Loan rate cuts add to festivities

SBI offering 25-50 bps discount on loans, PNB cuts rates by 25 bps.

After a series of rate hikes, here is some good news for home and car loan seekers. Banks have started cutting interest rates on retail loans ahead of the festive season.

State Bank of India (SBI) and Punjab National Bank (PNB) today announced 25-50 basis point discounts on their home and car loans for the next few weeks. Other banks are set to follow suit. One basis point is one hundredth of a percentage point.

This will offer temporary relief to home loan seekers who have seen the interest rate climbing to double-digits after four years. ICICI Bank had, last month, offered home loans at 8 per cent for three years, against the prevailing 9.5 per cent. The offer was, however, restricted to Mumbai. The bank made this offer for certain properties after tying up with builders.

SBI plans to offer a 25-50 basis point interest rate discount on all retail loans, while PNB has cut its retail loan rates by 25 basis points till the end of October. These offers will attract those customers who had postponed purchases of flats and vehicles.

ICICI Bank had raised home loan rates by a full 1 percentage point in May and then in June. Public sector banks, too, had raised their lending rates across the board by 50-75 basis points in two phases during May-June.

An SBI executive told Business Standard: "For the festive season, we will offer concessions on all types of retail loans up to a maximum of 50 basis points. This offer will be available till the end of October." SBI normally targets the salaried class.

These lower interest rate offers are flowing in after several hikes in lending rates by banks, beginning January 2006. The increase had begun pinching existing borrowers, particularly those who had taken home loans.

PNB said customers wishing to avail of housing loans during the festival season had reason to cheer, with concessions on interest rates on its retail credit schemes.

The interest on its floating rate home loan will be 25 basis points lower at 8.50, 8.75 and 9 per cent for repayment tenure of up to 5 years, up to 10 years and up to 20 years, respectively.

The bank is also providing discounts on processing fees and waiver of documentation charges to all customers who avail of retail loans from tomorrow.