SBI has a share of 34% in the home loan market and a portfolio of over Rs 5 lakh crore which it hopes to double in the next five years.
The regulator also carried out an examination of the correspondence with the bank regarding payment of remuneration to its employees in the form of commission to arrive at its decision.
State Bank of India (SBI) on Monday lowered home loan rates by 10 basis points to 6.7%, a concession that would be available till March 31.
The interest concession would be based on the loan amount and CIBIL score of the borrower, the lender said, adding the idea is to reward customers with a good repayment history. The lender will also waive processing fees. SBI has a share of 34% in the home loan market and a portfolio of over Rs 5 lakh crore which it hopes to double in the next five years.
Home loans account for the biggest share of 23% of the bank’s loan book. SBI chairman Dinesh Khara had earlier said the bank is expecting its home loan portfolio to touch Rs 7 lakh crore by 2023-24 with demand being driven by an increased desire among the youth to own homes early in life, rising incomes, and government policies like the cuts in stamp duty and subsidy.
Saloni Narayan, DMD (retail business), SBI, said the bank’s customers appreciated the transparency. “The reduced interest rates are one of the best interest rates in home loans anyone can wish for,” she added.
One of SBI’s biggest competitors in the segment is mortgage lender Housing Development Finance Corporation (HDFC) is offering home loans beginning at 6.8%. Its assets under management (AUM) were Rs 5.52 lakh crore as of December, without discounting the loans it has sold. Kotak Mahindra bank is now offering loans starting from 6.65%, ICICI Bank home loans start at 6.8%. As per disclosures on the websites, Axis Bank and LIC Housing Finance are charging 6.9%, respectively, for their home loans.
Analysts at JP Morgan believe that retail traction for SBI has been strong. “With the large part of credit costs and operating costs behind it in FY19, SBI should start reverting to normalized profitability from FY21, in our view, and the bank should hit the target return on assets (ROA) of 0.7-0.9% F21/22 onwards,” JP Morgan said.
As per Nomura, SBI’s strategy is to improve its operating profit in a risk-calibrated manner by focusing on its deposit franchise and offering better platform to attract new customers.