SBI offers two new home loan products

On Tuesday State Bank of India launched new home loan scheme under which it is offering two home loan products. Earlier bank was offering home loans at a fixed rate of 8% for the first year ended.

Under the new scheme bank is offering loans up to Rs30 lakh at fixed rates of 8% for the first year and 9% for the next two years. Moreover customers will get two options in the fourth year under this scheme – 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.

However for loans above Rs30 lakh bank will charge interest rate 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 is having a home loan portfolio of at least Rs56,000 crore.

Previously in December the Indian Banks’ Association (IBA) and member public sector banks had announced home loans, in which loan 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. But SBI launched its own scheme instead of the five-year fixed rate scheme, offered a lower rate of 8% fixed for only one year.

The IBA scheme has also ended on Tuesday. A senior banker with a large public sector bank said IBA is likely to announce a new home loan scheme within a day or two similar to the scheme introduced in December last year.

On Tuesday LIC (Life Insurance Corporation) Housing Finance also announced a reduction in interest rates for its existing home loan borrowers. According to company statement the floating interest rates for existing customers has been reduced by 50 basis points on EMIs due on 1 July and payable on 1 August. One basis point is one hundredth of a percentage point.

This is the third reduction done by LIC Housing Finance in the calendar year and in the last six months the total reduction has touched 200 basis points.

Previously the company had slashed 1.50% for existing home loan borrowers in two trenches of 75 basis points each in January and April.