SBI has decided to cut interest rate on auto loans by 0.5 per cent and on home loans by up to 0.6 per cent, respectively. The new rates of interest will be applicable from August 7, 2012.
On July 31, 2012, RBI Governor Duvvuri Subbarao brought down the Statutory Liquidity Ratio (SLR) down by 1 per cent to 23 per cent. The step has been welcomed by SBI, which has provided the benefits to its customers immediately.
"The one percentage point reduction in the SLR will release an additional Rs 10,000 crore for SBI. That coupled with Rs 6,500 crore released through the reduction in export refinance, may lead the bank to cut lending rates in retail," Chairman Pratip Chaudhuri had said.
Interest rate on auto loans will now be 10.75 per cent, down from the prevailing rate of 11.25 per cent. This will mean that on a seven-year loan, the monthly instalment will come down from Rs 8,625 to Rs 8,495 for a car worth Rs 5 lacs.
Similarly, interest rates on housing loans up to Rs 30 lacs are now 10.25 per cent, 25 basis points below the current 10.50 percent. Home loans above Rs 30 lacs and up to Rs 75 lacs will be offered at 10.40 percent interest, at a cut of 35 basis points. Home loans of above Rs 75 lacs also carry an interest rate of 10.40 per cent, 60 basis points less than the prevailing 11 per cent.
However, the base rate, which stands at 10 per cent, will remain unchanged. This means that existing borrowers will not be able to benefit from the new scheme.
SBI is currently offering the best interest rate on car loans and rates offered by almost all other major national banks vary from 11.50 per cent to up to 17 per cent, depending on the tenure of repayment and choice of bank. The cut in interest rates has made SBI the current favourite among car buyers.
One must note that the maximum loan offered is generally 85 per cent of the total value of the car, which means, for buying a car worth Rs 6 lacs, maximum loan obtained can be Rs 5,10,000.
We will have to wait and watch whether the cut in lending rates of SBI will have a positive impact on the Indian auto market which, as the results of the first quarter for fiscal 2012-13 indicate, has been doing less than average business lately.
