When the finance minister says something, you listen. Especially if you are a PSU bank – and even if you are the biggest. The PM/ FM combine know that elections are coming, so they should look good. How can you look good? By reducing the prices of petrol, and makaan. However as the government does not make enough cement, land and steel it can only reduce the cost of ‘money’ required to buy a house.

So it arm twists SBI to announce 8% home loan lending rate. To me this was ridiculous because a builder friend was trying to raise money at 14% and was not able to. The bluest of blue in the Indian corporate sector – The TATAs are raising money at 12% payable MONTHLY from the retail sector. (those of you who are looking for debt instruments for 3 years should look at TATA CAPITAL BONDS – there is no TDS, and the difference will be treated as capital gains, so it is tax efficient too).

The market keeps giving you signals and noise. If sbi at 8% is signal, Tata capital is noise – I would like to believe Sbi is noise and T C is signal for the medium term. 3 banks told me that lending at 12-14% with a huge collateral in the form of promoter shares, land, semi constructed buildings, etc. is a breeze at least for the next 4-8 months.

I do not think interest are too much in a hurry to go down, IMMEdiately, but they surely are not going up. The YTM on the 10 year paper is at an attractive rate for the GOI to borrow. However, if it comes to the market even with a Rs. 10,000 crore borrowing, the yields may go up.

I leave it for you to decide whether SBI is noise and Tata Capital is signal, or the reverse!

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