Home loan rates have plunged to the lowest levels in six years. The State Bank of India (SBI), the country’s largest lender has slashed the rate to 8.6% from 9.10%.
At the same time, it has also reduced its marginal cost of lending rate (MCLR) to 8% from the earlier 8.9%. In doing so, it ensured the MCLR stays at 60 basis points. Earlier, it used to be 20 points.
Now, home loans up to Rs 75 lakh can be taken at 8.6% as opposed to 9.1% earlier. For loans above that value, the rate would be 8.65% against the earlier 9.15%.
Other banks such as the Union Bank of India and the Punjab National Bank have also cut rates. Private bank ICICI has also lowered rates by 0.15 per cent. Following this, home loans up to Rs 75 lakh will attract an interest of 9.15 percent from the earlier rate of 9.30 percent. This, however, specifically applies to women borrowers. The rate for salaried individuals stands at 9.2%.
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The cut in lending rates by many PSU banks will make loans under the affordable home loan scheme, announced by PM Modi on Sunday, available at a little over 4% for loans of up to Rs 9 lakh.
With the reduction in MCLR, new borrowers can avail the loans at cheaper rates. This is so because the home loans are linked to MCLR, which locks rates for 12 months. Older loans can avail the benefit only after the end of their one-year lock-in. This means that all those who had taken home loan before 26 April, will have to enter into a new contract with the bank. They would have to pay a small fee for the process post which their loan would get linked to MCLR.
In addition, SBI has also re-introduced a teaser rate loan, which was discontinued five years ago after RBI raised objections. In this loan rate, for the first two years, loans will be available at a rate of 8.5%. This would be followed by a floating rate in the following years.
Not just SBI, lower interest rates will be offered by other banks which include State Bank of Travancore, IDBI Bank and Indian Overseas Bank. Senior SBI officials told The Times of India that “home loans would give an option to the bank to park funds in government bonds where return is less than 7%.”
Banks are also hopeful of countering the slowdown imposed by demonetisation through these affordable home loans. Economic growth in the first quarter of the financial year 2017-18 is likely to benefit from this. The impact is also expected to be felt in bank lending.
"Today, 45% of bank loans are going to only 300 companies. The extreme concentration of bank credit on the top end of the corporate sector has begun to border on the ridiculous," said Rajiv Lall, MD & CEO, IDFC Bank, reported The Times of India.
He also seemed optimistic about the announcements made by the Prime Minister. He said that the schemes would encourage loans to small businesses, the framework for which has been created by opening bank accounts and payment systems.
Lall seemed appreciative of the government’s initiative to encourage small lending. Because, in the past, only priority sector lending was dominant, he stated.
"From our perspective, this is an extremely positive step and will help us further in penetrating into the segments we serve. With these announcements, the challenges that we faced following demonetisation would clearly be history," said Kapil Wadhawan, chairman and MD, Dewan Housing Finance Corporation, reported The Times of India.
Gagan Banga, vice chairman and MD, Indiabullls Housing Finance, added, “This is a tremendously positive announcement coming on the back of many directed steps to realise the 'Housing for All' objective”..
(Source: The Times of India)
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