SBI cuts interest rate on home loans above Rs 75 lakh bonaz capital
State Bank of India (SBI), country’s largest lender cut interest rate on home loans above Rs 75 lakh by 10 basis points (bps) to 8.60 percent. bonaz capital
State Bank of India (SBI), country’s largest lender cut interest rate on home loans above Rs 75 lakh by 10 basis points (bps) to 8.60 percent. For salaried women borrowers, the loans will be offered at 8.55 percent.
“The new rates will be effective from June 15… The home loan rates offered are lowest in the industry,” SBI said in a statement.
“Taking a cue from the recent RBI reduction in risk weightage on home loans, SBI is passing on the benefit to its customers by reducing its interest rates on home loan above Rs 75 lakh,” the statement added.
Rajnish Kumar, MD, National Banking, SBI, said, “Loans above Rs 75 lakh account for about 15 percent of our total loans.”
Previously Kumar had said that there is less scope for reduction in lending rates. Hence, for lower value loans, the interest rates may not come down soon.
During the second bi-monthly policy announcement, as a countercyclical measure, the central bank also relaxed the risk weight requirements and loan to value (LTV) ratios of individual home loans above Rs 30 lakh.
Risk-weighted assets are used to determine the minimum amount of capital that must be set aside by banks and other institutions to reduce the risk of default on loans. For instance, a loan that secured by a letter of credit is considered to be riskier and hence requires more capital than a mortgage loan that is secured with a collateral.
For loans above Rs 30 lakh and up to Rs 75 lakh, the risk weight has been brought down to 35 percent (from 50 percent) with LTV ratio up to 80 percent. For loans above Rs 75 lakh, with LTV ratio up to 75 percent, risk weight has been reduced from 75 percent to 50 percent.
This would allow banks to set aside lower capital towards every incremental loan disbursed thereby making more capital available for banks.
SBI’s home loan growth in FY17 was at 16.8 percent at Rs 222,605 crore. SBI leads the home loan market share followed by HDFC and ICICI Bank.
Last month, SBI had reduced interest rates on home loans up to Rs 30 lakh to be offered at 8.35 percent for women borrowers and 8.40 percent for others.
Other top major lenders including HDFC, ICICI Bank and Axis Bank have already reduced rates on loans up to Rs 30 lakh at 8.35 percent for women 8.40 percent for others. Axis Bank offers the 8.35 percent to all borrowers, not just women.