MUMBAI: The nation’s largest lender State Bank of India (SBI) has joined its peers in reducing interest rates on new retail and business loans tied to external benchmarks to the tune of 15-25 bps.
Seven of its smaller peers like Bank of Baroda, Punjab National Bank, Bank of India, Indian Bank, Uco Bank and two mid-sized private sector lenders Karur Vysya Bank and RBL Bank have already lowered their repo-linked loan pricing for existing borrowers by 15-25 bps.
Among the large banks, only HDFC Bank, which is the country's second largest bank, to join the rate-cut cue. Despite choosing not to pass on the benefits to existing customers and new borrowers, the largest private sector lender instead increased MCLR loans prices by 5 bps. Its current loans are priced in the range of 8.75-9.65% for standard housing loans and for other loans at 9.40-9.95%.
The SBI move, effective February 15, comes more than a week after the Reserve Bank cut the repo rate by 25 bps for the first time in close to five years.
Following the downward repricing of new loans, SBI’s home loan rates now range from 8.25 to 9.2% based on credit scores, while business loan rates depend on deposit rate adjustments.
While the announcement is for new loans, all those retail and small business loans linked the to external benchmark—repo rate—come down or go up automatically when the RBI changes the repo rate.
In a posting on its home page late Sunday, SBI said its new home loans tied to the external benchmark rate (EBR), now come at 8.9% -- which gives the bank a spread/margin of 2.65% over the 6.25% repo rate. Business loans are available at 8.25-9.2% depending on the borrowers credit score, it said.
The top-up home loans are priced in the 8.55 to 11.05% range, while overdraft top-ups come in 8.75-9.7% and loans against property at 9.75-11.05%.
Though home and small business loan EMIs will fall now, SBI's auto loans are also linked to the one-year marginal cost of funds-based lending rate (MCLR), currently at 9%, and will come down only when deposit rates decline.
Both in home loans and auto loans SBI leads the market with home loan book at 7.98 trillion, being the single largest retail asset for the lender.