Borrowers can look forward to better days after facing the heat because of a rapid rise in loan rates last year.

The two PSU banks have also waived off processing fee

FPJ BUSINESS DESK Mumbai

Home loan borrowers can look forward to better days as interest rates, which shot up during 2011, are poised to moderate. Even as the big boys of the banking sector wait for the Reserve Bank of India ( RBI) governor D Subbarao to start cutting rates before they pass on the benefit to their customers in the form of cheaper equated monthly instalments ( EMIs), their smaller peers have taken the lead in the latest round and cut rates.

Public sector lenders Central Bank of India ( CBI) and Bank of Maharashtra ( BoM) have announced interest rate cuts by up to 0.25 per cent on select loans and also waived off processing fee.

Pune- headquartered BoM has decided to give housing loans under Rs 25 lakh for a five- year tenure at a reduced base rate ( below which it cannot lend) of 10.60 per cent, it said. Similarly, city- headquartered CBI has cut its home loan rates by 0.25 per cent, it said. A home loan of up to 25 years and under Rs 30 lakh will be available at 10.75 per cent.

Apart from relieving borrowers from shelling out higher rates, the move would also prop up the sagging home loan market.

After a sharp spike of nearly 3 percentage points in lending rates over the past two years, banks are reversing the trend to shore up their loan books, which has been steadily heading south, according to experts.

Both the lenders have also announced waiver of processing charges. While CBI is offering a blanket waiver on processing fees for loans across amounts and tenors till March 31, BoM has waived it for applications under Rs 25 lakh. Earlier, BoM charged up to Rs 12,500 for such loans.

High inflation and the ensuing jacking- up of interest rates by the RBI, coupled with decline in domestic growth have dampened demand for home loans to some extent.

According to the Reserve Banks Financial Stability Report released on January 12, housing credit growth fell to 2.3 per cent from 10.7 per cent a year ago. The countrys largest lender State Bank of India is also contemplating a cut in interest rates in select home loan categories where demand is slow.

The central bank hiked lending rate seven times during 2011, with both repo and reverse repo rates going up by 2.25%. Repo is the short- term rate at which RBI lends to banks, while reverse repo is the rate at which it borrows from them.