Chennai: Largest public lender State Bank of India (SBI) has brought down home loan rate by 0.05 per cent to 8.30 per cent, the lowest in the industry.
It has also reduced the auto loan by a similar percentage point to 8.70 per cent. The reduction in the retail loan rate by SBI is expected to prompt other lenders to go for a similar move. “With this reduction, SBI’s offering in home loan is the lowest in the market. The new rates will be effective 1 November,” SBI said in a statement.
The reduction follows a cut in marginal cost of funds based lending rate (MCLR) two days ago, which came after a gap of 10 months. The bank had last cut the rate on 1 January.
On the rate reduction, SBI MD retail banking, P K Gupta, said, ‘With this reduction in rates, we are offering lowest rates for most of our product offering in retail loans. Lower rates along with wide distribution network and use of digital technology to enhance customer experience is a perfect package for any retail loan customer.’
The effective interest rate for all eligible salaried customers will be 8.30 per cent per annum for loans up to Rs 30 lakh. Rates have been reduced by 5 basis points (0.05 per cent) in all other loan brackets. “Over and above of 8.30 per cent rate, an eligible home loan customer can also avail of an interest subsidy of Rs 2.67 lakh under the Pradhan Mantri Awas Yojana scheme,” the statement said.
CAR LOANS TOO
For a car loan customer, interest ranges from 8.70 per cent to 9.20 per cent compared to the earlier 8.75-9.25 per cent. The exact rate depends on the amount of loan and the credit score of the individual, it said.
OTHERS IN LINE
The cut in the rates by SBI is expected to be followed by other banks too. The RBI last year unveiled the MCLR system, which sought to remove the discretion of commercial banks have to set lending rates. However, the pace of bank lending rate cuts has lagged the reduction in policy rates, which fell by a total 200 basis points since January 2015. While an RBI panel has submitted its report on new benchmark in place of MCLR, the RBI is yet to take a call on its recommendations.