SBI had recently reduced its base rate by 25 basis points to 9.75 percent, and has now launched a range of offers to boost retail loans. SBI has lowered the processing fee to 1,000 for home loan borrowers while shifting to the state-run lender from a competitor. Even the conversion fee has been cut by half to 0.50 percent.  Conversion fee is the charge paid by existing customers for shifting to lower interest rates paid by new customers. SBI now provides its existing customers with an option for switching to lower rates over a nominal fee of 1 per cent of the outstanding loan.

State-run banks, with their branch spread wised across the nation, are benefiting huge from retail business. "Retail lending gives banks two definite advantages. First, it spreads the risk unlike in the case of large corporate loans. And second, after tying up customers with retail loans, we get the advantage of capturing the whole gamut of their banking needs," said UCO Bank's Kaul, as quoted by ET.

Lenders such as Allahabad Bank, UCO or United Bank are planning to raise the share of retail loans from the current 12-14 percent to about 20 percent of total loan portfolio in the next three years.

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