Barely two months after it raised the home loan rate for new customers by 1.5 percentage points, ICICI Bank on Thursday reduced its home loan rate from 13 per cent to 11.5 per cent for all home loans of less than Rs 20 lakh.
“Priority sector lending (PSL) has always been one of our key focus areas and we have a differential offering for our PSL customers,” an ICICI Bank spokesperson said. “This is our special pricing to promote the priority segment and offer affordable housing.”
There has been no change in the bank’s prime lending rate — PLR or the rate at which the bank lends to top companies — and hence the benefits of the low interest rate will not flow to existing customers.
A cut of 1.5-percentage points in the interest rate on a 20 year, Rs 20 lakh loan will reduce the equated monthly instalment (EMI) by Rs 2,102. This is one of the biggest cuts imposed by the ICICI bank at one go.
It is also the first cut by the bank after the Reserve bank of India (RBI) cut the repo rate (the rate at which commercial banks take short-term loans from the RBI) and the cash reserve ratio (CRR or the share of deposits banks must keep with the RBI). Since October, RBI has reduced the CRR from 9 per cent to 5.5 per cent and the repo rate from 9 per cent to 7.5 per cent.
At a time when the demand of property is on a downside, a cut in the home loan rates should help revive the demand for property. Several state owned banks have already announced a cut in their PLR.