Mumbai, Jan. 31 State Bank of India, the country’s largest bank, has decided to pull out all stops to attract home loan and SME (small and medium enterprises) borrowers into its fold.
Come February 2, it will offer loans to these two categories of borrowers, irrespective of the amount, at 8 per cent for a period of one year.
Existing borrowers of the bank’s two home loan schemes - loans up to Rs 5 lakh (at 8.5 per cent interest) and above Rs 5 lakh but up to Rs 20 lakhs (9.25 per cent) - too would get the benefit of the new interest rate for a period of one year. These two subsidised home loan schemes were introduced by all public sector banks in December 2008.
SBI’s new interest rate offer, coming as it does two days prior to the meeting of Mr Pranab Mukherjee, who holds finance portfolio, with the chiefs of public sector banks, is sure to set the cat among the pigeons. Other public sector banks may be forced to match SBI’s interest rate, especially with respect to the two home loan schemes, so that they don’t lose business.
SBI, in a statement, said home loan and SME borrowers can avail themselves of its new 8 per cent interest rate offer from February 2, 2009 till April 30, 2009.
Interest rate for the borrowers will be reset after the freeze period to the same rate as originally applicable under the respective schemes.
As for existing home loan customers, the bank has introduced a new multipurpose loan product, ‘SBI Lifestyle Loan’, whereby they can borrow to the extent of 10 per cent of their home loan up to a maximum of Rs 5 lakh at an interest rate of 8 per cent per annum for a period of one year.
This is as good as getting a personal loan at eight per cent, said a bank official.
SBI has a home loan portfolio of around Rs 52,000 crore.
The average ticket size of its home loans is around Rs 17 lakh. The current floating interest rate on the bank’s home loans of up to Rs 30 lakhs are: 9.75 per cent (five years), 10 per cent (for above 5 years and up to 15 years), and 10.25 per cent (above 15 years and up to 25 years).
“There is a genuine demand for home loans. We realised that potential borrowers were sitting on the fence, waiting for the right time to borrow. Our move will encourage borrowers to take the decision and also stimulate demand. This will also spur the real estate and allied sectors such as cement, steel and other construction materials,” said a senior SBI official.
The bank, which has an SME portfolio of around Rs 1 lakh crore, has also formulated a new loan package ‘SME Care’ to ease the liquidity position for SMEs.
Under this package, SME borrowers can take an additional working capital facility of 20 per cent of their fund based limits to take care of inventories of raw materials, finished goods as also delayed payments from their buyers in the current downturn at an interest rate of 8 per cent. The loan is repayable in one year.
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