SBI, HDFC slash home loan rates

SBI, which is country's largest public sector lender, keeps its rate lower by 10 bps

Two of India’s leading home loan financiers, State Bank of India (SBI) and Housing Development Finance Corp (HDFC), have cut interest on home loans by 15-35 basis points.

SBI, the country’s largest lender, has reduced interest on home loans of up to Rs 75 lakh 15-35 basis points. Effective Friday, the bank will charge 10.15 per cent interest on home loans up to Rs 75 lakh; women borrowers will get an additional discount of five basis points.

“The revised per-lakh EMI (equated monthly instalment) for a loan tenure of 30 years will be Rs 885 for women and Rs 889 for others, against the prevailing EMI of Rs 900,” SBI said in a statement.

HDFC decided to cut the interest on home loans availed of before January 31 by 25 basis points. Now, the entity will charge 10.25 per cent for loans of up to Rs 75 lakh.

“HDFC has announced a special winter bonanza for its home loan customers, effective Friday, December 20. This is a limited-period offer and is valid for all new applications submitted before January 31, 2014, with the first disbursement taken by February 28, 2014,” HDFC said in a statement.

Both the lenders had done away with the sub-Rs  30 lakh category. Now, there are just two categories—one up to Rs 75 lakh and the other for loans exceeding that amount.

In October, HDFC had launched a festive season scheme through which it offered rates at a discount of 25 basis points. Through this scheme, home loans of up to Rs 25 lakh were offered at 10.25 per cent to new customers; for loans of Rs 25-75 lakh, the bank charged 10.5 per cent.

Earlier this month, HDFC had raised the home loan rate by 10 basis points, owing to a rise in the cost of funds. Following measures by the Reserve Bank of India to tighten money-market liquidity and curb volatility in the foreign exchange market, lenders’ cost of funds had risen. Now, with those steps being withdrawn, the costs are declining.

A senior SBI executive said the bank’s decision to revise the home loan rate was due to competition in the market. “Rates were higher than competition. It will be a positive contribution to net interest income, while the impact on margins will be small. This should give a push to retail loan book growth, at a time when the economy has slowed,” he said.

Most banks are pushing retail loans such as those for houses and cars, at a time when corporate loan demand has been sluggish and fresh project investment proposals few.

As of September-end, SBI’s home loans due stood at about Rs 1.30 lakh crore, 20 per cent more than a year earlier. Among commercial banks, SBI is the largest home loan entity.