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SBI offers lowest home loan rates at 8% to stimulate the home loan market

Country's largest lender State Bank of India has announced freezing interest rates on new home loans at 8 per cent for a period of one year. It would be the lowest interest rate offered by any bank in India, applicable to all new as well as existing borrowers for one year.

The new scheme of 8% interest rate will be offered for loans taken during February 2 and April 30, 2009 and there will not be any cap on loan amount. According to a SBI release, the interest will be reset after the freeze period to the same rate as originally applicable.

Existing SBI home loan customers also have been given some discounted offers. For them, the bank has launched a new product SBI Lifestyle Loan – a multipurpose loan to the extent of 10% of their home loan up to a maximum of Rs 5 lakh at an interest rate of 8% for a period of one year.

The borrowers with loans up to Rs 5 lakh and who are in the Rs 5 lakh to 20 lakh bracket would also be given loans at 8% for a period of one year, the bank said. The originally contracted rate will be applicable after the one-year period.

The bank has also introduced a new package for SME borrowers—SME Care—under which an additional working capital facility of 20% of the fund-based limits will be extended. "The loan will be given to take care of inventories of raw materials, finished goods as also delayed payments from their buyers in the current downturn at an interest rate of 8 percent," SBI said. The loan will be repayable in one year, it said.

Besides, country's largest lender has also introduced SME Help--under which term loans will be offered to purchase fixed assets including generator sets with concessionary interest rate of eight percent for the first year, the bank said. After the first year, the applicable rate will be charged for the loans, it said.

Earlier PSBs collectively as a part of stimulus package had launched a scheme to lend housing loans up to Rs 5 lakh at 8.75% and up to Rs 20 lakhs at 9.25%. These rates are frozen for five years.

But the demand for home loans will pickup only after builders cut rates. A borrower first take into consideration the price of the flat and than only look at the interest rates. The financing banks should prevail on the builders to pass on the benefits to the ultimate buyer. Despite the sops allowed, builders have not yet gone for price cuts.








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