BENGALURU: It has been raining offers in this festive season and there’s good news in the offing as State Bank of India (SBI) has decided to cut home loans rates to 9.1 pct—the lowest in six years—as part of a festive scheme. This rate cut comes after a general interest rate reduction last week when SBI reduced its benchmark rates by 15 basis points.

This festive scheme is valid only for the months of November and December and where payments will take place in a month. Under this scheme, the home loans will be available for women at 9.1 pct, whereas for others it will be available at 9.15 pct.

"The rate cut is expected to bring down the equated monthly installment on a Rs 50-lakh loan by Rs 542 per month. Since March, the EMI has come down by over Rs 1,500. With this reduction, SBI's cheapest home loans are now lower than HDFC's cheapest home loan rate of 9.3pct,” said SBI MD, Rajnish Kumar to ToI.

This move from SBI comes in spite of the fact that banking sector is witnessing a sluggish growth in loans. Despite negative growth in corporate loans, overall bank credit has grown by 1.6 pct in FY17 due to home loans which are growing at 18 pct. SBI’s move comes as an attempt to capture this market by offering loans at lower rates.

This latest round of cuts is meant only for new borrowers. SBI's benchmark rate is the one-year Marginal Cost of Lending Rate (MCLR), which has been effective from April 2016. In an aggressive move SBI has kept the overnight MCLR at 8.65 pct, while the one month is at 8.75 pct. Under the revised rate structure, the one-year MCLR—which is used for calculating the rate of interest on home loans—will come down to 8.95 pct.

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