SBI lets existing home-loan customers to switch to lower rates

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In a move that would help a large number of home loan customers to reduce their interest burden, nation's largest lender State Bank of India has decided to allow them to reprice their existing loans at lower rates.

The switch over will be subject to a small fee-one per cent of the outstanding loan amount- a top official said.

The move is expected to help all those borrowers whose home loans are linked to the prime lending rate which is as high as 14.75 per cent at present.

Currently the floating rate of bank is linked to the base rate which is ten per cent. SBI's current floating rates vary from 10.5 per cent for up to Rs 30 lakh loan, 10.75 per cent for between Rs 30 lakh and Rs 75 lakh, and 11 per cent for loans above Rs 75 lakh.

"We thought of giving an option to our existing home loan borrowers who are on the prime lending rate to switch over to the new floating rates that are much lower than our prime lending rates. Anybody can reprice their loan by paying a 1 per cent of their outstanding as an upfront fee," managing director and chief financial officer of the bank, Diwakar Gupta, told.

He further said there is no cap on the loan tenure or the amount of the loan to reprice their loan to a lower rate nor there is any time limit for the switch over.

The bank was prompted to take this measure in the wake of customers making enquiries about shifting their loans to other banks, according to sources.

The objective is to help the existing customers to lower their interest burden, which will in turn help the bank avoid possible delinquencies.