New Delhi: In a festival season bonanza, State Bank of India, the country’s largest bank, has decided to lower interest rates on new housing, auto and personal loans by 0.5 to one percentage point.

While consumers can avail of the cheaper loan offer till December 31, sources said, interest rates could stay around the same level even beyond the festival season if liquidity remained comfortable.

A host of banks including HDFC, ICICI Bank, Canara Bank and Bank of Baroda have reduced home loan rates for the festival season. SBI’s move might force them to offer more discounts if it impacts demand.

According to SBI’s new rates that came into effect from October 8, floating rate home loans of over Rs 20 lakh for 20 years would come now come at 10.75% a year instead of 11.25% earlier. So, a borrower will have to pay 3.25% lower equated monthly instalments which would fall to Rs 30,457 from Rs 31,478 on a Rs 30 lakh loan for 20 years.

The reduction is sharper — by one percentage point — on loans of up to Rs 20 lakh for a 15 year term, which would now cost 10.25% a year.

In fact, SBI has introduced a 25 basis points extra rate cut on home loan up to Rs 20
lakh. Earlier, there was no such provision.

While new borrowers can rejoice, the existing customer will not benefit from the offer since the benchmark rate, known as State bank advance rate (SBAR) has been left at 12.75%. Instead of lowering the rate, SBI has increased the discount on SBAR. For instance, in case of home loans of up to Rs 20 lakh and a tenure between five and 15 years, the new rate 2.5% below SBAR as against 1.50% earlier. For existing borrowers, the old rate of 11.25% will continue though bankers feel that an improvement in liquidity could result in a reduction in SBAR.