Retail loans become cheaper

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Mumbai, Oct 14: As the festive season nears, banks are not only offering higher deposit rates but also reducing rates for their retail loans. This is despite a tight monetary policy.

Two major state-owned banks---Bank of Baroda and Union Bank of India---have decided to slash rates by 25 basis points on their home loan rates. They are keen to continue with the lower rates even after the festive season if the Reserve Bank of India (RBI) announces cuts in repo rate and the statutory liquidity rate (SLR) in its forthcoming credit policy on October 24.

MD Mallya, chairman & managing director, Bank of Baroda, confirmed that his bank would charge 0.25% less on the interest rates for housing and vehicle loans on account of the festive season. The scheme, which began on October 1, will continue until the end of the month.

“We find it a good opportunity as it helps us make our relationship stronger with our customers. But we are not offering any high interest rates on any of the term deposits,'' he said.

TY Prabhu, executive director, Union Bank of India, said the bank was offering a discount of 0.25% on housing loans rates, which had started since September 29 and will continue until next January 15.

The bank’s housing loan is available at an interest rate of 11.25% on fixed house loans and the rate will vary between 10.25% and 11% in the case of floating housing loans. On the deposit side, the bank is offering a rate of 10.5% for the public and 11% for senior citizens.

The bank is likely to continue with the offer if the SLR or repo rate is cut when RBI reviews its annual credit policy on October 24, said an official of the bank. Delhi-based Punjab National Bank also hiked rates on term deposits. With this revision, peak rate offered by the bank will be 10.50% in the slab of “one year to less than 2 years.”

The upward revision in interest rate comes as a response to the recent development in the money market and deposit rates prevailing in the market. The revised rates are effective Wednesday.