Page 5 - Banking Finance July 2019

BANK UPDATE

BANKING

SBI links home loans to repo rate
Large NBFCs post in-
SBI has taken a step ahead in terms of transparency in consumer loans by link-
crease in public deposits
ing the pricing of its home-financing products to the
in FY19 central bank policy rate that is used for setting the
broader cost of debt in the economy.
In spite of widespread crisis sur-
rounding Effective from July 1, consumers will have the op-
the non-
tion to take SBI home loans pegged to the central
banking fi-
bank repo rate, SBI stated in a statement.
n a n c i a l
The home-loan products linked to the marginal cost of lending rate (MCLR) will
company
be offered by the bank continually, but customers can opt for a repo linked home
(NBFC) sector, some of the large de-
loan rate, said PK Gupta, managing director in charge of retail banking at SBI.
posit taking NBFCs with good credit
rating and an established franchise, "This is a different product. It is linked to repo and at a larger tenure than the
have been able to post a significant normal home loan. The rate for an Rs 75-lakh home loan comes to 8.40%, com-
growth in ‘public deposits’ in FY19. pared with 8.55% on the existing home loan,” Gupta said.
“Growth in FY19 was driven because “However, the tenure under the new product will be more and can go up to 35
of a renewed focus by larger NBFCs, years, compared with 30 years we offer now because customers have to pay a
namely, Shriram Transport, Bajaj Fi- 3% outstanding amount plus interest every year,” he added.
nance, Mahindra & Mahindra Fi-
Presently, home loans up to Rs 75 lakh to customers at 8.55% are offered by
nance, Shriram City Union Finance,
the bank. The new loan product now being offered will have a base spread of
and Sundaram Finance, as cost of
2.25% above the 5.75% repo rate, meaning 8%. A 40 basis point spread over
funds from other sources went up,”
the rate will also be charged by the bank, stated Gupta.
said AM Karthik, Vice-President &
Sector Head-Financial Sector Rat- “Existing borrowers can shift to repo rate-linked product by paying a 0.25%
ings, ICRA. charge,” Gupta said. SBI CFO Prashant Kumar said, "We have already linked our
overdraft and cash credit rates to the repo rate earlier this year and now we
According to ICRA, deposit-taking
have introduced the home loan product. As we have said earlier, we will gradu-
NBFCs account for about 15-17% of
NBFC assets. The rating agency also ally link our loan rates to the RBI rates for faster transmission."
estimates the total public deposits
"It has been noticed in the past that it took four to six months for transmission.
of NBFCs as on March, 2019 at
But this time, transmission has been faster than that," central bank governor
about Rs 41,000 crore (provisional),
Shaktikanta Das said after the policy decision. He said banks have only reduced
up from about Rs 32,000 crore in
rates by 21 basis points of the 50-basis point reduction in policy rates, going by
March, 2018.
the weighted average lending rate reduction.
BANKING FINANCE | JULY | 2019 | 5