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After the RBI’s marginal cost of funds-based lending rates (MCLR) came into effect in April, banks led by SBI have started lowering rates. Speaking to Bloomberg TV India, SBI Managing Director Rajnish Kumar said the lowering of rates will not put pressure on margins as the cost of funds, operational cost, return on net worth and negative carry on CRR funds are captured into the MCLR.
SBI was the first to move on MCLR for new loan applicants. At this point, what would be the home loan rate if one goes to the bank for a new home loan?
These rates have become effective from April 1. And we have said the MCLR for home loans will be 9.20 per cent for one year. So the rate of interest for borrowers will be linked to 9.20 per cent and it will be reset every year. So today if anybody comes to us the loan rates are 9.45 per cent in general and 9.40 per cent for women if they are co-owners of the loan taken. It was 9.50-9.55 per cent earlier.
On a home loan of ₹50 lakh, the EMI saving is ₹300. It is a ball park figure but it depends on the amortisation also. The new EMI savings is on an amortisation of 30 years.
What will be the impact on the bank? Would this margin put pressure ahead?
No, it will not put pressure because all the costing — cost of funds, operational cost, return on net worth and negative carry on CRR funds — get captured into the MCLR. Over and above that, 25 bps is the risk premium and business strategy consideration.
What happens to existing customers, many of whom are paying at the rate of 9.6 or 9.7 per cent at this point?
There will be a switching option with a switching fee.
Is that what you are encouraging or you just think that will happen naturally even at the lower rates at this point?
That is for the borrower to decide. They have to do their calculations depending on what is the maturity of their loan. If somebody’s remaining maturity is just one year, they may not like to switch. For a borrower who has just contracted a few months back, the home loan’s remaining maturity may be 28 or 29 years. For them it would make a lot of sense to switch. Where do you see credit growth going ahead in the corporate and retail sector?
I think the growth in credit is mostly coming from the home loan and consumer side. And the growth on the corporate side has been muted.
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