SBI outpaces peers on home loans front

The State Bank of India (SBI) has outpaced its nearest competitors by launching a personal loan scheme against property at interest rates lower than the prevailing market rates. The scheme, which has been aimed at existing home loan borrowers and linked to the price of property, is currently offering personal loans at 11.25% to existing home loan customers. The scheme has in fact established a parity of the scheme floated by other players including ICICI Bank and home loan provider HDFC, which have pegged their loans at 12.25% and 12.50%, respectively. The new property related product, called 'SBI Home Equity scheme', gains relevance in the context of the sky rocketing prices of property across the country.

According to official sources, the loan eligibility under the scheme is linked to the value the property for which the borrower is already paying EMI in which the lender will give a maximum 75% of the value of the property after deducting the outstanding amount of the loan. Quoting an instance, they said adding that if the property is valued at Rs 1 crore and the borrower has an outstanding principal loan of Rs 10 lakh, the bank will deduct a margin of Rs 25 lakh and the outstanding principal of Rs 10 lakh, making the borrower eligible for a loan of Rs 65 lakh, provided his annual income supports it. On the other hand, rates offered by other players like ICICI Bank and HDFC for top-up loans are benchmarked to their base rates or prime lending rates. The scheme, which links home loans to personal loans, will attract home loan customers of other banks. Adding to the momentum customers may shift their loan account to SBI, particularly in the context of the RBI banning banks from charging any prepayment penalty and also the SBI is offering overdraft facility on the new scheme at 11.50% and in view of this the bank has emerged as one of the leading players in the clocking Rs.1 lakh crore portfolio.