Leading bankers have started finalising modalities for the implementation of 1% interest rate subvention on home loans. The central government had earlier announced the decision on subvention of home loans on September 30.
The subvention scheme will be applicable for all individual housing loans up to Rs 10 lakh and for properties costing up to Rs 20 lakh.
National Housing Bank (NHB), which is the nodal agency for the scheme along with the Reserve Bank of India (RBI), held a meeting of the bank officials of various scheduled commercial banks (SCBs) in New Delhi on Wednesday to discuss modalities.
Confirming about the meeting, NHB chairman & managing director S Sridhar, who is also the CMD of the Central Bank of India, told FE, ?It was a usual review meeting in which we discussed the modalities.?
Everything has already been made clear in the guidelines issued by the government in this connection, said Sridhar.
The subvention will be given to the borrowers in an upfront way, which means the interest rates on home loans will be reduced at the time of disbursement itself, said Sridhar. The scheme is expected to give a boost to credit flow to the housing sector and create additional employment in the housing and allied sectors, such as steel and cement.
CS Jain, head (personal banking) of IDBI Bank, said, ?Though we have received the guidelines in this connection, we will implement it only when the same is approved by our product committee. The committee of the bank is likely to meet on October 15, 2009.?
A senior official of the SBI said, on condition of anonymity, ?We have to create an operating arrangement for the implementation of the scheme. Even if the subvention is to be given in upfront, we will have to calculate the interest amount after opening the customer?s loan account.?
SBI?s home loan portfolio stood at Rs 60,000 crore as on September-end as against Rs 54,000 crore recorded as on March 31, 2009.
RR Nair, director and chief executive of LIC Housing Finance, said the official notification about the scheme was yet to come. Commenting about the meeting, Nair said that it was just a kind of information sharing over the scheme.
An amount of Rs 1,000 crore to be allocated as interest subsidy for a period of one year of operation of the scheme. An amount of Rs 300 crore will be allocated in the Budget of 2009-10 for implementation of the scheme. The balance amount will be allocated in the Budget of next year.
