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Home Loan Rates becomes Cheapest in Six years after SBI and Other Banks Cut down Rates

home loan rates sbi

The Home Loan Interest Rates were cut down by the India’s largest bank ‘State Bank of India’ from 9.10% to 8.6% and this result the home loan rates have fallen to their lowest level in six years. While the State Bank of India (SBI) cut its one-year marginal cost of lending rate (MCLR), the target to which home loans are linked to 8% rather than 8.9% earlier, it kept the spread above MCLR at 60 basis points, against 20 basis points earlier.

Meanwhile, home loans up to Rs 75 lakh, earlier available at 9.1% is now taking at 8.6%. For other people, it would be 8.65%, against 9.15% earlier. Apart from SBI, Punjab National Bank and the Union Bank of India also cut down the home loan rates. Private sector leading bank ICICI is also looking to follow the same strategy.

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Earlier reports said that the SBI and other banks were cut down the rates following Prime Minister Modi’s push to hint that benefits of demonetization in the form of record deposits are being shared with the poor and middle class.

However, the drop in lending rates announced by several public sector banks will mark the affordable home loan scheme, announced by PM Modi on Jan 1st, available at a little over 4% for debtors looking for loans up to Rs 9 lakh. The details of the scheme are not yet to be announced. The decrease in MCLR will allow new borrowers to get loans at the cheaper rates.

Old loans will get the benefit of the new rates only after their one-year lock-in ends. People those who had got loans before April 2016 would have their EMIs linked to the earlier benchmark. The SBI has also restored a teaser rate loan, where loans will be available at 8.5% for the first two years at a floating rate in following years.

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Other banks which have announced lower rates with the result from the New Year include Sate Bank of Travancore, IDBI Bank, and Indian Overseas Bank. SBI bank officials said that home loans would provide the bank with an alternative to space funds in government bonds where the return is less than 7%.

Meanwhile, the banks imagine the interest subsidy on loans for affordable homes and small scale businesses to counter the stoppage caused by economic tightening following demonetisation.

SBI, associates merger by the end of March 2017: Arundhati Bhattacharya

State Bank Merger

State Bank of India has been going at a brisk pace to merge its associate banks and Bharatiya Mahila Bank in itself. In spite of the strikes by the State Bank Associate employees against the merger, the Arundhati Bhattacharya,SBI Chief said that the merger would be completed by the end of the financial year.

“People have to understand that the change is inevitable. There has been a strike at many occasions, but we have to educate them and take them on board” she mentioned on the sidelines on the launch of SBI exclusive, an SBI wealth management offering.

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The Five associate banks that are proposed for the merger are State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad. The merger of associate banks started with, State Bank of Saurashtra and followed by State Bank of Indore.

There have been protests in all the 80,000 state bank associate branches on Friday 29th July 2016, against the merger affecting the financial services across the country. The strike was carried out under the All India Bank Employees’ Association (AIBEA) banner. Adding to the strike issue, was the announcement of the merger by the end of March, which made the employees much upset.

Concerns of the State Bank Associate Employees:
• The concerns of the state bank associates are that a forced merger is happening which should not be the current priority.
• The digitalization initiatives taken up by the private sector banks have hit the PSB’S strongly.
• The state bank of India being the largest player in the market with 16500 branches in India and 191 branches overseas has taken the initiatives like mobile wallet, digital banks, etc. to fight the competition, but the associates need time to pick up.
• The merger can be no answer to these issues, in fact, brings new challenges regarding people, technology and branch integration.
• Moreover, the All India Bank Employees’ Association (AIBEA) want associate state banks to emerge as a single largest bank instead of the parent SBI.

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The merger is expected to make state bank one of the largest lenders in Asia with an asset base of 37 lakh crore.As per the states interests, the merger will make the State Bank combined group to a position at 45th rank globally regarding assets. Currently, the position of SBI is 52. The cost to income ratio will come down to 100 points post-merger. The merger will be an advantage to the current economic position of the country, and many such mergers are expected to come, according to the financial analysts.