After rate cut, Bank of Baroda eyes bigger home loan pie

After announcing lowest lending rate on home loan in industry, public sector lender Bank of Baroda (BoB) is turning aggressive to grow its housing loan portfolio. It expects to disburse about Rs 2,500 crore in the fourth quarter of this financial year, ending March.

Besides lowering interest rate, bank has re-hauled processes, technology support and communication for retail business in the past few quarters.

“This should help us substantially scale up business in the coming quarters,” said a senior BoB executive.

Its annual growth in home loans was 11.58 per cent for the 12 months ended September, 2016, with an outstanding book of Rs 26,327 crore.

Looking at the quantum of disbursing housing loans in each quarter in the past, performing this task (Rs 2,500 crore in a quarter) looks very challenging.

A look at the period between June 2015 and September 2016 shows that quarterly disbursements of home loans have ranged between Rs 430 crore to Rs 929 crore.

The home loan business clocked each quarter by the State Bank of India is multi-fold. Its disbursements varied between Rs 8,159 crore and Rs 10,869 crore.  

On Monday, BoB slashed home loan rates by 70 basis points to 8.35 per cent. This is applicable for customers having a strong Cibil scores. At 8.35 per cent, the rate is lower than industry leader SBI’s 8.5 per cent offer.

The bank’s existing customers, who are on base rate, can also switch to the new marginal cost of fund based lending rates (MCLR) without any additional charges.

BoB’s one-year MCLR, to which all home loans are linked, is also at 8.35 per cent. SBI’s one-year MCLR is currently at eight per cent.

BoB has reduced its MCLR by 55-75 basis points across all tenors effective January 7.

A BoB official said a customer with a Cibil score of 760 and above will be offered the lowest rate of 8.35 per cent. For those with a lower Cibil score rate would be higher, up to 100 basis points.

Rating agency ICRA, in its analysis of housing credit by banks and HFCs, said even at lower yields of 8.6 per cent, banks and larger HFCs would still be able to make reasonable returns.  Banks currently have substantial funds parked in lower-yielding investments, given the weak credit demand.

FCNR (B) DEPOSITS SLIDE ON REDEMPTION

The FCNR (B) or foreign currency non-resident (bank) deposits fell by $18.69 billion in three months to the end of November 2016. The dip follows redemption on three-year deposits contracted in 2013 by non-resident Indians (NRIs). Despite the fall in NRI deposits, India’s foreign exchange reserves dipped by just $1.4 billion in three months to $365.3 billion by end-November.