SBI bucks trend, keeps home loan rates unchanged

Ignoring the signal from the Reserve Bank of India, which recently cut its repo rate by 50 basis points, as well as a strong nudge from the government to reduce lending rates, State Bank of India, the country's largest lender, has refused to cut home loan rates immediately ''as cost of deposits continue to be high'' for the bank. At the same time, the bank has slashed interest rates on fixed deposits by up to 1 per cent across various maturities.

However, SBI has reduced interest rate on car loans by 25 basis points, from 11.25 per cent to 11 per cent, making its car loans the cheapest in the country, and possibly triggering a rate war in this segment.

''The repo rate cut has a signal impact. In terms of cost, it is not as significant as CRR. Repo rate does not have an impact on bottomlines. Transmission effect of CRR is what we are now rolling out because March was a very challenging quarter in terms of liquidity,'' SBI chairman Pratip Chaudhuri said. However, other banks, including Allahabad Bank, United Bank of India (UBI) and Kotak Mahindra Bank, reduced their base rates – to which all home loans are linked - by 0.25 per cent each.

ICICI Bank and PNB had slashed lending and deposit rates last week. SBI ruled out a cut in benchmark lending rate, saying the bank is offering one of the lowest rates in the industry. The base rate, or minimum lending rate, of SBI stands at 10 per cent. Base rate is the benchmark rate below which a bank cannot lend. However, ICICI, which cut rates by 25 basis points (bps) last week, has brought down the base rate to 9.75 per cent. PNB's base rate has been cut from 10.75 per cent to 10.50 per cent.

The bank has raised interest rate on 180-day fixed deposits from existing 7 per cent to 7.25 per cent. The new rates would be effective 24 April, it said.

SBI chief general manager (financial control) Sunil Pant said the bank has reduced interest rates on fixed deposits with maturity between 7 and 179 days by 0.75 per cent to 7.25 per cent. For term deposits with maturity between 181 days and less than 1 year, the new interest rate will be 0.5 per cent lower than the existing 8 per cent, he said.