Banks may have to increase the rate of interest for housing loans if more capital was required for the purpose, K M Shet, chairman and managing director of Syndicate Bank said on Thursday.
Speaking to reporters after inaugurating an e-banking facility at the bank's main branch in Madurai, he said the Syndicate Bank had allocated Rs 3,000 crore (Rs 30 billion) for housing loans. Now it seemed as if they would require an additional Rs 110 crore (Rs1.10 billion).
"How do we mobilise this capital? We need to attract investors by paying a better interest rate."
However, there was no proposal to increase the rate of interest for housing loans in the current quarter or next quarter, he said.
Asked whether the government was forcing banks to merge or whether bankers had made a suggestion, he said many banks felt that merger was the only way to face competition from foreign banks, who would enter the country in a big way after the opening of the sector under the World Trade Organisation agreement.
Citibank, he said, had already been given licenses to open 50 branches. Indian banks needed to grow further and attract the high-end customers, possible only through mergers.
The bank planned to open 220 more branches and 210 extension centres before 2006. Besides, it had applied for
licences to open representative offices in South Africa and Dubai and a branch at Singapore, he said.
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