Now, ICICI takes on SBI, HDFC

Now, ICICI takes on SBI, HDFC
Times of India, December 9, 2009, Page 25

Offers Home Loan At 8.25%, Fixed For Two Years, Only For New Takers

TIMES NEWS NETWORK

Mumbai: Two private sector banks, ICICI Bank and Kotak Mahindra Bank, have joined home loan war with sub-9% annual rates of interest. While ICICI Bank is offering home loans for 8.25% per annum, Kotak Mahindra Bank is giving a special category loan to salaried customers at as low as 7.99% and at 8.49% to others.

The latest move by these two private banks will intensify the competition in the mortgage finance market. Last week, home loan major HDFC cut its rates to 8.25%, while SBI is continuing with its 8% offer.

ICICI Bank will offer a fixed rate of 8.25% for two years to new customers. The rate will be valid for loans sanctioned between December 1 and January 31, 2010, and the first disbursement should be before March 31. From the third year onwards, the customer will move to a floating rate structure which will depend on the interest rate prevailing at that point of time, the bank said.

Like HDFC's 8.25% product, ICICI Bank's product is also applicable to all new customers, irrespective of the amount of the loan. However, SBI offers low interest rates in two slabs for loans of up to Rs 30 lakh and above Rs 30 lakh.

Kotak Bank's 8.49% offer is also for all new loans for all loan amount, but this will be valid for 30 months. Kotak Bank will keep this offer open only till January 31, 2010. Its customers will also be shifted to a floating rate structure after the 30-month period. At present, Kotak's home loans are available in Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Surat, Pune and Chennai, a bank release said.

Over the last few months, SBI had been offering home loans at 8% fixed for the first year and subsequently moving to higher rates. Compared to HDFC's 8.25% offer, SBI offers home loans of up to Rs 30 lakh at 8% for the first year, 8.5% for the second and third years and from the fourth year onward it moves to a floating rate, the bank said on its website. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched.

For HDFC, the main reason for offering a lower rate was its ability to bring down its costs of funds, due to the availability of ample liquidity in the system. Banks continue to park around Rs 1 lakh crore with the RBI through reverse repo, indicating availability of enough funds in the system.