IBA announces cut in home loan rates

New Delhi, Dec 15: On Monday, Dec 15 the Indian Banking Association (IBA) announced a cut in the home loan rates, which will be valid upto June 30, 2009. Public Sector Banks (PSU) announced that home loans up to 5 lakh would be given at a maximum interest rate of 8.5 pc, while those between Rs 5-20 lakh would be offered at 9.25 pc.

Otherthan this the banks will not charge any processing fees and pre-payment charges for loans upto Rs 20 lakh and would also provide insurance cover said IBA. These measures came in par with the stimulus package announced by the government on Dec 7. State Bank of India (SBI) chairman O P Bhatt said, "the interest rate under the two schemes could come down, but would not go up beyond the threshold limit of 8.5 and 9.25 per cent for a five year period."

He added that 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, the public sector banks would give the loans at a margin of 10 pc up to Rs 5 lakhs and 15 pc for loans between Rs 5 lakh and Rs 20 lakhs, and in either case, banks would offer free insurance cover," Bhatt said.

ICICI and HDFC, the leading private banks in India have also decided to cut their rates. But sources say that these two will study the PSU banks' package before taking a call. Decision will be taken only after ascertaining whether PSU banks are getting any government subsidy for implementing the package. The banks have also decided to cut the lending rates for the micro and medium enterprises by 100 basis points.

OneIndia News (With inputs from Agencies)