SBI will soon have many happy customers. Know why!

‘Achhe din’ seems to have arrived for the existing customers of home loan of the State Bank of India. A news report published by The Economic Times informs that the nation’s top lender is offering personal loans for its existing home-loan customers at the same interest rates as its home loans, or top-up loans, at a time when RBI has signalled a softer interest rate regime by cutting policy rates twice.

In a bid to boost the bank's loan book and compete against the rival banks, the existing personal loan interest rate of 13.50-18.50% has been slashed by almost 3-8% for its existing home loan clients.

So now, an existing borrower can avail a personal loan from SBI at 10.15%, provided he had been paying his homeloan EMIs on time. For women, this will be even cheaper at 10.10%. The rates imply a 0.35-0.40 percentage point cut in the top-up loan rates that SBI has been charging.


SBI has also waived off the processing fee to lure its customers, however the reduction is valid only for a limited period. The bank plans to charge its existing home-loan borrowers 10.5% for top-up loans from next fiscal year. The ET report further suggests, a woman home-loan borrower can take up to Rs 50 lakh at 10.10%. The tenure of the top-up loan will be linked to the customer's outstanding tenure of the home loan. Top-up loans between Rs 50 lakh and Rs 2 crore will cost 10.75%. For Rs 2 crore to Rs 5 crore, the rate will be 11.25%.
Analysts believe that this move will help SBI achieve its loan growth targets.

The bank has lowered its credit growth target to 11% for this fiscal year through March from the originally planned 14%.

"Even 11% (growth in credit) is also a stretch," Chairman Arundhati Bhattacharya had told the ET while announcing third quarter result.
Despite nods from the central bank and the finance ministry the banks have mostly stayed away from cutting rates, citing subdued demand for loans and arguing that a reduction would hurt their bottom lines in the final quarter. Most banks have pegged a base rate of 10% to 10.25%, below which they don't lend.

Till last month, home-loan book has risen 13.2% year-over-year to about Rs 1.56 lakh crore and top-up loans totalled at Rs 4,800 crore.

(Image: India Times)