You must have heard of cashback schemes. However, cashback on EMIs? Yes, amidst excess liquidity, ICICI Bank today unveiled a mortgage product assuring borrowers a 1% cashback on their monthly installment payment. The product can help a borrower get up to 11% of the principal amount in a 30-year loan period.
The bank has launched two more schemes — a 20% cash back for spends by its debit and credit card customers up to a maximum of Rs 10,000, and a 20% step-up repayment — which can be availed of along side, executive director Anup Bagchi said. The offer, however, is only for new home loan borrowers, PTI reported today.
The cashback product comes weeks after Axis Bank launched an offering promising to waive EMIs if the borrower does not default on EMIs. With both these offers, the focus is on ensuring that the borrower pays regularly through the loan contract period and there is no pre-payment.
“For the longer tenure loans, it makes sense for the customer to stay in the mortgage product for a much longer time with all these incentives. The net increase they have to pay out is lower than the investments they can make with the surplus money, if they have,” Bagchi said, adding that the effective rate of interest for a borrower availing of an affordable housing product is 4.62 per cent after factoring in the Rs 2.5 lakh direct cash subsidy from the government and also the benefit deriving form the income tax exemptions.
The minimum loan tenure to avail of the product has been fixed at 15-30 years and a customer has the option either to adjust the cashback against principal outstanding or, get it as a direct credit in her bank account. The cashback will start accruing from the first EMI itself, but will first get credited to the customer after completion of 36th EMI and subsequently on a yearly basis.