Banks are stepping up efforts to draw in homebuyers and are cutting home loan rates by more than the Reserve Bank of India’s recent 25 basis point (bps) repo cut. The latest reduction signals a clear push to stimulate demand in a competitive market, with Union Bank of India lowering home loan rates by 30 bps and LIC Housing Finance by 35 bps, indicating that lenders are willing to ease pricing to capture new borrowers.
“The market’s competitive positioning is reflected in the sharper-than-repo reductions,” said Vikram Singh, executive director, Urban Money. He explains that public-sector lenders typically move more quickly on pricing because of their funding profiles, while private banks take a more calibrated approach to balance growth and margins. The non-bank lenders continue to be selective given their cost of funds.
With outstanding home loan portfolios slowing to 11% in the September quarter from 13% in FY25, the aggressive pricing seen in home loans reflects a conscious trade-off rather than improved balance-sheet conditions. Stable asset quality in the housing segment has also encouraged banks to expand their home loan portfolios. “With stress largely confined to very small‑ticket borrowers, banks view housing finance as a relatively safe way to grow their retail books, attract new customers, and defend market share, even if it meant taking on some near‑term margin pressure,” said a senior official at a state‑run bank.
