Mumbai: Several state-owned banks have waived the processing fees on home loans to spur demand for their primary retail product during the festive season.Banks, including Central Bank of India, Canara Bank, Indian Overseas Bank, Bank of Baroda and Punjab National Bank, have fully waived processing fee for the period ranging from December 2024 till March 2025, according to information on their websites.Indian Overseas Bank, which waived the processing fee for home loans, saw a 19% quarter-on-quarter increase in disbursals to Rs 1,849.67 crore in the second quarter of this financial year."Purchasing new things, especially a house, is considered most auspicious during the festive season. We announced a waiver of the processing fee for home loans. This is a big attraction to acquire more business from existing customers and attract new clients," said Ajay Srivastava, managing director and CEO, Indian Overseas Bank.Unlike public sector banks, private sector banks have not announced any such waiver so far. Public sector banks usually offer more attractive home loan rates, making them the preferred institutions for borrowers.114358884On a loan of up to Rs 30 lakh, the lowest rate offered by some private banks is 8.70%, while state-run banks are offering similar loans at 8.35% for up to 30 years."Lenders who source the business through direct sales agents (typically private banks) don't usually waive processing charges, as the sanctioning process involves costs. Given the competitive lending rates for PSUs (public sector undertakings), lower proportion of DSA origination and business targets amid festival season, these state-run banks could waive processing charge," said Anil Gupta, vice president, financial sector ratings, at ICRA.Further, as home loans are long tenor assets for lenders, the ability to cross sell liability or other asset product over the customer lifetime is higher, which is another incentive to waive such charges, he said.Credit outstanding to the housing sector, primarily home loans, has increased by Rs 10 lakh crore since 2022, primarily because of pent-up demand for homes in the wake of the Covid-19 pandemic, according to the Reserve Bank of India data. Bank credit outstanding to home loans stood at Rs 28.33 lakh crore in August, up from Rs 18.35 lakh crore two years ago, as per the data.