Private sector lender ICICI Bank announced a special home loan scheme that will help the bank retain customers and prevent them from shifting to other banks for better rates.
The bank is promising customers 1% cashback starting from the first EMI (equated monthly instalment, but it will be credited to their account later in different stages.
The first credit will happen in one batch after 36 EMIs and thereafter once every 12 months. The bank’s plan is to ensure that customers stick on with it for the first three years.
After the first credit, the 1% cash on every EMI will get credited to the customer after completion of the 12th EMI. Through this scheme, the bank is trying to postpone upfront discounts while preventing customers from migrating to other banks.
Anup Bagchi, executive director, ICICI Bank, said, “The new home loan is offering a benefit of 1% cashback on every EMI to customers. We believe that this proposition will propel customers to fulfill their aspirations of owning a home.”
Financial advisors say upfront discounts are better than cashbacks. The absence of prepayment penalties ensures active migration of customers for better rates because when banks lower their interest rates they do it only for the new customers and the older customers are saddled with old rates.
The absence of prepayment penalty ensures active migration of customers from one bank to the other for finer interest rates because when banks lower their interest rates they generally lower it only for the new customers and the older customers are saddled with higher interest rates.
Customers should be vigilant to check the rates and see if some upfront discounts are on offer, rather than discounts later, advice financial experts. It is better to get the finest interest rates rather than cash backs at the end of certain tenures.
Harsh Roongta, a leading investment advisor, said, “Cashbacks allow lenders to defer discounts and also help stop customers from migrating to other banks for better rates. Nowadays home loan customers do not stick to a lender for more than a few years seeking better rates. These schemes help the banks check customer migration. For borrowers, it is better to take a discount upfront than later.”
The tenure of the loan under this scheme should be for 15 to 30 years. The customers can choose to adjust the cash back against the principal outstanding of their home loan or they can get it as direct credit in the bank account.
BETTER DEAL
- The bank is promising customers 1% cashback starting from the first EMI
- The first credit will happen in one batch after 36 EMIs and then once every 12 months
- ICICI plans to ensure that customers stick on with it for the first 3 years
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Anup Bagchi, executive director, ICICI Bank, said, “The new home loan is offering a benefit of 1% cashback on every EMI to customers. We believe that this proposition will propel customers to fulfill their aspirations of owning a home.”
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