SPARKLE FOR BORROWERS

Banks ready to cut home loan rates by Diwali

 IN WHAT may come as a Diwali bonanza for creditworthy borrowers, many commercial banks are planning to cut home loan rates by about 50 basis points after RBI cut the repo rate on Monday. The country's largest lender, the State Bank of India (SBI), is likely to reduce retail home loan rates before Diwali while Punjab National Bank (PNB) and Union Bank of India (UBI) have already slashed rates by up to 50 basis points. But the rate cut of 50 basis points may not be applicable to all types of loans.
    Although private home loan providers like HDFC and ICICI are planning to wait and watch as of now, a rate cut by market leader SBI often has a ripple effect on many banks. UBI has cut rates by 50 basis points for loans up to Rs 30 lakh. The rate cut for loans above Rs 30 lakh, however, will be only 25 basis points. Also, there is the possibility that for loans amounting to Rs 75 lakh and above, the rate cut may be even lower. Sources say some banks may even decide against cutting rates for loans above Rs 75 lakh.
    Many banks, including SBI, have put a new ceiling of home loans above Rs 75 lakh; they prescribe a different rate structure for these loans. The government, however, recognises only two types of home loans — those below and above Rs 30 lakh. The former comes under priority sector lending. Also, rate cuts would not be applicable to commercial borrowers like real estate companies.
    "Our bank is contemplating a rate cut following the recent measures taken by the Reserve Bank. Though the decision to reduce rates may come at any point in time, it's expected that the bank would take a decision after seeing RBI's half-yearly monitory policy on October 24," an SBI official said. Govt's credit balm
    BANKS are also following some tough norms. He said the bank is following stringent norms for deciding an individual's creditworthiness while allocating loans so that the bank does not fall into a subprime-like trap.
    Finance ministry sources said the government is in constant touch with commercial banks to ensure easy liquidity for priority sector loans. "The government and the central bank have taken a series of measures to infuse liquidity into the system and there is no reason that the banks should be wary of providing credit to genuine borrowers even after that," an official said.
    niranjan.bharati@timesgroup.com