The Hindu Business Line : SBI set to cut personal banking product rates

STATE Bank of India (SBI) has decided to slash interest rates on its personal banking products by 1 percentage point to 1.5 percentage point shortly. While this is line with the current interest rate scenario, bank officials also expect this to boost the banks business in this segment.

The details are yet to be worked out, but a bank source said rate on all personal products would be reduced.

The average rate of interest in personal finance loans was around 14-16 per cent. In view of the falling interest rate scenario, the bank thinks it necessary to rationalise the interest rate structure, a source said.

The source said, since over the past year, credit pick up in all segments have been poor, the rationale behind dropping interest rates at this juncture was to capture a larger volume of the business.

SBIs personal banking portfolio covers loans such as housing, educational loans, auto loans, personal loans, loans against securities, loans against gold etc. While the total portfolio size is in excess of Rs 15,000 crore, the housing finance segment itself accounts for more than half at Rs 7,047 crore.

The bank has already reduced the interest rates on housing loans. Besides this, the bank has recently introduced a short-term housing loan scheme where the repayment can be done up to a period of 5 years. This scheme is aimed at high networth individuals and is being particularly targeted at the young and upwardly mobile segment of customers.

The interest rates under this scheme is 11 per cent fixed and 11.25 per cent floating, whereas for a regular loan repayment scheme which spans 20-25 years the interest rate is half per cent higher at 11.50 per cent floating and 12.00 per cent fixed.

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