ICICI latest to slash lending rates, by 70 bps

INDIA’S LARGEST lender State Bank of India (SBI) on Monday introduced a hybrid loan where customers will be able to avail home loan up to Rs 30 lakh at a fixed rate of 8.55 per cent for the first two years of the loan tenor which will be later linked to a floating rate. For women customers of SBI, the home loan rate will be fixed at 8.5 per cent for the first two years.

Arundhati Bhattacharya, chairperson of SBI, however, while speaking to the media on Monday clarified that the newly introduced loan is “not a teaser loan”. “It is not a teaser loan. This is spread over our marginal cost of funds based lending rate (MCLR) only. It will fixed for two years and will later be linked to the MCLR,” said Bhattacharya.

SBI in a statement on Monday also said that its regular home loans up to Rs 75 lakh will be priced at 8.65 per cent interest. For women, a fully floating rate home loan will be available at 8.6 per cent. Home loans above Rs75 lakh have been priced at 8.65 per cent and 8.7 per cent for women and other customers, respectively.

At present, while 40 per cent of SBI’S total loan book is on MCLR, only 15 per cent of the home loan book is on MCLR. Meanwhile, customers already part of MCLR will save Rs 8.4 lakh over a period of 30 years on a Rs 50 lakh loan.

On demand for housing loans, Bhattacharya said that the bank intends to meet builders to see what best could be done to boost the realty sector. “I don’t believe that cut in interest in the be all and end all for priming growth in the economy. We will be talking to builders what more we can do,” she said.

The bank has launched SBI Bridge Loan for people who want to upgrade to a new house but have not yet been able to sell their existing loans. “We have created a product called bridge loan which can be availed on the existing property, pay the interest and within 2 years the borrowers need to liquidate the property and repay the loan,” Bhattacharya said.

She said that in normal circumstances ATM availability is around 88-90 per cent and of 49,000 ATMS of the State Bank group, nearly 40,000-41,000 ATMS are dispensing cash. “Cash availability in last one week has improved considerably and we are making efforts that in all ATMS there are two cassettes of Rs 500 notes,” she said.

On loan growth, Bhattacharya said: “The loan growth target we had given earlier was of 11-12 per cent. As of now it is only 6.7-6.8 per cent after the contraction in November and December. With this rate cut, we are hoping that we would be able to take it to 89 per cent”.

She added that since there are only three months left in the year, it is difficult at this point of time to envisage what will it be. AFTER STATE Bank of India, PNB and Union Bank, more banks, including ICICI Bank, Dena Bank and Kotak Mahindra Bank, on Monday slashed the marginal cost of funds based lending rates (MCLR) in view of the surge in deposits after demonetisation.

ICICI Bank, India’s largest private bank, has announced a reduction of 70 basis points in MCLR benchmarks across tenures. ICICI’S overnight MCLR will be 8 per cent while the one year rate will be 8.20 per cent. On Sunday, SBI had slashed its lending rate by 90 basis points. Kotak Mahindra Bank announced a cut of up to 45 bps in its lending rates. After revision, Kotak’s one-year MCLR has come down to 9 per cent, while the one month and three month MCLRS will be 8.25 per cent and 8.40 per cent, respectively.

Some smaller banks like State Bank of Travancore and IDBI Bank had already announced MCLR cuts in the last week of December. Public sector lender Dena bank slashed its benchmark lending rate by 75 bps to 8.55 per cent for 1 year tenor, the bank said.

With the reduction in benchmark rate, home, car and other loans linked to MCLR would become cheaper. Banks have switched to MCLR as their new benchmark lending rate from June last year. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by RBI to ensure fair interest rates to borrowers as well as banks.

MCLR also seeks to address the regulator’s primary objective of expediting monetary policy transmission along with augmenting uniformity and transparency in the calculation methodology of lending rates. MCLR rates are revised every month.

Bandhan Bank has announced a hefty 1.48 per cent reduction in its lending rates to 10.52 per cent, which will bring down its pricing for micro loans, its biggest segment, to 18.52 per cent. “We will continue to pass on the benefit of lower cost of funds to our borrowers,” managing director and chief executive Chandra Shekhar Ghosh said.

He said 95 per cent of the lender’s Rs 18,500-crore credit portfolio is devoted to micro loans and added the deposit portfolio has risen to Rs 19,000 crore with 27 per cent of it being low-cost current and saving accounts (CASA).