SBI, Union Bank drop rates

SBI, Union Bank drop rates
ENS ECONOMIC BUREAU

Mumbai, March 2: Interest rates have started falling. State Bank of India (SBI) and the Union Bank of India have dropped their lending rates in different segments while other institutions, including Citibank, Tata Home and ICICI have reduced interest rates on housing loans in the aftermath of the Reserve Bank of India (RBI) bank rate cut to 7 per cent on Thursday.

SBI has revised its short-term prime lending rate (SBSTAR) and interest rates for domestic deposits with effect from March 5 while it left untouched the PLR and medium-term lending rate. Loans under SBSTAR with maturities of upto 180 days will beat 10.50 per cent per annum and for those exceeding 180 days but less than one year the rate would be at 11 per cent per annum, SBI said in a release.

In the case of domestic term deposits of amounts less than Rs 15 lakh, the bank has revised interest rate upwards by 25 basis points for deposits with duration of 15-45 to 5.25 per cent and 46-179 days to 6.5 per cent. The bank has cut the interest rate on deposits with maturities of three years and above by 50 basis points to 9.50 per cent.

For deposits above Rs 15 lakh and less than Rs one crore with maturities above 180 days it has been reduced by 50 to 100 basis points while that for Rs one crore and above, it has cut the rate for deposits with 180 days and maturities by 25 to 125 basis points.

A release by the bank said that the the PLR (State Bank Advance Rate) would remain unchanged at 11.5 per cent along with the medium term lending rate (SBMTLR) at 12 per cent. Union Bank of India (UBI) has decided to reduce its PLR by 100 basis points (bps) to 11.5 per cent from 12.5 per cent. The bank has also decided to introduce tenure-based PLRs for various maturities upto one year. For up to 90 days, and for 91-180 days, the rate is 10 per cent. For 181 days to one year, the rate is 11 per cent.

UBI now joins Bank of Baroda (BoB), which has also effected a 200 bps PLR cut to 10 per cent per annum from 12 per cent per annum on up to 180 day-tenure advances. In the 181-day to one-year band, the reduction effected is 100 bps to 11 per cent per annum from 12 per cent per annum. In the longer maturity band of over one year, the bank has reduced the PLR to 11.5 per cent per annum from 12 per cent per annum. BoB will continue its practise of a mark-up of upto four per cent on PLR depending on the risk perception of advances.

National Bank for Agricultural and Rural Development (Nabard) has reducedthe interest rate on its capital gains bonds. Said Nabard in a press release: "Nabard has decided to reduce the rate of interest on its capital gain bonds to 8.75 per cent per annum with effect from March 7, 2001 as against 9.25 per cent per annum being presently offered. However, all applications received upto March 05, 2001 would be accepted at the old rate of 9.25 per cent per annum."

It may recalled that Nabard had floated capital gains bonds on September 28, 2000. The issue is open and on-tap. A total of more than 15,000 investors have already contributed over Rs 1,200 crore to this issue. This is the third time that Nabard has cut down interest rates on its capital gain bonds from September 28. The first was in January; the second after the RBI's first announcement of a bank-rate cut on February 16, and the third time was on Friday.

Meanwhile, ICICI and Citibank have decided to offer special rates of interest for housing loans at the four-day property exhibition in Mumbai. These rate reductions, however, will last only during the exhibition. ICICI has cut the interest rate to 10.75 per cent as against the earlier 12 per cent for a tenor of one to five years); 12.25 per cent (12.50 per cent - five to 10 years); and 12.50 per cent (13 per cent - above 10 years), ICICI Ltd's senior general manager Chanda Kochhar said at the `Property Expo 2001' in Mumbai onFriday.

The event has been organised by the Maharashtra Chamber of Housing Industry (MCHI) along with ICICI and Citibank being the co-organisers. ICICI is expecting to get around 500 applications for housing loans during the four-day event, Kochhar added.

Citibank's director (sales and distribution) global consumer bank, PS Jayakumar, said that the rate has been cut by 50 basis points for the home credit and home loan scheme, which would attract an interest of 13.5 per cent and 13 per cent respectively. A processing fee of one per cent would be charged during this special event offer against the regular two per cent, he added.

Tata Home Finance too has slashed interest rates by 50 bps. It will now offer loan for fifteen years at 12.50 per cent per annum, down from the earlier 13 per cent. The new rates come into effect right away. It may be recalled that post-bank rate cut, HDFC had cut its PLR by 50 bps to 12.50 per cent effective from March 5, and will give effect to a general reduction in deposits by an equal measure from March 8. The housing finance company has also introduced two new loan slabs of five years and 10 years priced at 10.75 per cent and 12.25 per cent.