SBI extends home loan processing fee waiver to March-end, cuts

In a major boost to home buyers, country's largest lender State Bank of India has extended the processing fee waiver till March-end and also reduced the base rate by a sharp 30 basis points to 8.65 per cent.
The reduction in base rate, effective today, is going to bring relief for nearly 80 lakh customers of the bank whose loans are still linked to the base rate and not the marginal cost of funds-based lending rates (MCLR).
Flushed with excess liquidity, SBI had announced processing fee waiver for auto and home loans late August. In fact, since last fiscal, and especially after the November 2016 note-ban, all the banks have been saddled with excess liquidity amidst continuing degrowth in industrial credit.

For the first time in over two years, credit uptake by corporates entered the positive terrain but with a paltry 1 per cent growth in November this year.
"We've decided to extend the ongoing waiver on home loan processing fees till March 31, 2018 for new customers and others looking to switch their existing loans to us," SBI said in a statement today.
Managing director for retail and digital banking P K Gupta said that with stability returning to the realty space after the implementation of the Real Estate Act (Rera), he sees lots of demand for home loans going ahead.

"With most states having the realty regulator Rera now, stability has returned to the market in terms of project approvals. The teething troubles of the initial Rera months are behind the market. So, we foresee lots of demand for home loans. So, we think this is the right time to continue with that waiver to enable people for buy homes," Gupta said in a concall.

The bank revised down the base rate to 8.65 per cent for existing customers from 8.95 per cent, while the BPLR (benchmark prime lending rate) is down from 13.70 per cent to 13.40 per cent.

The bank, however, did not change the marginal cost of funds-based lending rate (MCLR). The one-year MCLR of the bank stands at 7.95 per cent.
"We had done the rate review in the last week of December, and based on whatever deposits rates we had, our base rate was brought down by 30 basis points to 8.65 per cent now," Gupta said.
The move is going to give nearly 80 lakh customers of SBI who on the old lending rate regimes and have not moved to MCLR. Banks review MCLR on a monthly basis, while the base rate revision happens once a quarter.

"The MCLR was reduced earlier also as the gap between MCLR and base rate had become quite wide. This reduction will help in reducing that gap," he said.
Due to weak transmission of policy rate by banks under the base rate system, the Reserve Bank had introduced the MCLR from April 1, 2016.
With the banks not fully passing on the rate cuts that the central bank has done in the past two years, the regulator is not happy even with the base rate regime and has mooted an external benchmark to better reflect market realities and speedier transmission.
Gupta said the current revision of base rate will ensure transmission of the policy rate cuts in the recent past.