State Bank of India Extends Home Loan Scheme to till march 2010

State Bank of India, India's largest lender by assets, Friday extended -- until March 31, 2010 -- its special home loans scheme and cut its deposit rates.
Rates on deposits of one year to less than two years have been reduced to 6% from 6.25%, SBI said in a release.

The new deposit rates, effective from Monday, will marginally improve net interest margins by two basis points to three basis points, bank chief financial officer S.S. Ranjan told Dow Jones Newswires.

For deposits of two years to less than three years, rates have been cut to 6.50% from 6.75% and rates on deposits of three years to less than five years have been slashed to 6.50% from 7%, SBI said.
The bank has also extended, for another five months, its scheme for home loan at 8% for the first year of repayment.

For loans up to 500,000 rupees with a maximum tenor of 10 years, the rate of 8% is fixed for five years.
Loans above 500,000 rupees and up to 5 million rupees will be charged an home loan rates of 8% in the first year and 8.5% during the second and third year.
Banks for the past two quarters have experienced sluggish loan growth amid a global and local economic downturn. However, as the economy shows signs of improvement, analyst say the timing for such a scheme is right.

"SBI posted delinquencies of 5.88 billion rupees on the home loan portfolio in the second quarter, which shows that we are not out of the woods," another analyst, who didn't wish to be named, said.
The decision on the home loan scheme by SBI comes a day after private sector lender Axis Bank home loan launched a similar offer until Dec. 10.
Bank of Rajasthan also launched a home loan scheme with interest rates as low as 7.50% for the first year of the loan.
"The banks are flush with liquidity and are parking it in home loans, which I don't deem as entirely safe," the analyst said.
He expects SBI's decision to further intensify competition for mortgage companies such as HDFC Home loan and ICICI Home Finance, which charge slightly higher interest rates.
"They (mortgage companies) don't have a bandwidth like a bank to compete," he said.

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