SBI reduces home loan rates, standardises them ahead of festive season

It will offer credit score-linked home loans at 6.70% irrespective of the loan amount; distinction between salaried and non-salaried borrowers removed

After private-sector lender Kotak Mahindra Bank reduced its home loan rates ahead of the festive season, the country’s largest lender, State Bank of India (SBI) has followed the same path.

SBI on Thursday said it will offer credit score-linked home loans at 6.70 per cent, irrespective of the loan amount. More importantly, for home loans above Rs 75 lakh, which was attracting an interest rate of 7.15 per cent earlier, now, it will come down to 6.7 per cent, results in a saving of 45 bps. This translates to an interest saving of more than Rs 8 lakh, for a Rs 75 lakh loan with a 30-year tenure.

Also, the now interest distinction between salaried and non-salaried borrowers has been removed by the lender. So, there will be no occupation-linked interest premium charged to prospective home loan borrowers. Earlier, the rate of interest applicable for a non-salaried borrower was 15 bps higher than the interest rate applicable to a salaried borrower.

C S Setty, Managing Director (Retail & Digital Banking), SBI said, “The 6.70 per cent home loan offer is also applicable to balance transfer cases. We believe zero processing fees and concessional interest rates in the festive season will make homeownership more affordable”.

Ahead of the festive season, the home loan market, which has been growing at a good pace throughout the pandemic, and has been one of the best performing segments, is seeing a price war among lenders.

Last week, Kotak Mahindra Bank reduced its home loan rates by 15 basis points (bps) to 6.5 per cent, making it one of the lowest home loan rates in the country in over a decade.

While there has been no policy rate cut recently, excess liquidity in the system is pulling rates down in general, said experts.

SBI is the biggest player in the home loan segment, with a book size of Rs 5.05 trillion. On a year-on-year basis, its home loan book grew by 11 per cent.

SBI is expected its is expecting its home loan portfolio to touch Rs 7 trillion by the financial year 2023-24 (FY24), buoyed by an increased desire among youth to own homes early in life, rising incomes, and government policies like the cuts in stamp duty and subsidy.

In Q1FY22, SBI said, they have seen slippages coming from the SME sector as well as from home loans. Almost 50 per cent of the home loan book is to the non-salaried class. Many of the SME borrowers also would have availed of home loans. And, the stress is largely due to the disruption in the cash flow of SMEs and once the cash flow comes back, the bank expects the home loan borrowers will honor their obligations. As of June quarter, its gross NPAs in the home loan book is 1.39 per cent.