India’s largest private sector lender ICICI Bank has reduced floating interest rate on new home loans of up to Rs 20 lakh by half a per cent. Accordingly, the new rate will be 11.5 per cent, an ICICI Bank spokesperson said here on Friday.
This has been done as loans below Rs 20 lakh come under the priority sector and also because the Reserve Bank has reduced the risk weightage on such loans, he said, adding that the  bank had effected the change in the rate about a month and half back.
The new rate is now comparable to that of other public sector lenders. However, the floating and fixed rates on home loans above Rs 20 lakh continue to remain at 12 and 14 per cent respectively. In FY’07, the bank’s home loan portfolio stood at Rs 63,500 crore.
It may be recalled that HDFC recently reduced rates on variable rate home loans by 25 basis points for new borrowers. The country's largest housing finance provider said the rate cut was a part of a monsoon promotional offer.
“As part of the monsoon offer, a customer applying for home loan up to Rs 50 lakh between June 18 and July 15 will be offered a variable interest rate of 11 per cent per annum instead of 11.25 per cent,” an official said. In addition, the reduced applicable fees during the promotion will be 0.25 per cent  instead of 0.50 per cent of the loan applied for, subject to a maximum of Rs 5,000. However, the customer has to avail of disbursement before July 31.
A 25-basis-point reduction in the lending rate would bring down the equated monthly installment on a Rs 10-lakh loan by Rs 160. HDFC rates are slightly below the rates offered by its rival ICICI Bank.
With this reduction, some categories of loans from HDFC are cheaper than ICICI Bank loans by one percentage point. There will, however, be no reduction in the fixed-rate loans offered by HDFC.