SBI surprises with rate hike on home loans
SBI is the first major public sector bank to hike rates
Sep 20, 2013
Source : The Times of India


DELHI: Home loans have become costlier with State Bank of India (SBI) hiking its benchmark rates and revising the pricing in retail loans. The bank has also raised its deposit rates to increase the pace of fund mobilisation.

A Rs 30-lakh home loan from SBI will now cost 10.1%, while loans for a higher amount will attract 10.3%. Earlier, the rates were 9.95% and 10.1%, respectively. Existing borrowers will, however, see their rates rise by only 10 basis points. This is perhaps the first time that existing borrowers will pay a lower rate than new borrowers following a revision in the spread. The spread refers to the mark-up over the benchmark base rate, which has been revised from 9.7% to 9.8%.

SBI’s move has surprised other lenders as the move comes a day ahead of the Reserve Bank of India’s mid-term policy review. Bankers have made a representation to RBI seeking a one percentage cut in cash reserve ratio to provide some relief on liquidity. An SBI official said the decision to increase rates was taken by the bank’s asset liability committee, which meets on 19th September.

Before SBI, HDFC, HDFC Bank ICICI Bank, and Axis Bank had increased their lending rate. But SBI is the first major public sector bank to hike rates. The future course of interest rates will depend on the measures announced by RBI governor Raghuram Rajan in his policy review on Friday. Even after the increase in rates, SBI’s home loans continue to be the cheapest among all lenders.

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