SBI home loan rate at 9.1% – lowest in 6 years!

The rate of 9.15% will be applicable for other borrowers. Another benefit is the waiver of all the processing fees.

In a festive cheer for the general public, State Bank of India has cut its home loan rate to 9.1%. This comes under a festive scheme of SBI.

According to the latest reports, under the new scheme home loans for women, or loans with women as co-borrowers, will be available for 20bps above the benchmark rate, implying a rate of 9.1%. The rate of 9.15% will be applicable for other borrowers. Another benefit is the waiver of all the processing fees.

It had been reported that these rates will be valid for loans sanctioned in November and December this year, and where disbursement is taking place in a month. Such rate cut comes on the back of a general interest rate reduction last week when the SBI reduced its benchmark rates by 15 basis points.

In a report of Times of India, it quoted SBI managing director Rajnish Kumar as saying, “The rate cut will bring down the equated monthly instalment on a Rs 50-lakh loan by Rs 542 per month. Since March, the EMI has come down by over Rs 1,500.” With this reduction, the SBI’s cheapest home loans are now 20bps lower than ICICI Bank and HDFC’s cheapest home loan rate of 9.3%.

SBI has kept the overnight Marginal Cost of Lending Rate (MCLR), which is the most aggressive offering, at 8.65 per cent, while the one month is at 8.75 per cent. The MCLR is used for calculating the rate of interest of home loans, and under the revised rate structure, the one-year will come down to 8.95 per cent.

This latest rate cut will be available only for new borrowers, as this change has been done by revising the benchmark. SBI’s benchmark rate is the one-year which has been effective from April 2016. Earlier, loans were priced in relation to the older benchmark -the base rate. The MCLR is revised every month for new borrowers. But once a customer avails of a loan, he is locked into the MCLR for a year.

The SBI is aiming to increase its loan growth by grabbing market share from other lenders by offering the lower rates on takeover of loans. But it has been reported that even though lower home loan rates reduce SBI’s margins, they help the bank in deploying resources which are piling up as bank deposits are growing at a faster clip compared to bank loans.

According to the media reports, the Central bank continues to be concerned on the issue of transmission even after the introduction of the MCLR. The issue was highlighted by Governor Urjit Patel at his maiden policy review this month.