MUMBAI: State Bank of India ( SBI ), the largest home loan provider, has cut interest rates on home loans above Rs 75 lakh by 10 basis points (100bps = 1 percentage point) to 8.55% for salaried women borrowers and 8.60% per annum for others.

“Taking a cue from the recent RBI reduction in risk weightage on home loans, SBI is passing on the benefit to its customers,“ said Rajnish Kumar, MD, SBI, explaining the rationale behind the cut. While SBI was the cheapest in the mid-segment, its loans were marginally higher than HDFC in the Rs 75 lakh-plus category where HDFC charges 8.55% for all borrowers. Incidentally, HDFC continues to be the cheapest in this segment. Other banks, however, might follow suit. “There is merit (in reviewing interest rates). We will take a look at it later,“ said Rajiv Anand, executive director, Axis Bank.

SBI's reduction in interest rates follows the RBI's move to make home loans cheaper by reducing the amount of capital that banks have to set aside on high-value mortgages. This is the second time that SBI is revising rates in a month. In May, the bank reduced its interest rates by 25bps by shrinking the spread over its benchmark rates.

SBI home loans of up to Rs 75 lakh will continue to attract 8.35% for women and 8.40% for other borrowers.

Although the RBI had tweaked the capital requirements relating to other home loan segments, Kumar said that the savings were only marginal. “The savings in cost on account of the reduction in risk weightage is only two basis points. We had already reduced interest rates in other segments on April 9,“ he added. Earlier this week, RBI governor Urjit Patel said that instead of cutting interest rates, the central bank was engaging in a “targeted intervention“ to direct funds to sectors like home loans which were doing well.

