Home loan rates have fallen to their lowest level in six years with several banks including the State Bank of India (SBI), the United Bank of India, Canara Bank, Indian Bank, IDBI, Indian Overseas Bank, Bank of India, the Syndicate Bank and also the Private sector banks such as ICICI Bank, Bandhan Bank Ltd, Dena Bank and Kotak Mahindra banks have also announced cut in its effective lending rates.
Importantly, these banks have cut rates following a prod from PM Modi in his recent address to the nation, signaling that benefits of demonetization in the form of bulk infusion of fresh liquidity are being shared with the poor and middle class. The reduction in lending rates by several public sector banks will make an affordable home loan scheme.
In case of the SBI, the country's largest lender has cut the effective rate to 8.6% from 9.10%. The SBI has cut its one-year marginal cost of lending rate (MCLR) — the benchmark to which home loans are linked — to 8%, against 8.9% earlier, it kept the spread above MCLR at 60 basis points, against 20 basis points earlier. So, home loans up to Rs 75 lakh, earlier available at 9.1%, can now be taken at 8.6%. For others, the rate would be 8.65%, against 9.15% earlier. The MCLR-linked home loans are either set every 6 months or after 1 year. Similarly, India’s largest private sector lender, ICICI Bank announced a reduction of 0.70% in marginal cost of MCLR benchmarks across tenures.
Referring to the rate cut, the SBI chairperson Arundhati Bhattacharya said, “This is a liquidity-driven rate cut. The liquidity in the system is unprecedented, in terms of the fact that what we did in the first nine months of the year, we have done one-and-half times that in 30 days”.
The analysts have hailed the move, saying that the EMI cheque will now be smaller than the rent cheque. This is also seen as a tremendously positive announcement coming on the back of many directed steps to realize the 'Housing for All' objective.