Tag: sbi loan rates

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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