1:46 pm - Wednesday November 4, 2015

State Bank of India may cut new home loan rates

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Mumbai – State Bank of India has decided to lower home loan rates for new borrowers and offer a special discount to women, in moves prompted by the Reserve Bank of India keeping policy rates unchanged on Wednesday contrary to expectations that they would be increased.

The country’s largest bank has decided to lower rates by 15-25 basis points (bps) and raised the borrowing limit for loans at the lowest rate. One basis point is one-hundredth of a percentage point. The changes are expected to kick in shortly.

“The reduction in the risk weightage and poor demand for loans has been the key reason for SBI to reduce rates,” said a senior SBI official.

Move may Help Realty Sector

The move might lead to a revival of interest in the real estate sector, which has been hit by high prices amid a sluggish economy.

SBI will charge 10.15% on loans up to Rs 75 lakh and 10.30% on loan amounts higher than that. Women borrowers will get a further 5 bps off. Earlier, the bank charged 10.30% for loans up to Rs 30 lakh and 10.50% for loans above that level.

The move to lower rates and offer discounts to women comes as Housing Development Finance Corporation, the country’s biggest mortgage company, did the opposite about two weeks ago. It raised rates by 10 bps to 10.5% for loans up to Rs 30 lakh and 10.75% for loans between Rs 30 lakh and Rs 75 lakh.

“The aim is to attract customers and improve market share,” said an SBI official who did not want to be named. The decision to reduce rates had been taken at a meeting of the high-level asset liability committee, he said. SBI has a home loan book of Rs 1,30,034 crore that comprises 13.6% of the bank’s loan book.

The move to raise the borrowing limit at the minimum rate to Rs 75 lakh from Rs 30 lakh comes after RBI changed its policy on risk weightage.

In June, RBI reduced risk weightage to 50 bps for home loans up to Rs 75 lakh, and 75 bps for loans above 75 lakh. Earlier, risk weightage was in three slabs – 50 bps for loans up to Rs 30 lakh, 75 bps for loans up 75 lakh and 125 bps for loans above Rs 75 lakh.

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