SBI likely to cut home loan rates after RBI relaxation

Countrys largest lender State Bank of India (SBI) will soon cut its home loan rates, a top official said Friday. The comments come a day after the Reserve Bank announced a 0.25 percent cut in its key rates.

SBI chairman Rajnish Kumar told reporters the bank is working on a proposal to cut home loan rates and will soon be announcing its move. He said the banks deposit rates are much lower than peers and pointed out that a reduction in deposit rates will be required to cut the overall lending rates under the MCLR system.

For effecting a rate cut in home loans, SBI will either have to decrease its one year MCLR or can go for a cut in its spreads over MCLR for the product. Within hours of the RBI move, state-run Bank of Maharashtra had announced a 0.05 percent cut in its MCLR.

An interest rate cut in home loans will be a shot in the arm for the struggling realty sector, which also got a slew of sops in last weeks interim budget ahead of the crucial elections. When asked about the external benchmark rate which the RBI wants to implement by April, Kumar said it is unlikely to be implemented as the operative guidelines on the same are yet to be released..