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COIMBATORE, Jan. 18

IN a bid to thwart the takeover attempts of its competitors, State Bank of India has decided to reduce the interest rate on existing housing loans as a one-time exercise on a case-to-case basis. The interest reset will be permitted only once in any loan account up to the end of April 2002.

SBI last revised the interest rate on housing loans with effect from January 1, 2002. Between April 2001 and January 2002, it cut housing loan interest rates thrice, each time slicing it by 0.5 per cent.

The rates were slashed to 12.5 per cent (13 per cent) at the beginning of this fiscal and further to 12 per cent on September 15, 2001. At the beginning of the current calendar year, the rates were further reduced to 11.5 per cent.

The bank has decided to permit the interest reset to help borrowers take advantage of the lower rates.

The bank offers both floating and fixed rate loans. However, a borrower cannot convert a fixed rate loan to a floating rate loan or vice-versa. Housing loans exceeding Rs 1crore to individuals are available at the floating rate of interest only.

The bank has clarified that floating rate loans once reset at the current rate would not automatically be eligible for future reductions. (The loan would then operate on the basis of the new contract with regard to the differential between the State Bank Medium-Term Lending Rate (SBMTLR) and the rate of interest.) But, a fixed rate loan will be re-fixed at the current rate of interest, and no further reduction would be available.

SBI has also issued several modifications to the existing instructions on housing loans. It has decided to extend two loans to the same individual for furnishings/consumer durables, which forms part of the project cost. The two loans could be availed of at different times, either for purchase or construction and subsequent repair or renovation of a single property or two different properties. Here again, where the loan is availed for furnishings and consumer durables and the check-off facility is available, the maximum amount available has been raised to 10 per cent of the project cost or Rs 3 lakh (whichever is lower) from 5 per cent of the project cost or Rs 2 lakh.

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