Banks to cut home loan rates after stimulus packages

[sajiv]

New Delhi: There is more good news for consumers after price cuts announced by car makers. Now banks have indicated that they are going to cut interest rates on home loans.

Reports say UCO Bank is planning to reduce interest rate by 3 percent  for loans below Rs. 5 lakh and by 2 percent for loans up Rs. 20 lakh.
Other Public Sector Unit (PSU) banks are expected to follow suit and cut rates for home loans up to Rs. 20 lakh and bring it down to between 8 percent and 10 percent.

Sources have told CNN-IBN that some PSU banks may cut rates to 7 percent on home loans up to Rs. 5 lakh. Interest rates may be cut to 8.5 percent on loans up to  Rs. 20 lakh.

Banks say nearly 80 percent home loans are below Rs. 20 lakh. The rate cut was part of the fiscal stimulus announced recently by the Union government. The Reserve Bank of India (RBI) is likely to lower risk weightages for small-ticket home loans to give a boost to the housing sector, which means banks, will need to set aside less capital to protect against defaults.

The decision by the RBI was taken in a meeting of bankers at the Finance Ministry on December 11.

The RBI slashed repo and reverse repo by 1 percent and the government an-nounced the Rs. 20,000 crore stimulus packages for the housing sector last week.

However, banks have till now resisted from cutting their consumers loan rates and the government may now issue a diktat to enforce it.
Meanwhile, commerce Mini-ster has said that next part of the fiscal stimulus would be announced sometime next week.

The RBI has also warned of a tough financial year ahead.