With competition in the home loan space getting intense, banks are looking to spruce up their products by either cutting rates or allowing customers to borrow larger amounts at the same rate, reports Shashidhar Jayakumar in Mumbai. M Narendra, CMD, Indian Overseas Bank, told FE his bank was toying with the idea of giving home loans at 10.25% for a value of up to Rs 75 lakh, way more than the current R30 lakh that it allows.
Meanwhile, the assets and liabilities committees (ALCO) of Bank of Baroda, Central Bank of India and Federal Bank are expected to meet soon to take a call on home loan rates.
“We are evaluating what’s happening in the market and have taken note of the moves made by other banks. We will take a decision on whether to cut rates on home loans,” said Ranjan Dhawan, executive director at Bank of Baroda, which gives home loans at 10.25% across all amounts and tenures.
State Bank of India (SBI), ICICI Bank, Kotak Mahindra Bank (KMB) and mortgage lender HDFC recently reduced rates on home loans by 15-25 basis points.
Union Bank of India, however, ruled out a rate cut on home loans. “We are already providing home loans at our base rate of 10.25% for up to Rs 75 lakh and 10.5% for loans above Rs 75 lakh. So it does not make sense for us to cut rates,” said SK Jain, ED.
According to market estimates, SBI, HDFC and ICICI Bank constitute 48% of the Rs 6-lakh-crore home loan market. At the end of the September quarter SBI had 25.72% market share in home loans with Rs 1.3 lakh crore, while ICICI Bank had Rs 59,566.5 crore and HDFC had Rs 1.29 lakh crore.
SBI was first to cut interest rates on home loans to 10.15% for loans up to Rs 75 lakh. For loans above Rs 75 lakh, the interest will be 10.25%. Women borrowers get an additional discount of 5 basis points. Similarly, ICICI Bank housing loans cut rates to 10.25% from 10.40% earlier for up to Rs 75 lakh. For loans above Rs 75 lakh, the private lender will now offer 10.50% against 10.65% earlier.
HDFC has cut rates by 25 bps in the Rs 30-75 lakh bracket to 10.25%. KMB cut interest rates by 25 bps to 10.25% for the loan bracket of up to Rs 75 lakh and by 15 bps to 10.75% for loans above 75 lakh. Data from the Reserve Bank of India showed that home loans in the April-October period grew by 8.66%, almost double the growth rate of 4.87% from the same period last year.
With the cost of funds having come down, and the demand for corporate loans still tepid, banks are looking to grow their home loan portfolios.