Smantha Sen

THE boards of most public sector banks, which are scheduled to meet in the coming weeks to consider results for 2006-07, may now include on the agenda the review of home loan rate hikes.
This follows the finance minister’s request to PSU banks not to raise home loan rates for those customers who have taken loans less than Rs 10 lakh.


State Bank of India, Bank of Baroda and Canara Bank are some of them which have raised home loan rates for all customers even the existing borrowers when they revised their prime lending rates in the wake of policy tightening by RBI.

However, other banks such as Allahabad Bank and Union Bank of India had refrained from raising rates for the existing home loan borrowers even while raising rates for new borrowers. Some banks such as Indian Bank did not raise rates at all, awaiting further policy directions.

In the last three months, banks have raised their prime lending rates two-three times. And each time, the rate hike was in the region of 50-100 basis points. Now, ICICI Bank is charging 14% for fixed rate loans, while its floating rate is pegged at 12%.

By restricting rate hikes to borrowers above Rs 10 lakh, the public sector banks will be altering the terms of their contract with the borrowers. In terms of the home loan contract, floating rate loans were to be revised, following every revision in the benchmark rate.

Source: economictimes