Mumbai: The third largest private sector lender Axis Bank Tuesday launched a dedicated home loan product for the self-employed.
At 1 percent above the base rate to start with, borrowers will pay higher than the ones in the salaried class, but lower than the going rates in the market, Axis Bank's head for consumer lending and payments Jairam Sridharan said.
"The self-employed category is definitely riskier than the salaried class. However, we have a clause under which prompt payment will reduce the interest outgo and get a self-employed borrower at par with a salaried one in five years," he said, adding the initial rate for such borrowers will be 11 percent.
The interest rate will get reduced by 0.25 percent each in three phases at the end of the second, third and the fifth year, he said, adding, at 0.25 percent over the base rate, a self-employed person will be at par with a salaried borrower by the fifth year.
The bank is primarily targeting traders and small businessmen, Sridharan said.
He said over half of the country is self-employed and this segment faces trouble getting bank loans, forcing them to approach NBFCs and pay higher interest rates.
At present, the borrowers from this class build a good credit history in two-three years and migrate to lower priced home loans from a bank, he said.
However, he conceded that the home loan segment is witnessing a dip in growth due to overall troubles in the economy, but added it continues to grow for his bank without giving any figures, citing pre-results silent period.