SBI OFFERS NO CUT IN HOME LOAN RATES FOR NEW BORROWERS

MUMBAI: New borrowers were disappointed on Monday when State Bank of India, which had fuelled hopes when it cut the base rate by 0.40 percentage points to 9.30%, did not offer a similar reduction in home loan rates, attributing market reasons.

But since a majority of the funds that banks source, come from deposits — mainly fixed deposits where the rates are comparatively high — it will still take some time for commercial banks to lower their loan rates.

Base rate is the minimum rate beyond which a bank does not lend.

Under the new regime effective from October 5, SBI is offering a home loan rate of 9.55% (9.50% for women), which is higher than the 9.35% the bank had offered borrowers in June this year.

This is likely to indicate the direction in which the market could move as SBI is the country’s largest lender with a leading share of most loan segments. Others such as HDFC and ICICI Bank are scheduled to come out with their loan rates soon.

SBI’s move follows the RBI’s monetary policy decision on September 29 when the central bank pleasantly surprised markets with a 0.50 percentage point reduction in the repo rate, cumulatively reducing interest rates by 1.25% in four tranches in a year. .

Typically, banks price their loan rates at a certain mark-up — it is called spread in banking parlance — to the base rate.