By Sangita Mehta | ET Bureau | 12 Jun, 2015, 04.00AM IST | Economic Times
MUMBAI: The State Bank of India has taken the battle for market share in the home loan market to the doors of leaders —Housing Development Finance and ICICI Bank — offering a total processing fee waiver for shifting to it from other lenders, said a person familiar with the move. State Bank of India, which is no exception to the slowdown in demand for loans from corporates, moves to establish its credentials as a serious retail player as it already offers the lowest rates on mortgages. But the bank’s continued charge of legal and valuation fee of as much as Rs 8,000 could limit the gains.
“We want to offer the best combination in terms rates and charges,” said an SBI official who did not want to be identified. “Already, the pre-payment penalty is banned and our rates are lowest, so we have decided to waive the processing fee.” Home loans is the oasis for bankers who are facing a severe slowdown in demand from corporates. For the staterun banks which are not significant lenders in the credit card, or other unsecured loans business for retail borrowers, home loans remain the only segment which can keep them going.
The secured nature of the product and the low rate of defaults makes it the best for PSU banks saddled with tons of bad loans from poor corporate lending. SBI’s home loan rates are the lowest among all lenders at 9.70% for women borrowers and 9.75% for others, irrespective of the loan amount. ICICI Bank charges 9.85% for loans up to Rs 30 lakh and 9.95% for loans between Rs 30 and Rs 75 lakh. HDFC charges 9.85% for women and 9.90% for others irrespective of the loan amount.
After the RBI banned pre-payment penalty on floating rate home loans, banks across the board have seen a sharp rise in customers moving from one bank to another in search of better rates. For SBI, nearly 10% of its incremental loan is on account of migration from other banks or housing finance companies. SBI’s home loan book stood at Rs 1.59 lakh crore, which is 15% of their total loan book. However, new borrowers seeking a home loan would be charged 0.5% of the loan amount, or Rs 10,000, whichever is less. While HDFC has not waived off processing fee for borrowers, its fee is inclusive of legal and valuation fee.