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SBI reduces home loan rates
Posted on: 09/Feb/2019 5:00:52 PM
This may be disappointing for all of those who are looking for lower interest rate. The largest lender in India - the State Bank of India has announced yesterday (Friday) that there is 5 basis point reduction (a marginal change) for loan amount till Rs 30 lakh. This will come to effect from 7th February, the bank points.
1 basis point = one-hundredth of a percentage point.
The RBI has notably brought down its policy repo rate of the range 25 basis point just one day earlier. Amidst this, the marginal cut in interest has come to effect by the SBI. Since August 2017, the central bank has cut down its rate for the very first time. With that, there is also change in MPC’s perspective which has switched to sharply bringing down the inflation forecast, thus paving way for one more cut in its April policy.
What is Repo rate?
Repo rate is RBI’s rate of interest at which it lends money to the other commercial banks when there is any funds shortfall. This rate is used for coping with inflation.
In his note about this, the Chairman of SBI, Rajnish Kumar says in home loan sector, SBI has got the highest market share. It will be ideal to bring this rate cut so as to empower all the segments including large, lower and middle class.
Kumar, while addressing an event, says in spite of this reduction in home loan rate, there will be no change with the benchmark lending rates. It is tough for us to change the deposit rates as SBI offers it at very low range while set against the other banks. The benchmark lending rates cannot be cut without bringing down the deposit rates. On the other hand, it will be possible with the home loan rates while the quantum is kept minimal.
In India, the largest mortgage lender is SBI. The overall market share of SBI is 34.28 percent. Generally, the SBI home loans pertain to 1-year MCLR. As far as the Bank of Maharashtra is concerned, there is lesser MCLR which is for 6 months loan having 5 basis points up to 8.55 percent annually. This will be helpful for the SMEs and MSMEs
There have been a lot of struggle for the banks as they have very low deposit hike of just the range 6-7 percent. This is not in-line with the credit hike (in double digit) of the range 14 percent. There is severe competition with the deposit mobilization through post office schemes. There are also many other forms of investments that offer very high interest rates. Hence, banks that are eyeing to increase their deposits are finding it tough in reducing deposit rates, and hence reduce the lending rates. Furthermore, banks have got a lot of bad loans that need extra provisioning which results in pressures in terms of profitability.
