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SBI's special home loan rates at 8.5 per cent

Press Trust Of India
Jan 01, 2011 at 08:48am IST

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Mumbai: Country's largest bank SBI on Friday announced special lower home loan rates for the first few years which are, however, higher than the lender's much-flayed but most popular teaser rates...Under the new special scheme, home loans of up to Rs 75 lakh attract 8.50 per cent interest rate for the first year and 9.25 per cent for the next two years.

The special rates are valid between January 3 and March 31, 2010.

The new formula announced today involves a card rate which is higher than bank's base rate or the minimum lending rate and then places a discount on card rate. The same formula is applicable on auto loans as well.

SBI's special home loan rates at 8.5 per cent

SBI on Friday announced special lower home loan rates for the first few years.

Earlier, SBI was offering a teaser rate of 8 per cent for the first year and 9 per cent for the next two years. These were not linked to the base rate.

"This is not a continuation of our old scheme...the difference is that we have linked the rates of interest to the base rate," a senior bank official said after the announcement of the new rates.

Posturing an aggressive stand to garner a larger market share, State Bank of India (SBI) in February 2009 launched lower rates for the initial years of the credit period which soon came to be known as teaser rates.

These were introduced when SBI was flush with over Rs 1,00,000 crore of excess liquidity, bank chairman O P Bhatt had said.

The scheme was in instant hit but invited sharp criticism from many quarters, including the Reserve Bank of India which had expressed concerns over the likely formation of asset bubbles due to teaser rates. The scheme was also flayed for not extending the concessional to existing borrowers.

Many lenders, including mortgage leader HDFC, followed SBI steps and had introduced teaser rates but discontinued with the scheme in the wake of liquidity getting tighter.

SBI in a release issued today said it "shares the concerns of RBI and accordingly has formulated a loan pricing policy".

Earlier in the day, SBI also increased its minimum rate of lending or the Base Rate by 40 basis points to 8 per cent.


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