Cut rates for small home loans, FM asks banks

SOP TO MIDDLE CLASS: The FM urged public sector banks to cut interest rates for loans of less than Rs 20 lakhs.

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Rajdeep Sardesai

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Keywords: Interest Rates, Home Loans

New Delhi: If it was the turn of exporters on Wednesday, the FM singled out small home-loan borrowers for some favourable treatment on Thursday.

The Finance Minister, who was under fire for having done little in the Budget for the needs of the middle-class, in particular, affordable housing, is now trying to make amends. Chidamabaram , on Wednesday, urged public sector banks to cut home loan rates for those who borrow less than Rs 20 lakhs.

”I have often said that housing should be more affordable,” Chidambaram said. “More than 80 per cent of home-loan borrowers are in the sub-20 lakh category. I think banks can and should lend at reduced rates for this category.”

Corporate India, however, was not as lucky. Chidambaram made it clear that the Dividend Distribution Tax benefit, announced in the Budget, would not be allowed to the entire chain of multi-layered companies

“I want to make it clear that multi-layered companies go against the grain of corporate governance. I don't know why you need a multi-layered corporate structure. These are nothing but shell companies created to ensure the existence of tax shelters,” the Finance Minister declared.

But whether the public sector banks oblige the FM is quite another story.

What is clear, however, is that in an election year, the Finance Minister and the UPA want every important political constituency on its right side.