Bangalore: State Bank of India (SBI) has halved its Processing Fee for home loans, reports Sangita Mehta for ET Bureau. This is a strategy to lure more customers, who are looking for affordable home loans.

Pratip Chaudhuri, Chairman of Policy Committee, has taken the decision to lower the processing fee. There are 3 sections of processing fees in the category of home loans. Firstly, loan amount below 30 lakh will have a processing fee of 0.25 percent on the loan amount. Secondly, loan amount between 30 to 75 lakh will have a processing fee of 6500, which previously was 10,000. Lastly, loan amounts above 75 lakh will have a processing fee of 10,000, which was 20,000 previously. The processing fee for loans above 75 lakh has been halved.

On the condition of anonymity, a senior officer at SBI said, "The decision is aimed at creating goodwill. With regards to fees charged from retail customers, SBI will charge only to the extent of covering its cost and not earn profit on it." Processing fee of ICICI and Axis Banks is 0.5 percent of the loan amount. HDFC too charges 0.5 percent on the loan amount as processing fee but also has an additional amount of 10,000 to be paid.

Though this move on the part of SBI is seen as a boon by customers, some believe that it was not very wise on the part of SBI to take such a step. Jairam Sridharan, Head of Consumer Lending and Payments of Axis Bank said, “In an environment where all banks are moving towards zero pre payment charges, we believe processing fee in the industry would tend to rise over a period of time." He further said, "Also, the waiver of pre-payment penalty will only encourage customers to prepay more loans, more frequently. Therefore, it is not sustainable to have a lower processing fee." However, other analysts think otherwise. Hemindra Hazari, Head of Research - Institutional Equities at Nirmal Bang, said, "At a time when corporate sector is going through a lot of pain, SBI may prefer to decelerate its corporate loan book and expand its retail loan book. And this move may be aimed at that."

Irrespective of a critical look at this move of SBI regarding processing fees, salaried people should welcome this step as a mode of saving money. Reduction in processing fees might not affect corporates much but it’s a big deal for the common man. After all, “a penny saved is a penny saved.”