bank holidays
State Bank of India has announced cheaper home loan schemes for defence personnel and Central government employees, keeping in mind their enhanced capacity to repay after the recent salary hike accepted by the NDA government. In Picture: Auto rickshaws wait in front of the head office of State Bank of India (SBI) in New Delhi August 12, 2013 (Representational image)Reuters

Indian banks are eyeing the enhanced repaying capacity of Central government employees who got salary hike after the NDA government accepted the recommendations of the 7th Central Pay Commission (CPC). State Bank of India (SBI) is the first, offering home loan schemes with lower interest and extended tenure to repay the loan amount.

Central government employees would now have the option to repay home loans up to the age of 75 years, as against 70 at present, with the monthly outgo (equated monthly instalments, or EMIs) reducing after the borrower retires from service.

The bank is also offering full waiver of processing fee and a marginal reduction of 0.05 percent in interest rate to attract them. There are about 47 lakh Central government employees, including 14 lakh defence personnel, who will benefit from the salary hike.

"Benefit of lower interest rate as a concession of 5 bps (0.05 per cent) over the home loan card interest rate is available wherever check-off facility is extended by the government under tie-up arrangement with the bank," SBI said in a statement.

The bank launched two schemes under which it will be offering home loans to employees who draw their salaries from the Central government.

Features of the schemes:

Reduced burden of servicing EMIs under the new schemes as lower EMIs would need to be serviced during the post-retirement term.

b) Flexibility of selecting a longer loan term as extended repayment up to the age of 75 years is available under the scheme. Under existing Home Loan schemes, repayment is normally available up to the age of 70 years only.

c) Benefit of lower interest rate as a concession of 5 bps over the Home Loan Card Interest Rate is available wherever check-off facility is extended by the Government under tie-up arrangement with the Bank.

d) Full waiver of Processing Fee.

e) Option for customers of other Banks / FIs to switchover their Home Loan outstanding balance to State Bank of India.

"The launch of 'SBI Privilege Home Loan' and 'SBI Shaurya Home Loan' products is timed with the notification of 7th Pay Commission recommendations. Surplus income can thus be utilised by government employees and defence personnel towards purchase of new/better house," SBI said.

The current home loan schemes of SBI are as given below:

sbi home loans pay commission
State Bank of India website

Though the Narendra Modi government is yet to decide on the quantum of hike in allowances, the increase is unlikely to be lower than that recommended by the pay panel. While the overall hike recommended by the 7th CPC is 23.55 percent, the increase in allowances comes to about 63 percent. The annual rate of increment has been retained at 3 percent. 

The total additional financial impact on the Central government for the current financial year is likely to be Rs 1,02,100 crore, of which the railways will have to share Rs. 28,450 crore.