Bank of Maharashtra has cut the interest rate on home loans to its lowest ever even as it targets growth in this credit segment to jump by 25%.

The state-owned bank has now priced its home loan rates at 6.40%, making it the cheapest in the market. The earlier rate on offer was 6.80% when the Pune-headquartered bank was growing its home loans at 20%.

Bank of Maharashtra has also cut the interest rate on car loans to 6.80% from the current 7.05%, making it one of the lowest in this segment. 

With the thrust on the retail segment, Bank of Maharashtra wants to improve its credit-deposit ratio to 70% from the current 63%. The bank is also trying to get back its retail customers who migrated to other banks due to lower rates.

“In the last 18 months much of the exodus has reversed and the bank has increased its home loan book by Rs 2,000 crore,” Bank of Maharashtra managing director and CEO AS Rajeev told Indianbankingnews.com. “We have already identified customers who continue to have a banking relationship with us but have migrated to other banks to benefit from lower rates. Through these new rates we are trying to woo them back to our fold.” 

The new interest rates, under the ‘Retail Bonanza-Festive Dhamaka’ campaign, will be applicable from 13 December. They will be linked to the credit score of the borrowers. For instance, the new home loan rate, lowered by 20 basis points, is offered to the borrowers who have credit scores of 750 and above so that the quality of loans are not compromised.

“We have about Rs 5,000-7,000 crore of excess statutory liquidity ratio (SLR), which is part of our investment book. We are trying to bring it back to the credit side,” Rajeev told Indianbankingnews.com.

The bank has also waived the processing fees for its gold, housing and car loans.

Bank of Maharashtra is the first bank to lower rates after the Reserve Bank of India (RBI) maintained status quo in key policy rates for the ninth consecutive time amid fears of the Omicron variant of Covid-19.

Bank of Maharashtra had doubled its net profit to Rs 264 crore in the fiscal second quarter ended September from Rs 130 crore a year ago. Total income had increased to Rs 3,700.44 crore from Rs 3,270.07 crore.

“With the economy gradually opening, up we expect to see a good credit growth. We are projecting a credit growth of 14% to 15% during the year,” Rajeev had then said after announcing the fiscal second quarter results.