Editorial

摘要

The public sector banks have lowered interest rates on home loans of up to Rs 20 lakh and thrown in other freebies such as zero processing fee, free insurance, lower margin money and no prepayment penalty. This should provide an impetus to the economy provided banks actually step up lending at these attractive rates 8.5% for loans up to Rs 5 lakh and 9.25% for Rs 5-20 lakh fixed for five years. The construction sector accounts for over 7% of GDP directly, factor in various backward and forward linkages such as iron & steel, cement and furnishing, and the share nearly doubles. So a revival in the construction activity would have a wide footprint. And the policy emphasis is rightly on low-cost housing, where supply is woefully inadequate in the context of the current pent-up demand. But much depends on how much lending actually flows Xo this segment at these low rates. While lending rates have fallen, deposit rates have barely budged from their doubledigit levels. For banks to lend large sums at these rates, their cost of funds would have to come down through lower deposit rates.. This constraint is very clear in the private sector lenders reluctance to cut lending rates so for.