New Delhi: The interest rates for home loans above the amount of Rs. 30 lakh are likely to drop. The highest reduction is expected to be in the home loans above Rs. 75 lakh. The Reserve Bank of India (RBI) will make it easier for other banks and financial institutions to lend by cutting the rate of interest, allowing them to provide loans easily to the borrowers in this segment.
Presently, the interest rates are based on the loan size. For loans up to Rs. 30 lakh, the rates are lowest. It increases with the size of the loan.
We can take the example of the State Bank of India. They charge 7% of interest on loans up to 30 lakh, 7.25% on loan between Rs. 30 to Rs. 75 lakh, and 7.35% on loans above Rs. 75 lakh. For women borrowers, most of the big banks charge 5 basis points lower rate.
The increase in rates is due to the capital requirements, which increases with the size of the loan. In today's date, a bank is supposed to maintain 35% of the prescribed capital for loans up to Rs. 30 lakh. The percentage increases with the size of the loans.
The personal loans require banks to maintain 100% of the prescribes capital, making it unsecured. Whereas, home loans allow the lenders to have lower capital as they are viewed as safe because of the security. Apart from the loan size, the capital requirements depend upon the loan-to-value (LTV), which refers to the loan amount compared to the value of the property.
In RBI's credit policy on Friday, it said up to March 2022, the capital requirement will depend only on LTV.