Barely days after the Reserve Bank of India (RBI) surprised the Street by keeping the repo rate unchanged, banks and mortgage lenders have started lowering the interest rates on home loans. State Bank of India (SBI), ICICI Bank and Housing Development Finance Corporation (HDFC) have reduced their housing loan rates to persuade home buyers to borrow. There is relief for banks in the current quarter on cost of funds. In the July-September quarter, they borrowed heavily from the Marginal Standing Facility window at 10.25 per cent, following the central bank’s decision to make money dearer, to curb volatility in the foreign exchange market.
With the currency stabilising, RBI has reduced the MSF rate to 8.75 per cent; liquidity has also become more comfortable, on the back of government spending, and banks’ reliance on the MSF window has fallen sharply. This had a favourable impact on their cost of funds. SBI, the largest commercial bank, has been the most aggressive reducing its housing loan rates, by 15-35 basis points. The state-run lender is now offering home loans up to Rs 75 lakh at 10.15 per cent, one of the lowest for housing finance. Female borrowers will get an additional discount of five bps. The bank’s housing loan portfolio increased almost 20 per cent to Rs 130,034 crore in the 12 months ending September 30.
SBI’s gross advances during this period grew 19.2 per cent during this period. The share of home loans in its total advances has remained at around 13.5 per cent for three years. SBI Chairperson Arundhati Bhattacharya said the rate cut will help accelerate the bank’s home loan growth in the near term. “However, we cannot expect a very sharp rise in the growth rate,” she said, as most of the bank’s housing finance customers belong to the mid-market segment and the average size of the loans are not so large.
Source: BS