The intense competition in the banking industry is playing out in the mortgage market, with lenders offering cheaper home loans in a bid to attract customers.
In the case of HDFC Bank, the country's largest private sector bank, the lower rates on home loans depend on the customer's credit profile.
Similarly, India’s largest lender, State Bank of India (SBI) is offering existing customers with a good track record on previous repayments lower interest rates on new home loans.
And private sector lender IDFC First Bank is providing additional top-ups on existing loans with lower interest rates.
Requesting anonymity, a senior HDFC Bank executive said, “A customer with a good credit score and behaviour will get good interest rates.."
A customer with SBI, who took a home loan from the bank in 2023, was recently approached with a more attractive deal. “I was paying my EMI (equated monthly instalment) on time and the bank offered me another loan with lower interest rates,” said the customer, who asked not to be named.
Moneycontrol also spoke to an IDFC First Bank customer, who too was offered a discounted interest rate due to his good credit score.
There were no replies to email queries sent to HDFC Bank, SBI and IDFC First Bank till the time of publishing the article.
Bank credit to the housing sector in the year to February 2024 grew 36 percent, the central bank's latest sectoral credit data showed, to Rs 26.82 lakh crore in February this year from Rs 19.62 lakh crore in February 2023.
Intense competition
Experts highlighted that offering interest rates at some discount to customers with good credit records is standard practice, but due to rising competition, banks are looking to target more customers.
"Customised rates are provided to customers, who have a good repayment and credit record with a good CIBIL score. This helps banks get an understanding of the customers' credit behaviour," said Vijay Singh Gaur, lead analyst, banking, financial services and insurance, CareEdge.
The plan seems to be working. SBI’s home loan portfolio for the October-December quarter of FY24 grew 13.16 percent on-year and stood at Rs 6.93 lakh crore.
For HDFC Bank, the management on February 15 said that it recorded 3.6 percent quarterly growth as of December 2023 and, after the merger with pure-play mortgage provider Housing Finance Development Corporation, the bank’s market share in home loans grew 18-20 percent in the December quarter from a year earlier on an incremental disbursals basis. On a sequential basis, the bank gained a leading position as it recorded a growth of 3.6 percent, which was the highest among its peers in home loans.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
