Special Home Loan Scheme Withdrawn by Most Lenders

Strategic Insights -

Many public sector banks, including Punjab National Bank, Corporation Bank, United Bank of India, and Bank of Maharashtra, have decided to discontinue the special home loan scheme, which ended on March 31. State Bank of India, India's largest bank, has decided to extend the scheme by a month, offering a fixed rate of interest at 8% for the first year and 9% for the second and third year. SBI will continue to offer an 8% fixed rate for all home loan borrowers, with interest rates on loan from the fourth year linked to the then prevailing prime lending rates. The decision to withdraw the scheme comes as the Reserve Bank of India (RBI) expressed concerns over "teaser loans," which may offer low rates in the initial period but rise in subsequent years.

Key Takeaways:

  • Most public sector banks, including Punjab National Bank, Corporation Bank, United Bank of India, and Bank of Maharashtra, have withdrawn the special home loan scheme effective April 1.
  • State Bank of India will continue to offer the special home loan scheme, extending it by a month, with a fixed rate of interest at 8% for the first year and 9% for the second and third year.
  • SBI will offer an 8% fixed rate for all home loan borrowers, with interest rates on loan from the fourth year linked to the then prevailing prime lending rates.
  • The Reserve Bank of India had expressed concerns over "teaser loans," which may offer low rates in the initial period but rise in subsequent years.
  • Many private sector banks, including HDFC, ICICI Bank, Axis Bank, Union Bank of India, and Canara Bank, have also discontinued the special home loan scheme.
  • SBI has booked loans worth Rs 2,500 crore every month under the special scheme and has seen a 30% year on year growth in home loan portfolio.
  • SBI will review the continuance of the special home loan scheme after RBI announces its annual policy on April 20.

Statistics:

  • 30% year on year growth in SBI's home loan portfolio.
  • Rs 2,500 crore in loans booked every month under the special scheme by SBI.
  • SBI will review the continuance of the special home loan scheme after RBI announces its annual policy on April 20.

Sources:

  • Etrejargon.com
  • RBI's notification, January 2023
  • TimesContent.com