SBI Cuts Home Loan Rate To 9.1%: A Festive Bonanza For Borrowers

Home Loan
SBI Cuts Home Loan Rate To 9.1%: A Festive Bonanza For Borrowers

State  Bank  Of  India  (SBI),  the  largest  public  sector  lender  has  cut  home  loan   rate  to 9.1% per  annum.  SBI  has  reduced  the  home  loan  rate  to  the  lowest  level  in  six- year  as  part  of  a  festive  scheme.  The  news  will  bring   cheers  to  many  new  home  loan  borrowers.

Under  this  scheme,  the  home  loan  rate   for  women  or  loans  with  women  as  co-borrowers has  come  down  to  9.10 %  per  annum  from  existing  9.25 %   and  9.15 %  from  existing  rate  of  9.30 %  per  annum  up to Rs 75 lakh for  all  other  borrowers  respectively. These  rates  cut will  be  available  to  both  new  borrowers  as  well  as  those  who  wish  to  switch  over  their  home  loan  to  SBI   as  the  bank  has  done  this  by  revising  the  spread  over  the benchmark. With  this  reduction,  SBI’s  home  loans  are  the  cheapest  in  the market  and  will  benefit  a  lot  of  new  borrowers  who  are  looking  for  budget  homes.

This  limited  period  festival  rates  will  be  valid  for  loans  sanctioned  in  November  and December  2016,  and where  disbursement  is  taking  place in  a  month. Moreover,  SBI  has  also waived  off  all  processing  fees  as  part  of  the  festive  season  offer.

According  to  the  Times  Of  India  report,  SBI  MD  Rajnish  Kumar  said, “The  rate  cut  will bring  down  the equated  monthly  installment  on  a  Rs 50-lakh  loan  by  Rs 542  per  month. Since  March,  the  EMI  has  come down  by  over  Rs 1,500.”

The  latest  rate  cut  comes  after  the  SBI  reduced  its  marginal  cost  of  funds based  lending  rate  (MCLR)  by  15  basis  points  (bps)  in  the  last  week  of  October. SBI  links  new  home loan  interest  rates  to  one-year MCLR, which  has  come  down  to  8.90%  from  9.05%. In  fact, all  banks  typically  lend  with  a  spread  on  the  MCLR. Usually, the  rates  are  25-50  bps  higher than  the  MCLR.

SBI  has  a  spread  on  home  loans  at  20  bps  for  women  and  25  bps  for  other  individuals  (100 bps = 1 % point). Hence,  the  interest  rate  on  SBI’s  home  loans  for  these  two  groups would  be  9.10%  and  9.15%  per annum, respectively.

MCLR  is  the  new  benchmark  lending  rate  at  which  banks  lend  to  new  borrowers. The MCLR  rates  get revised  every  month. New  home  loans  are  either  linked  to  6-month  or  1-year  MCLRs. In  fact,  these  loans come  with  a  reset  clause  based  on  the  tenure  of  the MCLR  it  is  linked  to.  SBI’s  benchmark  rate  is  the  one-year  Marginal  Cost  of  Lending  Rate (MCLR),  which  has  been  effective  from  April  2016.  Once  a  customer avails  a  loan,  he  is locked  into  the  MCLR  for  a  year.

The  announcement  of  these  rates  cut  has  come  after the  Reserve Bank  of  India  (RBI) cutting  the  repo  rate by 25  bps  in  its  monetary  policy  review  in  October. RBI  governor Urjit  Patel had  then  expressed  his  concerns about  the  benefits  of  earlier  bank  rates  cut  not getting passed  to  the  borrowers.

Other  banks  are  also  transmitting  the  bank  rates  cut  to  retail  lending  rates. ICICI  Bank  Ltd, has  also reduced its  MCLR  by  10  bps  to  8.95%.

The  current  home  loan  rate  cut  by  SBI   comes  at  a  time  when  there  is  a  sluggish  growth in  loans  in  the  banking  sector. Moreover, SBI  can  increase  its  loan  growth  by  grabbing more  market  share  from  other lenders by  offering  the  lower  rates. Experts  say  that  it  could  increase  the  competitive  pressure  on  other  lenders  to  bring  down  their  interest  rates.  It  is also  an  indicator  that  the  lending  rates  are  set  to  fall further in  the future.

 

Next Post

ICICI Bank And HDFC Cut Home Loan Rates By 0.15% To Compete With SBI

Fri Nov 4 , 2016
Published on: Nov 4, 2016 @ 16:12 ICICI Bank  and  HDFC  have  reduced  home  loan  interest  rates  by  0.15  per cent  up  to  a  loan  amount  of  Rs 75  lakh. Competition  in  the  home loan  business  has  begun  since  State  Bank  Of  India (SBI)  had  reduced its  rate  by  15  bps […]
Home Loan Rates