SBI cuts home loan rate, EBLR by 25 bps after RBI's repo rate reduction

State Bank of India (SBI) has reduced its home loan rate by 25 bps to 8.25% and EBLR to 8.90%, following RBI's 25 bps repo rate cut to 6.25%, signalling easing rates in the system

The country's largest lender, State Bank of India (SBI), has cut its lending rate for home loans by 25 basis points (bps) to 8.25 per cent. It has also reduced the External Benchmark Based Lending Rate (EBLR) by 25 bps to 8.90 per cent. The revised rates come into effect from February 15, 2025, according to updated rate information on SBI's website.

 

The rate revision by the public sector lender follows the Reserve Bank of India's (RBI) reduction in the policy repo rate by 25 bps to 6.25 per cent on February 7, 2025, signalling an easing of rates in the system.

 

 

SBI's home loan portfolio grew by 14.26 per cent year-on-year (Y-o-Y) to Rs 7.92 trillion as of December 2024. Home loans account for 22.94 per cent of the total domestic loan portfolio. Other retail loans rose by 8.33 per cent Y-o-Y to Rs 5.30 trillion, with a 15.33 per cent share in domestic loans at the end of December 2024, according to an analyst presentation.

 

The downward revision in lending rates is likely to dent Net Interest Margins (NIMs) in the near term. SBI's NIM declined to 3.01 per cent in third quarter of the financial year 2024-25 (Q3FY25), compared to 3.22 per cent in the same period a year ago. Sequentially, NIM fell from 3.15 per cent in Q2FY25.

 

The yield on advances in domestic operations remained almost flat at 8.88 per cent in Q3FY25, while the cost of deposits increased to 5.07 per cent in Q3FY25, compared to 4.75 per cent in Q3FY24 and 5.03 per cent in Q2FY25.

 

According to Sachin Sachdeva, Sector Head – Financial Sector Ratings, ICRA, NIMs as a percentage of bank advances are likely to contract by 15 bps.

 

"Within banks, the impact on private banks is expected to be higher at 21 bps, compared to 11 bps for public sector banks. The impact will be greater for private banks due to their higher share of EBLR-linked loans compared to public sector banks," Sachdeva said.