Home loan portability reaps huge gains for SBI

25% of the bank's new customers have migrated from other banks

With customers are allowed to shift their home loan to other banks at no extra cost, State Bank of India has seen 25 per cent of its fresh home loans are to customers who migrated from other banks.

Last year, following Reserve Bank of India’s suggestion, the Indian Banks’ Association had asked to its member banks to abolish pre-payment penalty on floating rate home  loans which encouraged customers to shift banks and take advantage to lower rate.

At present, SBI’s home loan rate lowest among large banks, which is 10 per cent for Rs 30 lakh loan. SBI also have the lowest base rate – the reference rate for all loans – which is at 9.75 per cent.

In October, RBI by issuing a circular, abolished pre-payment penalty for all banks.

SBI which is pushing its retail credit growth, as corporate loan demand is slack, had also reduced the spread it charges from home and auto loan customer. Spread is the difference between the base rate and the actual rate which a bank lends to a borrower.

Following encouraging response to its rate reduction, SBI, is targeting 30 per cent growth in the home loan segment for the current financial year as compared to 16-18 per cent overall loan growth. After the rate reduction, home loans disbursals of SBI have increased almost by 3 times to Rs 150 crore per day.

Capitalisation

With the government planning to infuse Rs 15,000 crore in public sector banks in the current financial year, SBI said it will prefer a rights issue over a qualified institutional placement.

“Finance Minister has said that around Rs 15,000 crore has been allocated for recapitalisation . We will see what kind of allocation comes from the government.,”  Chaudhuri said adding that the bank is confident of getting Rs 4,000 crore from the government.”          

As on September end, SBI’s capital adequacy ratio was 12.63 per cent with a tier-I capital of 8.97 per cent.
Base rate

While SBI has decided not to reduce its base rate for the time being, but Chaudhuri did not rule out the possibility of a rate cut next month.

“We have reviewed the base rate. We have decided not to reduce it any further, as our base rate is the lowest,” Chaudhuri said.

He said the bank’s asset liability committee will again meet in the first week of December to decide on the matter.