Bringing much-needed relief for home buyers in the new year, the State Bank of India has cut down the base rate by 30 basis points to 8.65 per cent for existing customers from 8.95 per cent. SBI also reduced the BPLR (benchmark prime lending rate) from 13.70 per cent to 13.40 per cent. The base rate reduction, effective January 1, will benefit nearly 80 lakh of existing customers of the bank whose loans are still linked to the base rate and not the marginal cost of funds-based lending rates (MCLR).
SBI, which is country's largest lender, has also extended home loan processing fee waiver till March 31 for new customers and for customers switching their loans from other banks to SBI. SBI has reduced the base rate to 8.65 per cent for existing customers from 8.95 per cent, while the BPLR is down from 13.70 per cent to 13.40 per cent with effect from January 1.
Managing director for retail and digital banking P K Gupta said that with stability returning to the realty space after the implementation of the Real Estate Act (Rera), he sees lots of demand for home loans going ahead.
"With most states having the realty regulator Rera now, stability has returned to the market in terms of project approvals. The teething troubles of the initial Rera months are behind the market. So, we foresee lots of demand for home loans. So, we think this is the right time to continue with that waiver to enable people for buy homes," Gupta said.
On November 1, the bank lowered its one-year MCLR by 5 basis points to 7.95 per cent against 8 per cent earlier. Home loans lending rates are pegged over and above one-year MCLR rate. While for the salaried men the spread stands at 40 basis points, women borrowers have to pay 35 basis points over and above MCLR for home loan.
"We had done the rate review in the last week of December, and based on whatever deposits rates we had, our base rate was brought down by 30 basis points to 8.65 per cent now," Gupta added.
Flushed with excess liquidity, SBI had announced processing fee waiver for auto and home loans late August. In fact, since last fiscal, and especially after the November 2016 note-ban, all the banks have been saddled with excess liquidity amidst continuing de-growth in industrial credit.
For the first time in over two years, credit uptake by corporates entered the positive terrain but with a paltry 1 per cent growth in November this year.
The bank, however, did not change the marginal cost of funds-based lending rate (MCLR). The one-year MCLR of the bank stands at 7.95 per cent. Banks review MCLR on a monthly basis, while the base rate revision happens once a quarter.
Due to weak transmission of policy rate by banks under the base rate system, the Reserve Bank had introduced the MCLR from April 1, 2016.
With the banks not fully passing on the rate cuts that the central bank has done in the past two years, the regulator is not happy even with the base rate regime and has mooted an external benchmark to better reflect market realities and speedier transmission.
with PTI inputs