Govt asks banks to cut home loan rates, again

New Delhi: The Union Government on Thursday said that it would continue to push for cheaper home loans even for the existing borrowers.

Speaking in the Lok Sabha Union Home Minister P Chidambaram, who earlier held the finance portfolio, said the government has asked banks to cut interest rates on home loans.

"We have now prevailed upon bankers to cut their home loan rates. There was a one time cut. There is another cut. Home loan rates have been reduced. For fresh loans up to Rs 5 lakh home loans are being given at 8.5 per cent and from Rs 5 to Rs 20 lakh at 9.25 per cent.," Chidambaram said in the Lok Sabha.

The former finance minister replied on the state on the economy in Parliament from the government side.

Chidambaram's statement assumes importance as public sector banks on Monday said interest rate for fresh home loans of up to Rs 5 lakh will not exceed 8.5 per cent, while the lending rate is a maximum of 9.25 per cent for new housing loans in the bracket of Rs 5 lakh and Rs 20 lakh.

However, the existing borrowers did not get such relief.

"We are talking to the bankers. As the PLR is refixed, they must lend even to the past borrowers and reset the loans rates for past borrowers also. As the PLR is brought down even floating rates must come down," he said in reply to a debate in on review of the economic situation in the country.

Chidambaram said housing is an important sector and a major driver of the economy.

"Steel, cement, bricks, pipes, wires, electrical equipment, construction, labour everything depends on housing," he added.

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"Bankers are unwilling to lend. We are talking to the bankers and lending has begun. Banks will continue to lend to borrowers," he assured the House.

Chidambaram admitted the global economic crisis and the recession in the major economies of the world was a cause of concern and cautioned that the current financial year is going to be difficult one.

"There is still no end to pain. If world output suffers there could be more pain. India has suffered some pain due to the economic crisis. We are trying to minimise the pain for our poorer section," said Chidambaram.

Blaming the major economies of the world for the current crisis, Chidambaram said that India is not the cause but along with China will provide to solution to the current mess.

"The world today looks at our Prime Minister to bail them out," he claimed

He also claimed that the economy has grown at a healthy rate in the past four years under the United Progressive Alliance government and revealed that per capita income in the last four years has risen by 7.4 per cent.

The Home Minister said that the UPA has kept its focus on growth and social justice from the beginning and claimed that the economy will grow by seven per cent for year 2008-09.

He also hoped that by the second half of next year world economy is likely to bounce back.