Public sector banks announce small cuts in home loan rates

Home loans are likely to become cheaper now as state-owned banks have cut rates. The Reserve Bank of India’s signal to cut rates over the course of this year has triggered the move. RBI cut the Cash Reserve Ratio (CRR) by 0.5 per cent (50 basis points) in its third quarter policy review on January 24, injecting Rs 32,000 crore into the system.

Bank of Maharashtra has cut the base rate by 0.11 per cent, waiving the processing fee on home loans up to Rs 25,00,00.

Central Bank of India has cut home loan rates by 0.15 per cent effective from February 20, 2012, waiving processing fee on home loans till March 30 2012. Currently, the bank’s home loan rates fall between 10.75 per cent for loans taken up to Rs 30, 00,000 and 11.75 per cent for loans over Rs 75, 00,000.

State Bank of India, however, is not looking at base rate cut immediately, which is currently at 10 per cent. Instead, it is looking to cut education loan rates.

Union Bank of India had cut the base rate by 10.65 per cent in December 2011, before the RBI cut the CRR by 0.5 per cent.

The Street expects another CRR cut given that the liquidity deficit goes above the RBI’s comfort zone. The central bank will announce its mid-quarter policy review on March 15, 2012. Bankers, however, feel that the deposit rates are unlikely to ease soon.

RBI raised rates 13 times since March 2010. This affected the overall growth in the economy and hurt the real estate sector the most. High interest rates resulted in home buyers delaying decisions. In the credit policy statement in January 2012, RBI signalled softening of interest rates by cutting CRR by 0.5 per cent.