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The Economic Times

MUMBAI: Rate war is brewing in the Indian home loan market with the leading private sector player ICICI banks and also finance companies like India Bulls and Dewan Housing have followed the market leader State Bank of India and HDFC in announcing rate cuts on home loans. 

SBI announced a rate of 9.85% to women home loam borrowers and 9.90% for other borrowers irrespective of the loan amount to match HDFC's rates on Sunday, April 12, ICICI Bank also followed on Tuesday in lowering its home loan rates. 

The interest rate for fixed rate home loans have also been reduced by ICICI Bank which has not lowered it base rates. " Borrowers taking fixed rate home loans with tenure of 10 years for loan amount up to Rs 30 lakh will have to pay 9.90 per cent, the same effective interest rate applicable for floating rate home loans," said the bank. 

Women borrowers and financially weaker sections will now get home loan at 9.85 per cent, while for other borrowers it will be 9.90 per cent, according to a release issued by ICICI Bank. Taking a cue from banks, even finance companies, Dewan Housing Finance and India Bulls have lowered their rates to 9.9%. 

After the Reserve Bank of India governor Raghuram Rajan nudged bankers during his annual policy statement on April 07 that even after two rounds of key policy rate cuts, banks were still holding on to their lending rates, many banks followed market leader State Bank of India in announcing a base rate cut which automatically brings down the home loan rates. Further SBI on Sunday, April 12 reduced its spread on home loans to match the rate by the largest home loan finance company HDFC. With announcing a rate cut now interest rates offer by the largest lenders SBI, HDFC and ICICI besides lenders liker Indiabulls and Dewan on par. 

SBI which in the previous rate cycle introduced teaser rates with aggression may look at newer products to attracts customers. This is particular since there appears little demand for loans from corporates, home loans is the only green patch for lenders. Credit growth has slowed to 10.2% so far this fiscal year—the slowest pace since the financial year 1996-97, according to data available for the period until 6 March.