Mumbai: The country’s largest lender State Bank of India on Tuesday introduced a new home loan scheme under which it offer loans up to Rs30 lakh at fixed rates of 8% for the first year and 9% for the next two years.
The bank’s earlier offer of home loans at a fixed rate of 8% for the first year ended Tuesday.
Under the new scheme, customers will have two options in the fourth year: a floating rate at 2% below State Bank Advance Rate (SBAR), which is currently at 11.75%,, or a fixed rate of 1% below SBAR with a five year re-set. A re-set means new rates will come into effect at the end of the specified period.
For loans above Rs30 lakh, the interest rate charged from the fourth year will be either a floating rate at 1% below the existing SBAR or a fixed rate of 0.5% below SBAR with a five year re-set.
SBI has a home loan portfolio of at least Rs56,000 crore.
The Indian Banks’ Association (IBA) and member public sector banks in December had announced home loans, in which borrowing of up to Rs5 lakh was offered at 8.5%, and between Rs5 lakh and Rs20 lakh at 9.25%. Both rates were fixed for five years. However, SBI launched its own scheme instead of the five-year fixed rate scheme, offering a lower rate of 8% fixed for only one year.
The IBA scheme also ended Tuesday. According to a senior banker with a large public sector bank, IBA will likely come up with a new home loan scheme within a day or two similar to the scheme introduced in December last year.
In a separate development, LIC (Life Insurance Corporation) Housing Finance on Tuesday announced a reduction in interest rates for its existing home loan borrowers. The floating interest rates for existing customers will now be reduced by 50 basis points on EMIs due on 1 July and payable on 1 August, a company statement said. One basis point is one hundredth of a percentage point.
With this latest reduction, the third by LIC Housing Finance in the calendar year, the total reduction has reached 200 basis points in the last six months.
The company had earlier reduced 1.50% for existing home loan borrowers in two tranches of 75 basis points each in January and April.