Big Indian banks to stop offering special schemes

Reserve Bank of India's Q2 review prompts two India banks to defer 8 percent promo loans.

With the Reserve Bank of India (RBI) sending out hawkish signals in its second-quarter review, State Bank of India (SBI) and Punjab National Bank (PNB) may have to raise their home loan rates by January to align them with the expected hike in key policy rates. The special schemes offered by public sector banks have resulted in the cost of home loans crashing to the lowest levels in five years, according to a report in Economic Times.

"Seeing the hawkish tone in RBI's quarterly monetary policy review, the bank board thinks it may not be possible to continue with these schemes after the end of the current calendar year," said a senior official with PNB, the country’s second-largest public sector lender, requesting anonymity.

While the special offers will be withdrawn from the end of the current calendar year, most banks are extending the festival offers such as zero processing fee till that time. PNB chairman and managing director KR Kamath confirmed that the discounted rates on housing loans would be extended till end of December.

Currently, various banks are offering teaser rates for the first few years on home loans. Development Credit Bank is offering 7.95 percent rate for the first year on their home loans. SBI, Dena Bank and Canara Bank are currently offering 8 percent rate for the first few years. After the offer period, such loans will be converted into floating rate loans.