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Saturday, October 22, 2011

PSBs extend home loan tenure up to 30 yrs

Fearing credit turning bad assets in the wake of high interest rates, a number of state-run banks, led by State Bank of India (SBI), have decided to raise home loan tenures to 25-30 years or till the borrower touches 70 --well past their working age.

Earlier, the Finance Ministry had written to all public sector banks to increase the tenure of loans instead of raising EMIs in the light of rising interest rates.

SBI took the lead and has reportedly decided to extend the tenure of home loans by 10 years or up to 30 years, while others are doing this on request.

"We have decided to increase the home loan tenure by up to 10 years to 30 years and up to the age of 70, depending on the customer profile. Our Managing Director (S Krishna Kumar), is likely to announce this tomorrow," a senior SBI official told PTI, requesting anonymity.

Fearing more bad loans in the system as interest rates kept on rising following tight monetary policy being under taken by RBI, the Finance Ministry had recently written to the public sector banks (PSBs) to increase the loan tenure instead of increasing the monthly repayment (EMI) amount.

However, all the banks that PTI contacted for reaction on the issue, said this guideline has been in existence for many years now and they had been implementing it on case to case basis.

Over the past 19 months, the RBI has increased policy rate by 325 basis points (one basis point is one-hundredth of a per cent) to 8.25% to batten down stubbornly high inflation, which stood at 9.72% in September.

Generally, home loans are scheduled for 20 years and in some cases up to 25 years, if the borrower will not be retiring by then at 65.

Source: Business Standard


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