The Hindu Business Line : SBI to raise processing fee on loans

Mumbai, July 8 As part of its strategy to enhance the non-interest income, State Bank of India plans to increase the processing fee on loans, both for corporate and retail.

While the bank may still offer some concessions on a case-to-case basis, it will increase the card rates, said Mr Ashok Mukand, Deputy Managing Director, State Bank of India.

With the cost of funds going up, any additional income will enable the bank to maintain its bottomline. Other public sector banks may also take a cue from SBI to increase their non-interest income. As fees from sale of bank drafts are seeing a slowdown due to increasing online transactions, the processing fees on loans are an important source of revenue, said some bankers.

For 2007-08, SBI saw its fee income increase by 23 per cent. The fee income for large corporates grew by 61 per cent growth and for mid corporates by 43 per cent.

According to SBI’s Web Site, the current processing fee, for home loans, is 0.25 per cent of the loan amount, with a cap of Rs 5,000, which includes the service tax.

Its biggest competitor, ICICI Bank, charges 0.5 per cent of the loan amount as administrative fee or Rs 2,000, whichever is higher, on home loans, according to its Web Site.

Lower charges

Mr Mukand said, “Our processing fees are rather low now. We are looking to raise processing fees on corporate loans and retail loans, though there could be some concessions, on a case-to-case basis. As our prime lending rate and home loan rates are the lowest in the market, our charges will be lower than that of other banks, despite the increase in processing fees.”

The rise in interest rates is unlikely to affect margins, Mr Mukand said.

“We have raised the interest rates on deposits only in certain bands, but in the case of loans, the increase will be across the board. So, profits should improve because of better returns on loans and margins should also improve,” he said.

More Stories on : Credit Market | Public Sector Banks | State Bank of India

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