SBI cuts home loan rate to lowest in 6 years; others may follow suit

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The rate cut by SBI could increase the competitive pressure on other lenders to bring down their interest rates on home loans and other personal loans. This limited period festival offer is valid from November 1, 2016 to December 31, 2016, SBI said. The rate cut comes in the wake of the Reserve Bank slashing Repo rate and the lowering of its deposit rates by SBI last month.

“On a home loan of Rs 50 lakh, reduction in interest rate by 0.15 per cent by SBI will help a home buyer to save Rs 542 per month and approximately Rs 2 lakh during the loan tenure of 30 years. Value of the savings on EMI of Rs 542 per month if invested in a Recurring Deposit, will be approximately Rs 6 lakh at the end of the loan tenure,” said an SBI official. SBI in a statement said its home loans are the “cheapest in the market” and provides an opportunity for both, new home buyers as well as those who wish to switch over their home loan to SBI to save on EMIs.

The RBI had cut key policy rate — repo rate — by 25 bps to 6.25 pc, stating that decision of the Monetary Policy Committee is in consonance with the objective of achieving retail inflation at 5 per cent by Q4 of 2016-17 and the medium-term target of 4 per cent within a band (+/- 2 per cent) while supporting growth. According to the RBI data, housing loans have shot up to Rs 7,86,900 crore as of August 2016 as against Rs 6,74,500 crore in August 2015, a rise of 16.7 per cent. Public sector banks have started focussing on home loans in a big way as the sector has witnessed very low level of non-performing assets.

Meanwhile, ICICI Bank is offering the salaried having an account with it, credit from Rs 5 lakh going up to Rs 1 crore against property owned by them. The product, ‘ICICI Bank Home Overdraft’, will offer dual advantage of a term loan as well as an overdraft facility, the bank said in a statement. “While the term loan provides customers with quick funds for immediate needs, the overdraft facility offers them the flexibility to access funds instantly for expenses, as and when required,” it said.

Those buying the overdraft loan from the bank would be able to utilise the funds for their personal needs such as for education, medical treatment, home renovation, marriage and overseas travel among others. Beginning from a minimum of Rs 5 lakh to a maximum of Rs 1 crore, customers will have the facility to avail a minimum 10 per cent of the total amount as term loan and maximum 90 per cent as overdraft.

ICICI Bank said the interest on term loan would be charged as per the equated monthly instalment, while on the overdraft the charges will be only on the utilised amount for the period the funds are used.

Anup Saha, senior general manager & head – Retail Secured Assets, ICICI Bank, said, “We have moved a step ahead with the launch of ‘ICICI Bank Home Overdraft’ that aims to provide our salaried customers the flexibility of quick access to funds against their home property. We believe this proposition will add more value to our customers by helping them cater to their personal needs. Going forward, we aim to introduce more such innovative solutions that provide more convenience and flexibility to our customers and help them fulfill their aspirations.”