ICICI Bank, HDFC cut home loan rates; others set to follow

Taking a cue from State Bank of India, ICICI Bank on Thursday reduced interest rates for home loan borrowers. The offer is valid from November 1 to November 30.

Taking a cue from State Bank of India, ICICI Bank and HDFC on Thursday reduced interest rates for home loan borrowers.

At both ICICI and HDFC, women borrowers will get home loan at 9.15%, a 0.15% reduction from the earlier rate; for everyone else, the interest rate will be 9.20% for loans of up to ₹75 lakh.

For loans above ₹ 75 lakh, the rates are 9.25% for women and 9.30% for others.

In case of ICICI Bank, the offer is valid from November 1 to November 30, while for HDFC, it is effective November 4 onwards.

After the RBI policy on October 4, where the central bank reduced its key lending rate by 0.25 percentage points to 6.25%, ICICI Bank had reduced its minimum lending rate by 0.10% to 8.95% for a one-year period. On Wednesday, the bank also announced the launch of a credit facility, ICICI Bank Home Overdraft, against home loans for salaried customers. It helps them seek loans up to ₹1 crore for personal needs against a property.

Other banks are also likely to announce rate cuts soon to lure customers, a private sector bank official told HT on the condition of anonymity.

There is scope for more reduction of interest rates by 0.10% to 0.15%, said Keki Mistry, vicechairman and CEO of HDFC, India’s largest mortgage player.

Dipak Gupta, joint managing director, Kotak Mahindra Bank said: “We recently revised (October 6) our base rate downward by 10 basis points (0.10%) to 9.40% per annum, where both new as well as existing customers have benefited. Interest rates have softened. The bias is southward, given that CPI (retail) inflation is likely to average little over 5% in the fourth quarter of 2016-17 and WPI inflation for September has slowed marginally. Banks have started reducing interest rates and transmission, too, is happening gradually.”

Retail inflation fell to a 13-month low of 4.31% in September, on the back of moderating food prices, giving room for the RBI to cut interest rates further.

On Wednesday, SBI cut its home loan rates by 0.15% to 9.15% — a six-year low — to cash in on the festival season demand. For woman borrowers, the rate has been reduced to 9.10% from 9.25%. This means that on a home loan of ₹50 lakh for 30 years, a consumer can save ₹542 per month on EMIs. The offer is valid from November 1 to December 31. Existing borrowers can switch to the new rates after paying a fee.

“We do see up to 15-20 basis points (0.15% to 0.20%) room left for banks to further cut interest rates,” said Karthik Srinivasan, senior vice-president, financial sector ratings, ICRA.

Amid low demand for loans from companies, banks are focussing on retail loans, especially home loans. According to the RBI, banks disbursed ₹7,86,900 crore worth of housing loans as of August 30, 2016, against ₹6,74,500 crore in the same period last year, a 16.7% increase.