On Tuesday, the State Bank of India, ICICI Bank, Bank of Baroda and Punjab National Bank slashed interest rates on home loans above ₹75 lakh between 10.10 to 10.25 percent and 10.1 percent to women borrowers.
The banks said that this scheme will be brought into immediate effect from Tuesday to compete with other lenders.
"We want to increase market share in loans of higher amounts. There is a huge market for such borrowings in large cities. At present, SBI leads the market in the sub-₹30 lakh loan category," Business Standard quoted a senior SBI official.
However, HDFC bank has fixed its rates between 10.15 percent and 10.65 percent.
Earlier, SBI had two slabs- a rate of 10.15 percent for loans up to ₹75 lakh and 10.30 percent rate for above ₹75 lakh. Under this renewed scheme, 10.15 percent will be the standard rate for all home loans.
This step has come after the Reserve Bank of India at its monetary review on 5 August announced to keep its repurchase rates unchanged, but it reduced statutory liquidity ratio (SLR) to free up funds for lending when credit growth improves. The RBI announced to trim SLR for banks by 0.50 percent to 22 percent from 9 August.
A similar decision in June released ₹40,000 crore into the Indian banking system, reported PTI.
Analysts say that interest rates have decreased because there is more supply than demand. "There is a downward pressure on rates in the banking system at this point in time. Spreads have come down across the board from consumer to corporate," Mint quoted Aditya Puri, managing director and chief executive officer, HDFC Bank.
But few lenders like HDFC and Indian Bank have not yet made changes to its interest rates.
At 1:30 pm on Wednesday, stocks of banking sector surged 121.24 points at 18017.01 points. In the meantime, shares of all banks surged except Canara Bank, HDFC Bank and Kotak Mahindra Bank.