SBI has full competition head on by launching a personal loan scheme against property loans at interest rates lower than some private banks.
The scheme, aimed at existing home loan borrowers and linked to the price of property, is offering personal loan at 11.25 % to existing home loan customers.
The offer is related to the top-up scheme of ICICI Bank at 12.50 % and HDFC, which have hooked their loans at 12.25 %. The new product, called ‘SBI Home Equity scheme’, gains relevance in the context of the rise in property prices over the last few years.
The personal loan entitlement under the scheme is linked to the value the property for which the borrower is already paying EMI. The lender will give a maximum 75 % of the value of the property after deducting the outstanding amount of the loan.
The interest rate of 11.25 % charged by SBI is benchmarked to the bank’s base rate of 10 %.
Similarly, rates offered by other banks 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.
Customers may shift their loan account to SBI, particularly in the context of the Reserve Bank of India banning banks from charging any prepayment penalty. SBI is also offering overdraft facility on the new scheme at 11.50 %.
SBI has emerged as one of the largest players in the home loan market with a portfolio of more than Rs 1 lakh crore.