The Telegraph
Wednesday , August 27 , 2014
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SBI cuts home loan rate

Mumbai, Aug. 26: The State Bank of India (SBI) today reduced interest rates on home loans by up to 15 basis points. The relief, however, will only apply to new home loans and there will be no change in the equated monthly instalments of existing borrowers.

The SBI will offer an interest rate of 10.10 per cent to women borrowers and 10.15 per cent to others, irrespective of the loan amount.

Earlier, there were two categories based on the loan amount. Women borrowers could seek home loans of up to Rs 75 lakh at an interest rate of 10.10 per cent, while others would get it at 10.15 per cent. However, the interest rate on loans of over Rs 75 lakh stood at 10.25 per cent and 10.30 per cent for women and men, respectively.

Banking circles feel the move from the SBI is largely to garner market share. With banks facing tardy demand in credit from the corporate sector, they have been focusing on retail borrowers. It is felt that other banks are likely to follow the SBI.

Earlier this month, HDFC, which is the country’s largest housing finance company, had announced a special monsoon offer to bring down the interest rate to 10.15 per cent for new borrowers, irrespective of the loan amount.

SBI’s rate cut is being seen as a move to counter that offer. However, in the SBI’s case, there will be no relief for existing borrowers as the bank has not altered its base rate, which currently stands at 10 per cent. The base rate, which serves as a benchmark for most of the loans, is the minimum rate at which banks must lend.

The SBI has been maintaining that its existing customers have not been adversely affected as its base rate is among the lowest in the industry. The country’s largest bank had last brought down its home loan rates in December 2013 when they became cheaper by up to 25 basis points.

As of June 30, home loans provided by the SBI stood at Rs 1,44,210 crore, marking a growth of nearly 16 per cent over the same period of last year. Home loans account for around 14.30 per cent of the bank’s domestic advances, up from 13.73 per cent in the preceding year.

In May this year, ICICI Bank had also cut its home loan rates by 10 basis points.

SBI’s is the first interest rate reduction after the August review of the monetary policy by the Reserve Bank of India.