Reduces interest rates on all its retail products – home loans, car loans, personal loans and education loans by 0.05% effective May 1, 2016
The State Bank of India (SBI) has set the pace for softening of interest rates.
On Monday, country's largest bank reduced interest rates on all its retail products – home loans, car loans, personal loans and education loans by 0.05% effective May 1, 2016, making its retail products the cheapest in the market.
The new home rates are 9.35% for women borrowers and 9.40% for general category loans.
The other players in the market such as HDFC Ltd, HDFC Bank and ICICI Bank, whose focus during the financial year has been on retail loans, will have no choice but to follow suit in a fiercely competitive retail loan market where customers are extremely rate sensitive.
SBI is the biggest player in the home and car loan market, followed by HDFC Bank in the car loan market and HDFC Ltd in the home loan market.
The cut follows the reduction in the Marginal Cost-based Lending Rate (MCLR) for one-year to which the retail loans are linked from 9.20% in April to 9.15% effective May 1. This is the second such reduction by SBI since the Reserve Bank of India's (RBI) repo rate cut on April 2.
Keki Mistry, vice chairman and CEO of HDFC Ltd, told dna, "We will review our rates in a couple of days. We keep periodically reviewing the rates; we will take a call."
Rajnish Kumar, managing director, State Bank of India said, "If deposit rates fall, then interest rates could fall further. Our products are the cheapest in all the categories – be it home loans, car loans, personal loans or education loans. The competition will catch up with our rates as the market is extremely competitive."
A senior SBI official said, "Our MCLR will get revised every month. So from here on there will not be any dramatic reductions, but the interest rates will get adjusted marginally in line with the fall in our deposit costs."
"With the reduction in MCLR, SBI's home loans have been growing at 23% and the reduction is expected to boost growth further," said an SBI official in charge of home loans. The auto loans of the bank which is reporting an annual growth of 22% over the previous year will also be cheaper by 0.05% at 9.60% for women borrowers and 9.65% for the general category borrowers.
SBI also has a super bike loan scheme where the rates are 12.15%, but here the processing fees can be anywhere between Rs 5,400 to Rs 17,800. In all other categories of car loans, the processing fee, which was waived off until April 30, is now back in force and is fixed at Rs 500 or 2% of the loan amount.
The EMI for a seven-year car loan for women borrowers will be Rs 1,645 for Rs 1 lakh and for general category, it will be marginally higher at Rs 1,647.
A senior SBI official in charge of the car and personal loans said, "Our car loans have been growing at a very strong pace of 22% and the delinquencies have come down to 0.65% for 2015-16 and the delinquencies for personal loans have been at 1.04%. While it is just 0.25% for the salaried class, on an aggregate level the delinquencies are at 1.04%."
Personal loans of the bank are at 12.55% to 16.65% and the education loans will be now available at 11.15% for loans up to Rs 7.5 lakh and 10.85% for loans above Rs 7.5 lakh.
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