Existing home loan customers may be in position to bargain for a lower interest rate, as many banks are expected to pare their rates after the new base rate regime kicks in from July 1.
RBI has already said that the existing customers should be given an opportunity, if they desire, to shift to the new transparent base rate system.
Many public and private sector banks confirmed that retail loans are likely to be priced 1-2 percentage poins above the base rate to stay competitive.
This will give existing customers an opportunity to renegotiate rates when the switch the beanchmark for their floating rates to the new base rate from the current prime lending rates. Banks were allowed to lend below their respective prime lending rates, which meant that most of them kept their rates high, denying the customers benefit of declining interest rates.
In the new system, banks will not keep the base rate high as they could be outpriced. In order to be competitive most banks will keep the base rates in the range of around 8-9 %. Customers who are in the mid-term of the loan period and are paying interest in double digits will have an advantage.
SBI has given indications that it will keep its base rate at 8%, Bank of Baroda Chairman MD Mallya also told ET that their base rate will also be in the range of 8-8 .5%.
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