PTI

Mumbai, Dec 15: Public sector banks on Monday announced that home loans up to Rs five lakh would be given at a maximum interest rate of 8.5%, while those between Rs 5-20 lakh would be offered at 9.25%.

Besides, the banks would not charge any processing fees and pre-payment charges for loans up to Rs 20 lakh, and would also provide free insurance cover, the Indian Banks Association (IBA) today.

Outlining the new housing loan package in accordance with the stimulus package announced by the government on December 7, SBI chairman O P Bhatt said the interest rate under the two schemes could come down, but would not go up beyond the threshold limit of 8.5 and 9.25% for a five year period.

The offering under the packages would be made till June 30, next year, Bhatt said, adding that after the lock-in period of five years the borrowers could look in for free or floating rates that could change in accordance with market conditions.

To make the package attractive, the public sector banks would give the loans at a margin of 10% up to Rs 5 lakhs and 15% for loans between Rs 5 lakh and Rs 20 lakhs, and in either case, banks would offer free insurance cover, Bhatt said.

Leading private lenders, including ICICI Bank and HDFC, appeared favourably inclined to cut their rates, with sources saying the two lenders would study the PSU banks' package before taking a call. The sources said any decision would be taken after ascertaining whether PSU banks are getting any government subsidy for implementing the package.

The banks have also decided to cut the lending rates for the micro and medium enterprises by 100 basis points.