Lower rates boost SBI home loans

The lower interest rates charged by the State Bank of India (SBI) are contributing to a growth in its home loan portfolio at a time when the sky-rocketing real estate prices have slowed the credit demand.

While fresh loans for buying houses are growing albeit at slow pace, buying out other banks' home loans is helping the public sector bank to strengthen its home loan book.

"There is a slowdown in personal loans, though it is not a steep decline. We are giving personal loans to eligible persons. But the growth in home loans is marginally better than same period last year," SBI deputy managing director (national banking) Sitaramam Komaragiri told reporters on the sidelines of launching the Mastercard & SBI money transfer facility.

The bank's festival offer of lower interest rates on retail loans is in progress till the end of this month. People are buying houses, Komaragiri said, but did not specify the growth rate in the home loan segment. 
 

RATE RECKONER
Bank/institution	Rate range  (floating)
SBI	10-10.75 % based on loan amount  and maturity
ICICI Bank	12 % for loans  up to 20 years
HDFC	10.25% up to  Rs 20 lakh 10.50 % >Rs 20 lakh
Figures as on Dec 11, 2007

Another senior SBI executive said, "Our lending rates for homes are lower by 100-200 basis points compared with competitors, especially private banks. Our rates are between 10-11 per cent, while others charge 12-13 per cent."

The bank's cost of funds is low at 5.5 per cent, but it is still able to make profits. Because of its low costs, the bank is able to finance borrowers who have taken home loans from other banks.

State Bank of India's outstanding home loan portfolio grew by 18.04 per cent year-on-year to touch Rs 40,807 crore. It added loans worth Rs 2,825 crore in April-September 2007. The asset quality is under control, according to a presentation made to analysts.

The bank's advances in the personal segment grew by Rs 11,962 crore (18.18 per cent year on year basis) at the end of September 2007. The outstanding personal segment advances aggregated Rs 77,772 crore.

The retail advances constituted 24.82 per cent of the gross domestic advances as at the end of the September quarter. Housing loans constitute 52.47 per cent of the bank's retail advances.