Mumbai, Dec 15: Stung by a sagging demand for housing, public sector banks on Monday slashed home loan rates for a limited period -- up to June 30, 2009 -- and capped interest
rates at 8.5 percent for loans up to Rs 5 lakh to encourage low-income housing.
For middle-income loans of Rs 5-20 lakh, the interest rate has been capped at 9.25 percent, State Bank's Chairman, O P Bhatt, told reporters after a meeting of the Indian Banks'
Association here.
"The banks will also not charge any processing fee or pre-payment charges for loans up to Rs 20 lakh," Bhatt said, adding that free insurance cover would also be provided on loans under the above categories.
Outlining the new housing loan package in accordance with the stimulus package announced by the Government on
December 7, Bhatt said, "There will be a freeze on any hike on these interest rates for a five-year period, but there will be no bar on the rates coming down further."
He said after the lock-in period of five years, the borrowers could look in for free or floating rates that could change in accordance with market conditions.
To make the package attractive, public sector banks would give the loans at a margin of 10 percent up to Rs 5 lakh and 15 percent for loans between Rs 5 lakh and Rs 20 lakh, and in either case, banks would offer free insurance cover, Bhatt said.
The above action would, however, be restricted only to new home loans and there would be no relief for existing
borrowers, he said.
More than 80 percent of home loan applications emanate from below the Rs 20-lakh segment for public sector banks, which are aiming to disburse around Rs 15,000-20,000 crore worth new home loans up to June 30, 2009, following the package announcement today.
The new package is not expected to impact the public sector banks much. "This (the package) may impact us (public sector banks) by only 2-3 basis points," Bhatt said.
State-owned banks have also offered a helping hand to micro and small industries by lowering their lending rates for loans up to Rs 10 crore.
Loans for micro industries will stand reduced by 1 percent with immediate effect, while rates on loans for small and medium enterprises will be reduced by 0.5 percent, bankers said.
To improve credit flow to the micro and small and medium enterprises segment, PSBs have also decided to grant need-based ad hoc working capital loans up to 20 percent of
the existing fund-based limits in respect of units having an
overall fund-based credit facility up to Rs 10 crore.
These loans can be repaid in one year with a provision of a moratorium of six months, during which only interest
would have to be serviced, bankers said.
Besides, in order to support export-oriented sectors, "banks will be pro-active and forthcoming in sanctioning
adequate increases in working capital limits and will relax the cash margins on letters of credit/guarantee based on
needs", they said, adding that "receivables up to six months
will be reckoned for book debt financing".
The moratorium period in respect of micro and SME loans
where project implementation has been delayed because of the
current economic downturn could be extended on a case-to-case
basis.
Banks will also help those units unable to repay their
loan obligations on time by "rescheduling or re-phasing" their
loans within the overall loans policy of the respective banks.
State-owned banks' total outstanding to micro and SME
companies as on March 31, stood at Rs 1,48,000 crore, out of
which Rs 66,000 crore worth loans were disbursed to micro
firms, bankers said, adding, the package announced today was
expected to benefit nearly 40-lakh micro and SMEs in the
country.
The lowered interest rates will benefit all existing
and new MSME loan borrowers.
Bureau Report