Tag: sbi housing loan rates

State Bank chief wants 100 bps cut in CRR

Mumbai, April 16:  Business Line

A cut in Cash Reserve Ratio will be much more effective in bringing down lending rates than a repo rate cut, said State Bank of India Chairman Pratip Chaudhuri.

A strong votary of abolishing the CRR, the SBI chief said he will bring the base rate down by 20 basis points, if the Reserve Bank of India cuts the CRR by 100 basis points. Base rate is the minimum lending rate below which banks cannot lend.
Policy meeting

The RBI will review key policy rates in its annual policy meeting scheduled on May 3.

Currently, the CRR (the slice of deposits that banks keep with RBI) and the repo rate (the interest rate at which banks borrow short term funds from the RBI) are at 4 per cent and 7.50 per cent, respectively.

“Repo rate has very little or insignificant impact on the cost transmission. The only thing that can significantly bring down the base rate is the CRR. “Looking at the inflation numbers yesterday, I am encouraged to recommend a 1 per cent (100 basis points) reduction in CRR,” Chaudhuri said.

Also, a CRR cut will release more liquidity into the banking system. “The banks will be less desperate for deposits so it (liquidity) will have a more benign impact on the interest rates,” the SBI chief said.
THREE-DAY DEPOSITS

Chaudhuri, who mooted the idea of banks being allowed to introduce ultra-short term deposits of three days maturity, said there will not be any liquidity management issues if such a product is introduced.

Pointing out that absence of such a product is making banks uncompetitive, Chaudhuri reasoned that if banks can take care of seven-day deposits, then they can take care of three-day deposits too.

The SBI chief said that he has explained the new idea to the RBI top brass.

In any case, there is no rule saying that customers cannot withdraw money before the seven-day maturity period, he said. “So, if a seven- day deposit is stable then three-day deposits will also be stable.”

SB deposits

Chaudhuri pointed out that the entire savings bank deposits of banks constitute 25 to 40 per cent of their total deposits and they are with drawable on demand.

SBI chief pitches for 50 bps cut in CRR, repo rate

18 Mar 2013, Business Line.

A softening in lending rates will be conducive for kick-starting the investment cycle in the country, according to State Bank of India Chairman Pratip Chaudhuri.
Whichever country has shown rapid growth, particularly in the manufacturing sector, the interest rates were much lower.
Rates of interest need to come down further. Our base rate is at 9.70 per cent, I would like to see a base rate of something like 9.50 per cent because internationally the rates are so low,” said Chaudhuri.

Base rate is the minimum lending rate below which banks cannot lend. The actual lending rates charged to borrowers by banks are the base rate plus borrower-specific charges, which include product-specific operating costs, credit risk premium and tenor premium. India’s largest bank last pared its base rate from 9.75 per cent to 9.70 per cent on January 30.

SBI nudged its base rate lower a day after the Reserve Bank of India cut both the repo rate and the cash reserve ratio (CRR) to 7.75 per cent (from 8 per cent) and 4 per cent (from 4.25 per cent of deposits), respectively.

Repo rate is the interest rate at which RBI lends short-term money to banks. CRR is the slice of deposits that banks have to park with RBI. Chaudhuri said: “If you are a corporate in India and want to set up a petrochemical plant, you will pay 11 per cent interest rate. But if your competitor in Dubai is setting up a similar petrochemical plant, he will pay an interest rate of 3 or 4 per cent… So, you are uncompetitive from day one.”
Policy rates

The SBI chief said lending rates in the banking system could soften if the central bank cuts key policy rates in its mid-quarter review of monetary policy, which is due on Tuesday.

“Both the CRR and the repo rate should be cut by 50 basis points each. CRR cut is more important as it releases primary liquidity into the banking system.

“Whereas a repo rate cut is more of a signal/an indication (of the direction of interest rates). It is not very material but, yes, the cost of refinance goes down,” said Chaudhuri.

The central bank has underscored that subdued investment activity in the economy has led to the decline of capital goods production. With investment activity remaining subdued, the prospects of a recovery in industrial growth appear weak.

In its latest macroeconomic and monetary developments document, the RBI observed that the emerging slack in investment needs to be addressed. This slack has emerged from a combination of domestic and global factors.

“While global growth may remain slow for some more years as significant fiscal adjustment is needed to overcome the debt overhang in the advanced economies, the domestic growth could respond to the policy (reform) action that has now begun,” it said.

SBI raises fixed deposit rates by 0.25 per cent

27  Feb 2013, PTI.

NEW DELHI: State Bank of India (SBI), the largest bank of the country, on Wednesday announced increase in interest rate on fixed deposits by 0.25 per cent on select maturities.

Of the total 9 maturity periods for fixed deposits, rates have been revised upwards in 4 categories with maturities of over one year.

The new rates would be effective from March 1, SBI said in a statement.

With the revision, the interest rate on 1-2 years fixed deposit would go up to 8.75 per cent, from 8.50 per cent.

Similarly, term deposit 2-3 years, 3-5 years and 5-10 years would also earn higher interest rate of 8.75 per cent.

However, the bank has left interest rate unchanged for deposits less than 1 year.

Earlier this month, the bank had cut lending rate by 0.05 per cent, soon after the Reserve Bank cut its key policy rates.

After this marginal reduction, SBI’s base rate, or the minimum rate of lending, came down to 9.70 per cent from 9.75 per cent effective February 4.

In its third quarter policy review on January 29, RBI had lowered key short-term lending rate by 0.25 per cent and also injected Rs 18,000 crore liquidity through similar reduction of Cash Reserve Ratio.

The repo rate, at which RBI lends to banks, was eased after a gap of nine months as the central bank fought the stubbornly high inflation through tight money policy, leading to high interest rate regime.

SBI cuts car, home loan processing fees by 50%

18 Oct 2012, ET Bureau.

MUMBAI: The country’s largest bank, State Bank of India, has reduced its processing fee on home loans and car loans by half in a move aimed at attracting customers and beating competition.

The decision comes soon after many PSU banks announced a complete waiver of processing fee for a limited period, while private banks announced innovative schemes to attract customers.

SBI already offers the lowest rate on home loans. Besides hoping to lure new customers, it is also targeting those of rivals like HDFC, Axis Bank and ICICI Bank by reducing processing fee.

RBI’s ban on pre-payment penalty has made it easier for borrowers to shift from one home loan lender to another at minimum cost. SBI will now charge Rs 1,000 as processing fees for loans up to Rs 25 lakh, Rs 3,250 for loans between Rs 25 lakh and Rs 75 lakh, and Rs 5,000 for loans above Rs 75 lakh.

It would charge a flat fee of Rs 1,000 from borrowers who plan to switch to it. On car loans, it would charge a minimum of Rs 510 and a maximum of Rs 5,100 processing fee. The reduced processing fee will be in effect till December 31.

“There is already heartburn among home loan customers who are paying a higher home loan interest rate. They have paid a fee to their existing bank. There is no point charging them again,” a senior SBI officer said not wanting to be named.

SBI to trigger a churn in home loans

3 Aug 2012, TNN

MUMBAI: With lenders continuing to offer special deals only to new home loan customers, the industry is set to see a churn in the portfolio as this is the only way a large number of existing borrowers will be able to take advantage of lower rates.

SBI’s move has changed the equilibrium that loan rates had settled down to after the April rate cut by the Reserve Bank of India. While other lenders realize that SBI rates are the most competitive, they are still undecided about reducing their benchmark rates. SBI’s existing borrowers can take advantage of the new rates only after paying a conversion fee, which is 1% of the outstanding loan.

Officials in other banks say that rates for existing borrowers cannot be brought down without revising their benchmark Base Rate or Prime Lending Rates (for housing finance companies), which are pegged to the overall cost of funds. For banks, the benchmark rate determines not just the home loan rates but every other floating rate, including working capital loans for corporates – the mainstay for many banks.

This means that their most likely response would be to revise the interest spread, which is the difference between the floating home loan rate and their benchmark rate. But this revision in spread will not benefit existing borrowers who will be shifted to new rates only if they pay a one-time charge.

The one-time conversion charge for existing borrowers and the processing fees for new borrowers are the only barrier to home loan portability since all pre-payment charges have been withdrawn for floating rate loans. However, an existing borrower stands to benefit even after paying the 1% conversion fee, SBI deputy managing director P Pradeep Kumar said while announcing the new rates.

“The Base Rate can be changed when there is a sharp drop in interest costs. In the current environment when inflation rate is high, it is difficult to reduce interest rate dramatically,” he added. SBI has also cut rates on deposits above 5 years by 25 basis points, but this is not enough to bring down costs.

According to Apnapaisa CEO Harsh Rungta, it does not matter at what stage of the home loan the borrower is in; if there is a better rate, it makes sense to shift. “Even now there are borrowers who have loans at 12.5%. They do not even need to make a calculation to decide whether to shift,” he said. Home loans are very close to the stage when the interest spread is as good as it gets, he adds.

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