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Mumbai: State Bank of India (SBI) on Friday became the first to slash the interest rate on home loans above Rs75 lakh post the central bank’s direction to reduce risk weights. The bank reduced the home loan rate by 10 basis points to 8.55% from 8.65% earlier. The new rates are effective from 15 June.

One basis point is one-hundredth of a percentage point.

The Reserve Bank of India (RBI) on Wednesday said that the risk weights on loans above Rs75 lakh will be reduced to 50% from 75% previously. This will help banks in saving capital which can be used for further lending.

Risk weights are used to calculate the minimum capital that must be held by banks to reduce the risk of insolvency.

“Taking a cue from the recent central bank reduction in risk weightage on home loans, SBI is passing on the benefit to its customers by reducing its interest rates on home loans above Rs75 lakh," said Rajnish Kumar, managing director, national banking, at SBI.

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