SBI Likely To Cut Home Loan Rates Next Week

Mumbai: State Bank of India (SBI) is expected to bring down interest rates on home loans and other retail loans next week to coincide with the start of the festive season. The Maharashtra and Goa circles of the bank are already offering home and auto loans at 50 basis points lower than the effective rates for new borrowers.

SBI offers floating rate home loans at an interest rate of 10.75-11.25%. For a fixed rate home loan for up to 10 years, the bank charges an interest rate of 12.75%. The floating rate for auto loans is at 12-12.5%. As part of the promotional offer in Maharashtra, the bank has waived half of the processing charge and is also offering a higher loan to value ratio for new borrowers, which means borrowers could get loans higher than the normal 80-85% of the cost. Last week, Bank of Baroda lowered home loan rates for new borrowers in the hope that it would generate some demand. BoB reduced interest rates on home loans by up to 50 basis points to 10-11.50%. A slump in demand for retail loans is worrying bankers as the impact of subdued interest income on year-end profits is staring at them. Banks had raised their prime lending rates (PLRs) by 250-300 basis points during the last one year. The PLRs of the five largest banks have increased to 12.75-15.75% from 10.25-12.75% a year earlier.