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PSU Banks cut interest rates, home loans & loans for MSMEs become cheaper

Public sector banks after IBA meeting on 15th December, 2008, announced a loan package to stimulate economy. This stimulus loan package supports the several measures taken by the Government and Reserve Bank to support the economy in the backdrop of the current downturn.

Now home loans up to Rs five lakh would be given at a maximum interest rate of 8.5 per cent, while those between Rs 5-20 lakh would be offered at 9.25 per cent as part of a package to provide relief to the common man and buoy real estate.

In the limited period home loan offering, which is valid till June 30, 2009, the banks will lend without processing fee or pre-payment charges. Besides, they will also carry the added bonus of free life insurance cover and an unchanged interest rate ceiling for the next five years.

The new scheme is available only for fresh loan-seekers, it does not apply to existing home loan borrowers and cannot be swapped with an existing loan as the aim is to increase demand for housing loans, as this will also help boost sectors such as cement and steel.

Besides, the banks also decided to cut lending rates for micro industries by 1 percentage point for both existing and new loans, with immediate effect, to boost the micro, small and medium enterprises (MSMEs) sector, reeling under the impact of economic slowdown.

Interest rates for SMEs up to Rs 10 crore have also been reduced by 0.50 percentage points, with immediate effect, and banks would also take up a second restructuring of SME accounts on a case-to-case basis. The moratorium period will be extended in respect of loans availed by MSME sector, where project implementation has been delayed in the current scenario of economic downturn.

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