The country’s largest public sector bank, State Bank of India (SBI), has taken a big and shocking step and increased the upper limit of its home loan interest rates by 25 basis points. While earlier these rates were between 7.5% to 8.45%, now they have increased to 7.5% to 8.70%. With this decision of the bank, it has now become a little more difficult for the common man to buy his dream home.
Who will be most affected
This increase in interest rates will have the biggest impact on new customers who have a low credit score. The bank has increased its upper rate, which will make it more expensive for customers with low CIBIL scores to take home loans. According to a report, SBI has made this important change on the basis of CIBIL score and External Benchmark Lending Rate (EBLR). A person associated with the bank says that home loans have been a low-return product for them, so it was necessary to increase the margin for new customers with low credit scores.
Has SBI increased the rates only
This increase is not limited to SBI only. Apart from the State Bank of India, Union Bank of India has also increased its rates. Union Bank’s interest rates have increased from 7.35% to 7.45% at the end of July. This increase has come at a time when the Reserve Bank of India (RBI) has continuously cut the repo rate, except for the last meeting. In comparison, private banks like HDFC Bank, ICICI Bank, and Axis Bank are still offering home loans at low rates.
State Bank of India (SBI):- The old rates were 7.5% to 8.45%, which have now increased to 7.5% to 8.70%.
Union Bank of India:- Their rates have increased from 7.35% to 7.45%.
HDFC Bank:- They start at 7.90%.
ICICI Bank:- They start at 8%.
Axis Bank:- They start at 8.35%.
This clearly shows that there is a clear difference in the strategy of private and government banks.
What will be the impact on old customers
The good news is that this change of bank will be applicable only to new customers. This increase will not have any effect on old home loans worth ₹ 8 lakh crore. Home loans have the largest share in SBI’s total retail loan portfolio. For a long time, private banks were criticizing this aggressive pricing strategy of public sector banks, but now SBI has taken this important decision to increase its margins. This step will help in maintaining the financial stability of the bank amid increasing competition in the market.