Mar 17, 2008

Home Loans - UCO Bank may reduce interest rate on home loans by 0.50%

Uco Bank may reduce interest rate on home loans by 0.50% - ET

UCO Bank said on Friday it may cut home loan rates by 50 basis points. The state-owned bank is scheduled to take a final decision on the proposal at a board meeting on March 15. It is not clear whether lower rates will be offered for home loans under Rs 20 lakh. The government had said that it is in favour of lower interest rates for home loans under Rs 20 lakh to meet demand. These loans constitute 80% of the advances classified under priority sector. "We have already cut down home loan rates by 50 basis points and may further cut down the rates by another 50 basis oints," Uco bank chairman and managing director S K Goel said. On raising capital, Mr Goel said the bank would take a view only when market stabilises. If markets do not stabilise till June, the bank would raise about Rs 250 crore through qualified institutional placement, he said. Smaller loans have less risk weight than those above Rs 20 lakh and, therefore, bankers have incentives to lend to these borrowers at lower interest rates. Several banks, including SBI, Canara Bank, Allahabad Bank and HDFC, have reduced lending rates by 25-50 basis points. The largest private bank, ICICI Bank, has said there could be softening of rates in the first quarter of the next fiscal. SBI charges 10%- 11.5% for loans up to Rs 20 lakh. Mr Chidambaram's recent call for softer interest rates could mean further lowering of interest rates in the home loan segment.