Public sector lender Central Bank of India has frozen lending rate on new housing loans up to Rs 20 lakhs (Rs 2 million)  at eight per cent for a period of one year.

The bank has targeted to disburse an additional Rs 500 crore (Rs 5 billion) of home loans by April end with the introduction of the new scheme, a statement said in Mumbai on Thursday.

Lending rates for loans between Rs 500,000 and Rs 20 lakhs would now be offered at eight per cent as against 9.25 per cent earlier, the bank said.

After one year, this rate would be reviewed according to the prevailing market situations, a Central Bank official said.

Customers who have been sanctioned loans between March 12 and April 30, 2009, can avail the benefit of the scheme, the bank said.

In February, Central Bank had reduced its lending rate on home loans up to Rs five lakh from 8.5 per cent to eight per cent.

State-owned banks started cutting their home loan rates after State Bank of India [Get Quote] froze its new home loan rates at eight per cent for one year recently.