SBI initiates three-pronged strategy to boost its home loan business

Mumbai, December 29: The State Bank of India has initiated a three-pronged strategy to push its home loan business. The country's largest lender will sell its home loan products through the entire group network instead of limiting it to the bank, develop a mechanism to identify right customers for home loans, and implement a uniform delivery system across its branches, a top official said.

"We are looking to grow home loans at 15%-17% in FY16 and how to leverage our group resources," said B Sriram, managing director and group executive (national banking) at SBI.

The state-run bank, which owns more than one fourth of the housing loan market in the country, grew its home loan business 14% year-on-year for the quarter ended September at around Rs 1.49 lakh crore.

With the Reserve Bank of India issuing guidelines for licensing small banks and entry of players such as Bandhan and IDFC, the home loan market is expected to get more competitive in the coming years.

Sriram said SBI plans to connect about 40,000-50,000 counsellors working for its non-bank group subsidiaries such as SBI Mutual Fund and SBI Life Insurance to source home loans, to boost its customer reach. For example, an outsourced counsellor working for SBI Mutual Fund would also approach his clientele for SBI home loans, for which she would earn commissions.

"Alternative channels could be the main channel next 10 years in the banking industry as they attract young customers," Sriram told ET in an interaction. SBI is also working on a mechanism to identify the right customer to offer home loans or any other cross-selling product like mutual fund or insurance. For example, if a customer enters a SBI branch and does a transaction, immediately a screen will prop up on the branch official's computer showing the customer's profile and product suitability.

SBI to cut processing and conversion fees on home loans

With the advent of festival season India’s largest lender – SBI has embarked upon a special campaign to ramp up its home loan book. It is going to reduce the processing fee for home loans to Rs.1,000 per loan irrespective of the size. The offer would be made available from September 1 onwards, a senior bank official told.
With the advent of festival season India's largest lender - the State Bank of India (SBI) has embarked upon a special campaign to ramp up its home loan book. It is going to reduce the processing fee for home loans to Rs.1000 per loan irrespective of the size. The offer would be made available from September 01 onwards, a senior bank official told.
Currently, loan processing is at 0.25% of the loan amount subject to a cap of Rs 6,500 for loans upto Rs.75 lakhs. For any higher loan amount, the maximum fee ceiling is Rs.10,000.  For example, if you apply for a loan of Rs. 20 lakhs, you need to pay a processing charge of Rs.1000/- With the new offer, it will be uniform at Rs.1,000 for a home loan. However, the offer would end on 30th November, 2012.
At the same time, the banking behemoth is actively mulling reduction in conversion fee which is presently at 1%. For all banks, conversion fees are in the range of 0.50-2%. This move, if implemented, will help the existing (SBI) home loan customers, who are not entitled to get the benefit of reduced interest rates to avail of the lowered interest rates. Let’s assume the loan size is Rs.30 lakhs and a customer has already repaid Rs.10 lakhs. Therefore, he has to pay Rs.20,000/-(i.e. 1% of 30-10 lakhs) one-time upfront for the conversion.
Earlier, SBI cut the interest rates on home and auto loans by over 50 basis points, effective from August 07. However, it did not change the base rate (remains at 10% p.a), the benchmark rate below which the Reserve Bank of India does not allow any bank to lend. Now, a home loan borrower can avail of a home loan with interest at 10.25% as against 10.75% prior to the rate cut, for a ticket size of Rs 30 lakhs. The interest rate will be 10.40% for loans above Rs. 30 lakhs. The EMI on Home Loan tenor of 30 years is Rs.897 per lakh which is the lowest in the market.
However, the new rates are available only to the new customers. So, a customer who had taken a loan at a higher floating rate viz. 11.25% will be keen to avail the benefit of the current lower rate. So, he can convert his loan to the new rate by paying the conversion fee. "Those proposed moves by RBI will certainly benefit customers, who should tap opportunities right in time. However, the bank cannot just keep on doing this beyond a point as it may hurt their margins," said Anil Rego, CEO and founder, Rights Horizons, a Bangalore based advisory firm.
With 26% market share, SBI continues to be the leader in home loan market followed by the privately held housing finance company- HDFC.  "We have got some surplus funds after RBI cut statutory liquidity ratio by 1% to 23%. We have decided to utilize it in expanding our retail business. The Bank is aiming at 20-25% growth in its home loan portfolio. As the country's largest bank, we have a vital role to play in supporting the economy", said the official.
As of July, SBI's home loan portfolio stood at around Rs 1.06 lakh plus crores. Total retail loans stood at Rs 1.86 lakh crores in the April-June quarter. To facilitate home loan borrowers, it is planning to upload the list of housing projects, approved by the bank shortly.  The bank has tied up with 1,046 such projects across India till July in 2012-13. In order to enlist its projects, a builder has to meet certain norms prescribed by SBI. For listed projects, the bank sanctions home loans in 4-5 days while it takes around 14 days to approve a home loan for other housing constructions. The lender offers a loan to value (LTV) of 90% for home loans upto Rs 20 lakhs and upto 80% for loans above Rs 20 lakhs.

SBI cuts home, car loan rates

Thursday, August 02, 2012

State Bank of India has cut home loan and car loan rates. This could trigger a rate war among banks to attract retail customers as loans to industry have slackened.

SBI’s rate cut gambit comes in the wake of the RBI effecting a one percentage point cut in the statutory liquidity ratio on Tuesday. The SLR cut is seen allowing banks the cushion of additional liquidity.

India’s largest bank has cut home loans by up to 0.60 percentage points and car loans by 0.50 percentage points.

The interest rate on home loans up to Rs 30 lakh will be 10.25 per cent (10.50 per cent earlier).

On home loans beyond Rs 30 lakh and up to Rs 75 lakh, the bank will charge 10.40 per cent interest (10.75 per cent). The interest rate on home loans beyond Rs 75 lakh will be 10.40 per cent (11 per cent earlier).

SBI has cut interest rates on car loans to 10.75 per cent from 11.25 per cent earlier. The equated monthly instalment on car...

SCHEME OF 1% INTEREST SUBVENTION ON HOUSING LOANS

The Union Finance Minister during the Budget for 2009-10, had announced a Scheme of 1 per cent Interest Subvention in respect of individual housing loans upto Rs.10 lakh, provided the cost of unit does not exceed Rs.20 lakh. The validity period for the scheme is 1^st Oct 2009 to 31^st March 2011.

From 01.04.2011 onwards the scheme was modified with eligibility extended to individual housing loans upto Rs.15 lakh, provided the cost of unit does not exceed Rs.25 lakh. The present validity period for the scheme is 1^st April 2011 to 31^stMarch 2013.