These high margins leave scope for slower gains in lending rates even if the central bank keeps raising rates. “The base rate will go up only when the average cost of deposits goes up and thus there will be some lag effect for revising lending rates,” said JM Garg, chairman and managing director at Corporation Bank.
This is not the first time that banks have raised deposit rates, leaving lending rates untouched. They increased deposit rates by 75-100 basis points between March and July this year while benchmark lending rates remained static for a year now.

But the scene of excess liquidity may be changing fast, although no squeeze is foreseen. Although the situation of banks parking funds with the central bank has changed to them borrowing from RBI, it may not accelerate. On Tuesday, the surplus liquidity was Rs 2,225 crore, the difference between the money parked by banks with RBI.

Governor D Subbarao on Tuesday said it was the intent of the central bank to keep liquidity in a deficit mode, which will ensure that the repo rate would be the effective rate, triggering fears of a rise in the cash reserve requirement.

Non-food credit accelerated to 22.3% as on July 2, from 17.1% in March, above the target of 20% for the year, partly due to high borrowings by telecom companies to pay for spectrum.

Bank of Thailand revised up its growth forecast for this year in view of the robust expansion of the economy during the first half of this year.

The central bank expects the economy to grow between 6.5% and 7.5% this year, a sharp revision to April’s forecast of between 4.3% and 5.8%. The economy is expected to retain the growth momentum during next year on the back of sound domestic economic fundamentals, bright prospects of a continued global recovery and improvements in consumer and investor sentiments.

Releasing the central bank’s latest inflation report, deputy governor Paiboon Kittisrikangwan said growth is seen in the range of 3%-5% for next year, unchanged from the projection in April. Going forward, the Thai economy would be driven by private domestic demand and the export sector, the official said.

However, the bank expects the growth momentum to moderate in the second half of this year compared to the first half due to persisting internal political tensions and softened global growth due to sovereign debt concerns. In the first quarter, the Thai economy grew 12% annually, its fastest pace in 15 years, led by strong exports.

Thailand’s economy is likely to grow more than initially expected, the International Monetary Fund said last week. The Washington-based lender said it foresees Thailand’s real gross domestic product rising 7%-8% in 2010, up from its previous projection of 7%. Thereafter, the Thai growth may come down to 4% next year, the IMF said. That was a downward revision from 4.5% growth projected in July.

The central bank revised down its inflation forecasts, citing subsiding oil and commodity prices, readiness of businesses to maintain prices at the prevailing levels until the end of the third quarter and the government’s extension of some cost-of-living reduction measures to the end of the year. The bank now sees inflation within the range of 2.5%-3.8% this year, down from the previous forecast of 3.3%-4.8%.

Meanwhile, the bank slightly revised up the inflation forecast for next year, citing increasing demand pressures and narrowing output gap. In 2011, inflation would be between 2.5%-4.5%, it said, compared to 2.3%-4.3% previously forecast.

The bank’s monetary policy committee assessed that uncertainties surrounding the growth projection were lower than that in the previous April report, with downside and upside risks becoming more balanced, the report said. This was mainly due to diminished domestic downside risks, as political tensions have abated to some degree. On the other hand, the global growth prospect will remain a major risk factor on the external front, the bank noted.

You might already think that you know all you need to about private offshore banking, but if you’ve got a fair bit of capital to manage and could do with re-structuring your finances, then it is probably right up your alley.

Private Offshore Banking is designed to offer a personalised, tailor-made service which will optimise your existing assets, preserve your wealth and generally make your financial life a lot easier.

Offshore private banks cater for a wide variety of clients; from expatriates and international executives, to those looking to establish an effective way to transfer wealth to their heirs. It’s ideal for people looking to diversify their funds internationally while guarding against unnecessary taxes and minimising financial uncertainty, alongside those who need the flexibility and freedom of efficiently dealing in more than one currency.

The background

Historically, private Banking has tended to be seen as quite elitist, with certain institutions imposing stringent criteria when it comes to choosing their clientele. To some extent this is true and certain banks ask for a minimum deposit of around 500,000 – 1 million, but in recent years most banks have begun to offer similar services to customers with just a tenth of this kind of cash in their back pocket.

Private banks pride themselves on offering a diverse range of services to their clients including wealth management, savings, estate planning, trusts, and all kinds of tax planning. Private Offshore Banking means that you will benefit from all of these, alongside the assurance that your account will be based in a tax haven.

Similarly, if you wish to move a certain amount of money onshore, your personal relationship manager (RM) is already aware of your individual circumstances and can suggest the best way to mitigate against any unnecessary Capital Gains Tax (CGT).

One thing is for certain; private Banking means that there is no mis-selling and no fobbing you off with products that you don’t really need. RMs are there to help you structure your finances appropriately, and not simply earn commission based on the specific products you invest in. You also benefit from the close-knit support network surrounding each RM; if you are looking to invest in a fund, they will first consult an investment specialist to advise on the most appropriate decision for you.
Decisions, decisions…

If you’re set on the idea of channelling your fortune into an offshore private bank account, then the next question is which one to choose.
Looking for the ideal bank might seem like looking for a needle in a haystack, but if you are serious about your investments and have a large chunk of money to deposit, it’s worth familiarising yourself with the winners of Euromoney’s annual global private Banking awards.

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