Mumbai, Sept. 30: State Bank of India (SBI) today announced a sharp reduction in its retail lending rates. The move, which covers money borrowed for buying homes, coincides with the festival shopping spree.
The country’s largest commercial bank, which entered the booming retail finance segment after its private sector rivals like ICICI Bank and HDFC Bank, has been building up its fledgling retail finance business through a mix of strategic alliances with auto manufacturers and leveraging its vast branch network.
Today, in an attempt to further notch up a larger market share, the bank slashed interest rates on home and car loans by 0.25 to 1.5 per cent and worked out new maturity slabs that will suit housing loan customers.
The changes will be effective from Wednesday, an SBI official said. “Our primary aim is to pass on the benefits of the softening interest rates to the retail customers and attract more borrowers into our fold,” he added.
The revised floating rate for home loans for a tenure of five years has been cut by 25 basis points to 7.75 per cent from 8 per cent earlier. The bank major has done away with the bracket of 5-10 years and replaced it with a new bracket of 5-15 years and 15-20 years. There was no statement from the bank on the revisions.
The interest rate for 5-15 years has been pegged at 8.25 per cent against 8.75 per cent. For loans of 15-20 years, the interest rates have been revised to 8.5 per cent from 9.25 per cent, shaving almost 75 basis points in the process.
In an attempt to play safe, the SBI official said the interest rate on fixed loans would be 25 basis points higher than those offered under the floating rate system.
SBI’s housing loan portfolio has grown Rs 1,521 crore in the five months of this fiscal, while the total personal banking advances have increased by Rs 2,400 crore. This is significant as it comes against the backdrop of a decline in credit to other sectors.
The bank major also shook the car finance market with rate cuts. Its car loans will be a whopping 150 basis cheaper at 11 per cent compared with 9.5 per cent earlier for a period up to three years. The interest will be 10 per cent for periods above three years to seven years.
The automobile market has seen a lot of bustle after SBI made an aggressive late entry by signing exclusive deals with Maruti Udyog for financing potential customers. It has also forged deals with other auto majors like Tata Motors, Bajaj Auto and TVS.