After private sector lender HDFC Ltd , State Bank of India over the weekend announced a cut in home loan interest rate by up to 0.25 percent for new borrowers. For women borrowers the rate has been aligned to the base rate at 9.85 percent per annum, SBI said in a statement.
But for other borrowers, the interest rate will be 9.90 percent, 5 basis points higher than the base rate or the minimum lending rate.
B Sriram, managing director and group executive national banking, SBI, says there is good news for existing home loan holders as well. They have the option of converting their existing loan rate to new rates for a small charge, he adds.
He expects the home loan portfolio to grow by 18 percent in FY16. According to him, competition in the home loan space has been rather intense.
Sriram says low-cost deposits are getting converted into term deposits.
Below is the verbatim transcript of B Sriram's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: I just wanted to ask you the old home loanees get 15 basis points knocked off and the new guys get 25 basis knocked off, is that right?
A: Yes that is right but the old home loanees also have the choice to convert their existing rates to current rates at a small charge of 0.56 percent.
Latha: What is your total home loan book as a percentage of the total book or even the size of your home loan book?
A: The size of the home loan book is about Rs 1,60,000 crore.
Latha: That makes you bigger than HDFC.
A: Yes, we are market leaders in that and we have close to about 26 percent market share.
Latha: Would this shave off something from your margins, would there be pressure in the current quarter – April-June quarter on net interest margins (NIMs) in general since this is not a small part, it is a fairly big part of your book?
A: What we are looking at is to try and grow volumes to try and make sure that whatever little margins are shaven off are made good by way of volumes. We had done about 14.5 percent last year and there was quite a good consumer demand in the last three to four months of the last year. We are hoping that the same trend continues into the New Year.
With some good figures on the Index of Industrial Production (IIP) also coming in and a lot of consumer demand also growing is what we are looking at, we are looking at about 18 percent growth this year and that would more than compensate for any income loss that we are looking at.
Sonia: This 18 percent growth will be in your home loan portfolio, is that your expectation for FY16?
A: That is right, what I am talking of is only the home loan portfolio. The 14.5 percent is also on the home loan portfolio.
Sonia: Will you be looking to revise your base rates further anytime soon and if yes by when?
A: At the moment we have just brought down the base rate by about 15 basis points. We have to continuously look at both the liability of the asset side of the book. These are discussions that happen continuously in our asset-liability committee (Alco). So, we will continuously watch the market and see as to how we go ahead.
Sonia: Now that your rates are the cheapest in the market and in the industry in any case there is no pre-payment penalty, do you see it become easier for State Bank of India (SBI) to takeover corporate and retail loans from other banks, something that you have been successful in doing in the recent past?
A: That is also a market that is available to us. However, that is a very small market to takeover. It is the new home loan that literally drives the market. 72 percent of our home loan book is what we call lower segment, less than Rs 30 lakh. Most of our portfolio is on first time buy so we are hopeful that the trend will continue and we should be looking at a continuous supply of new home loans rather than looking at the takeover business. However, takeover is also a part of it.
Stay tuned for more..
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