In an effort to grow their home loan business, State Bank of India (SBI) and Bank of Baroda (BoB) have slashed rates by 25-45 bps, and introduced key changes. For new home loans of Rs 75 lakh and above, SBI will charge 6.7 per cent as against the previous 7.15 per cent. The country’s largest lender will also offer credit score-linked home loans at 6.7 per cent, irrespective of the loan amount.
Besides, SBI has also done away with the distinction between salaried and non-salaried borrowers — there will be no occupation-linked interest premium charged for prospective home loan borrowers. Earlier, the rate of interest applicable for a non-salaried borrower was 15 bps higher than a salaried borrower.
SBI executives said while keeping their focus on affordable housing and small-ticket loans, the bank wants to increase its business in large-size loans (Rs 75 lakh and above). These customers have a high credit score and are in a position to negotiate best deals.
“When challenge is thrown at us, the bank will respond in an effective way without diluting eligibility norms,” a top SBI executive said.
Meanwhile, BoB said it will offer a waiver of 25 basis points on the existing rates for home and car loans, along with a waiver of processing fee in home loans. Now, the bank’s home and car loan rates will start from 6.75 per cent and 8 per cent, respectively.
Last week, Kotak Mahindra Bank reduced its home loan rates by 15 bps to 6.5 per cent, making it one of the lowest rates in the country in over a decade.
Ahead of the festive season, the home loan market, which has been growing at a good pace throughout the pandemic, is seeing a price war among lenders. 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 has grown by 11 per cent in Q1, FY22.
SBI is expecting its home loan portfolio to touch Rs 7 trillion by the financial year 2023-24 (FY24), driven by an increased desire among the youth to own homes early in life, rising incomes, and government policies such as cuts in stamp duty and subsidy.
The SBI said there have seen slippages from the SME sector in Q1FY22.