"We would pass on this benefit to the borrowers. It could be in the range of 25-50 basis points" K Raghuraman, executive director, Punjab National Bank told PTI.
The bank is yet to work out the quantum that would be passed to the borrowers of this segment, he said. According to Oriental Bank of Commerce, ED, Allen C A Parera, there could be marginal reduction in the interest rate on the segment in the near term.
However, it is a temporary measure, he said, adding the central bank could also increase it if circumstances turn adverse.
RBI in its policy document reduced risk weight on residential housing loans to individuals for loans up to Rs 20 lakh from the existing 75 per cent to 50 per cent as a temporary measure. It will be reviewed after one year, keeping in view the default experience and other relevant factors, it said.
ABN Amro Bank chief economist Abheek Barua said: "It was anticipated... banks would certainly pass on this gain to their customers." It is meant for lower cost housing. It was perceived that they had been given raw deal. So some kind of correction was required, he said.
According to real estate company Omaxe's CEO Arvind Parekh: "It is a positive step for the housing industry."
Demand from this segment, which has declined in the recent past due to higher interest rate and higher provisioning is likely to get a boost, he said. In the recently concluded meeting with bankers, the government had asked public sector banks to hold interest rates on home loans of up to Rs 10 lakh.
"Banks have been advised that while keeping their long term portfolio (in mind), they should protect the interests of home loan borrowers taking loans of Rs 8-10 lakh, to the extent possible," Secretary (financial sector) Vinod Rai had said.
Following the Cash Reserve Ratio hike announced last month by RBI, some public sector banks like State Bank of India, Bank of Baroda and Canara Bank had raised home loan rates for all customers, including existing borrowers, when they revised their prime lending rates.
However, other banks such as Allahabad Bank and Union Bank of India had refrained from raising rates for the existing home loan borrowers even while raising rates for new borrowers. Some banks such as Indian Bank did not raise rates at all, awaiting further policy directions.
Private sector banking major ICICI Bank had increased its home loan rates by one percentage point to 14 per cent for fixed rate loans and to 12 per cent for floating rate loans.
It's closest competitor, HDFC raised its lending rate by 0.75 percentage point for new customers and 0.50 percentage point for old customers.
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