MUMBAI: Bringing cheer to home buyers, State Bank of India on Monday reduced interest rate by 25 bps for loans up to Rs 30 lakh for women borrowers. At 8.35 per cent, it is the lowest rate and will be effective from Tuesday. For others, SBI will charge 8.40 per cent till July, 31. HDFC, the second-largest player, offers 8.65 per cent rate to women for loans up to Rs 75 lakh and 8.7 per cent for others, followed by ICICI Bank.
More banks are expected to cut interest rates for three reasons. One, cost of funds is reducing, as banks are flush with deposits following demonetisation. Two, as RBI Governor Urjit Patel stressed last month, there was still room to cut rates without having to tweak key policy rates. Banks passed on only 0.90 per cent rate cuts as against a 1.75 per cent repo rate reduction since January 2015. Three, home loans are the fastest growing among all retail loans and have relatively lower delinquencies.
“This is a giant leap to give a fillip to the affordable housing segment keeping the Prime Minister’s vision of providing housing for all by 2022,” said Rajnish Kumar, MD for national banking, SBI adding, “This will lower monthly EMI by Rs 530 (for a Rs 30 lakh loan).”
A recent TransUnion CIBIL study found that home loans grew at a fast clip of 23 per cent per year between 2012 and 2016. As of March 2017, home loans outstanding stood at Rs 8.60 lakh crore, 15 per cent higher than last year.
“With lending rates continuing to fall, retail loan growth, especially in the mortgage segment, is estimated to be higher than systemic loan growth,” said Shashin Upadhyay, research analyst at ICICI Securities Ltd.
Though the overall home loans bucket is increasing, the average ticket size fell from Rs 4.7 lakh in 2009 to Rs 4.1 lakh in 2016. Meanwhile, SBI is also giving a special offer for construction finance to builders for affordable housing projects. “This will give a dual push both for construction finance and for home finance for affordable homes, but the bank did not quantify the reduction,” said Kumar.
SBI offerings
Loans up to H30 lakh considered under the affordable housing category
SBI’s 25 bps cut in interest rates is only for women borrowers
With this cut, SBI’s home loan rate at 8.35% is the lowest rate in the country
This could lower EMI by H530 for a H30 lakh loan
The new rate for women will be for the salaried borrowers; for the non-salaried, it will be a 20 bps cut
For male borrowers also, the reduction is 20 bps to 8.40%