With customers allowed to shift their home loans to other banks at no extra cost, a quarter of State Bank of India (SBI)'s fresh home loans are accounted for by customers who migrated from other banks.
Last year, after a Reserve Bank of India directive, the Indian Banks' Association had asked its member banks to do away with the pre-payment penalty on floating rate home loans. This encouraged customers to shift banks and avail of lower rates.
Currently, the interest on SBI's home loans (10 per cent for a loan of Rs 30 lakh) is the lowest among large banks. At 9.75 per cent, the bank also has the lowest base rate, the reference rate for all loans.
SBI, which is pushing retail credit growth, as corporate loan demand is slack, had also reduced the spread on home and auto loans (spread is the difference between the base rate and the rate at which the bank lends to customers).
After the encouraging response to its rate cut, SBI is now targeting 30 per cent growth in the home loan segment this financial year, compared with the 16-18 per cent overall loan growth target. Following the rate cut, SBI's home loans disbursals rose about three times to Rs 150 crore a day.
The government plans to infuse Rs 15,000 crore in public sector banks this financial year. SBI has said it prefers a rights issue over a qualified institutional placement.
"The finance minister has said about Rs 15,000 crore has been allocated for recapitalisation. We will see what kind of allocation comes from the government," SBI Chairman Pratip Chaudhuri said, adding the bank was confident of securing Rs 4,000 crore from the government.
As of September-end, the bank's capital adequacy ratio was 12.63 per cent, with Tier-I capital of 8.97 per cent.
While SBI has decided not to reduce its base rate for now, Chaudhuri didn't rule out the possibility of a rate cut next month.
"We have reviewed the base rate. We have decided not to reduce it any further, as our base rate is the lowest," Chaudhuri said.
He added the bank's asset liability committee would meet in the first week of December to decide on the matter.