The Telegraph
Saturday , June 10 , 2017

SBI cuts premium home loan rates

Mumbai, June 9: The State Bank of India (SBI) today lowered its interest rates on home loans above Rs 75 lakh by 10 basis points, just days after the Reserve Bank of India offered some reliefs to the sector.

India's No. 1 bank said the new rates would take effect from June 15 - with salaried women to pay 8.55 per cent and others 8.60 per cent on their home loans. Last month, it had tweaked the rates for loans up to Rs 75 lakh.

The RBI on Wednesday gave twin reliefs to housing loans that were expected to be passed on to buyers in the form of reduced interest rates.

The central bank reduced the provision or the amount banks have to set aside on these loans to 0.25 per cent from 0.40 per cent and cut the risk weight for loans above Rs 75 lakh.

Previously, the risk weight on loans of above Rs 75 lakh where the loan-to-value ratio (LTV) is up to 75 per cent stood at 75 per cent. This was reduced to 50 per cent. LTV is the ratio of a loan to the value of the property.

Analysts said the National Housing Bank (NHB) would also toe the RBI line and soon relax the risk weight applicable on housing finance companies (HFCs).

"The reduction in risk weights and standard asset provisioning for new individual home loans reaffirm the regulatory impetus to a segment that has forward and backward linkages to the economy and also has stood resilient to asset quality pressures while supporting the government's objective of Housing for All by 2022," Rohit Inamdar, group head and senior vice-president, financial sector ratings, Icra said.

The rating agency feels the lower incremental provisioning requirement of 0.25 per cent is likely to reduce the provisioning costs for HFCs (housing finance companies) by around 0.03-0.08 per cent, depending on their pace of growth and the share of disbursements to the individual home loan segment.

"Taking a cue from the recent RBI reduction in risk weight on home loans, the SBI is passing on the benefit to its customers by reducing its interest rates on home loan above Rs 75 lakh," managing director (national banking) Rajnish Kumar said.

Banking circles now feel that the others are also likely to bring down interest rates on such loans.

Capital cushion

Backed by its mega qualified institutional placement (QIP) issue, the SBI today said it would not need any funds infusion from the central government as it is comfortable on the capital front.

The SBI had raised Rs 15,000 crore from the issue of shares to the institutions launched on June 5. About 52 crore shares of the bank were offered to institutions at Rs 287.25 a piece that will bring the government's holding in the bank down to 57.07 per cent. The QIP saw a demand of more than Rs 27,000 crore.

Further, the capital adequacy ratio of the merged bank will stand at 13.64 per cent.

Speaking to reporters here today, SBI chairperson Arundhati Bhattacharya said the bank was now comfortable on the capital front till next year. Therefore, it will not need any infusion from the Centre.

Rating agency Moody's yesterday said public sector banks would need Rs 90,000 crore from the government over the next two years to meet capital adequacy norms. much in excess of the Rs 20,000-crore kept for them till March 2019 by the Centre.

"As per the plan we have put in place, we are quite comfortable on the capital front till next year. We will not require government funds (in the current year). At this point we have not asked for capital (from the government)... Even without this capital raising, we can meet all the regulatory capital requirements up to 2019, including Basel III need. This is over and above that," the SBI chief said.

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