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Banks (Finance)

SBI Ends Teaser Home Loan Scheme Amid RBI Pressure and High Real Estate Prices

Strategic Insights

— 2 min read

The State Bank of India has discontinued its highly popular teaser home loan scheme, citing RBI pressure and high real estate prices as reasons. The SBI Easy Home Loan and SBI Advantage Home Loan, which provided loans at competitive rates, will be replaced by a new floating rate product at competitive rates. The new product will offer loans up to `30 lakh at 1% above base rate (current effective rate being 9.50% per annum), while loans above `30 lakh and up to `75 lakh will be priced at 1.25% above base rate (current effective rate being 9.75% per annum), and loans above `75 lakh will be priced at 1.75% above base rate (current effective rate being 10.25% per annum). SBI's chairman Pratip Chaudhuri assured that existing borrowers will not be affected and that the bank is in dialogue with the RBI on this matter.

Key Takeaways:

  • The SBI Easy Home Loan and SBI Advantage Home Loan schemes have been discontinued due to RBI pressure and high real estate prices.
  • The schemes were popular for offering loans at competitive rates, but will be replaced by a new floating rate product.
  • Loans up to `30 lakh will be priced at 1% above base rate (current effective rate being 9.50% per annum).
  • Loans above `30 lakh and up to `75 lakh will be priced at 1.25% above base rate (current effective rate being 9.75% per annum).
  • Loans above `75 lakh will be priced at 1.75% above base rate (current effective rate being 10.25% per annum).
  • Existing borrowers who availed loans sanctioned and disbursed before April 30, 2011 will not be affected.
  • The bank may see a decline in home loan growth due to this change.
  • Some analysts view this move as a positive for SBI's net interest margins (NIMs), as it will improve the outlook on NIMs.
  • Experts feel that this change could have an adverse impact on the bank's growth rate.

Statistics:

  • Total home loans outstanding at SBI stood at `86,000 crore as of March 31.
  • The SBI Easy Home Loan and SBI Advantage Home Loan schemes were launched in 2009.
  • The bank revised its car loan scheme, introducing a new product named "SBI Advantage Car Loan" with a rate of interest of 10.75% (or 2.25% above base rate).
  • Effective April 25, SBI's base rate will be 8.50%.
  • The bank has decided to waive prepayment penalty on home loans and car loans.

Sources:

  • [DNA (Daily News & Analysis), 2012]
  • [State Bank of India Press Release, 2012]
  • [Angel Broking Report, 2012]
  • [Apnapaisa.com Press Release, 2012]
  • [Contify.com, 2012]

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