SBI Sees No Rate War on Home Loans, but Ups Disbursal Target

Mumbai: Stating that it does not foresee a rate war on the home loan front, State Bank of India, the country's largest lender, on Wednesday said it is targeting an uptick in housing advances at 18 per cent on good demand and its aggressive rate posturing.

After a tepid 2014-15 on overall credit pick-up front, SBI is targeting to increase its overall loan growth to up to 15 per cent this fiscal year as the economy has begun to look up, SBI managing director and group executive for national banking B Sriram told reporters on the sidelines of an event here.

"We don't foresee any rate wars, all the lenders are competing with similar rates in similar bands. It's good for customers, as they have a larger choice now," Mr Sriram said.

The official, however, hinted at not reducing the auto loan spreads, as it did with home loans, saying it currently offers the most competitive rates and customers have already benefited from the 15 bps reduction in base rate last week.

He further said that the bank is targeting to increase its housing loan growth to 18 per cent in current fiscal year against 14.5 per cent in the recently concluded FY15.

As of December 2014, SBI had an outstanding housing loan book of Rs 1,52,905 crore, up from Rs 1,35,129 crore in year ago period, registering a growth of 13.15 per cent, while market leader HDFC's loan book grew to Rs 2,19,951 crore during the same period, up from Rs 1,92,284 crore in the December 2013 quarter.

It can be noted that from last week, SBI, ICICI Bank, Axis Bank and mortgage lender HDFC have cut lending rates and adopted a more aggressive stance when it comes to home loans, wherein they have reduced their spreads and in some cases, taken the lending rate at par with the base rates.

SBI is lending to new women borrowers at par with its base rate of 9.85 per cent and for others, it has reduced the mark-up above the base rate to lend at 9.90 per cent.

Mr Sriram said the impact on margins will be offset by the rise in demand for loans. "Whatever little margins that we forego, I am sure will be made good by the volumes that we are expecting," he said.

He said that in this competitive environment, the bank is focusing on customer service and cited its work on improvement in the loan processing time as one such area.

SBI has compressed the average loan processing time to 22 days as against the 35 days earlier, he said, adding that in some cases where there are builder tie-ups, it can come down to seven days as well.

When asked if he expects the customers served by other lenders to switch over to SBI, Mr Sriram said his takeover portfolio stands at a very low 5 per cent and most of the disbursements are for fresh loans.

Among the various pockets in the country, Mr Sriram said Bengaluru and Pune are the most active on the home loan front but added that with expectations of a broad-based economic growth, other areas will also catch up.

SBI, which cut its base rate last week, did so as per the existing formula of computation based on average cost of deposits for the seven-day to one year deposits.

The country's largest lender is awaiting clarity on the new marginal cost of funding methodology suggested by the regulator for better transmission of its rate cut moves, he said.

Meanwhile, he also said that the bank is looking at adding 4,000 cash dispenser-cum-cash deposit machines across the country this fiscal year. Apart from that, the bank will also add 2,000 each cash dispensing machines and cash deposit machines.

Its ATM network currently stands at over 43,000 at the bank level and 53,000 at the group level, he said.