NewKerala.com

Key Points

SBI defied RBI’s rate-cut trend by raising home loan rates for new borrowers. The hike hits low-credit applicants hardest, pushing their ceiling to 8.7%. While public banks still offer lower starting rates, SBI’s move may trigger industry-wide adjustments. The bank warns of squeezed margins despite RBI’s efforts to boost affordability.

Key Points: SBI Raises Home Loan Rates 25 Basis Points Despite RBI Cuts

  • SBI increases home loan rates to 7.5-8.7% despite RBI easing
  • Low-credit borrowers face steeper 8.7% ceiling
  • Public banks offer rates from 7.35% to 10.1%
  • EBLR-linked loans (60% of total) to reflect changes fastest
2 min read

SBI raises home loan rates by 25 basis points for new borrowers

SBI hikes home loan rates for new borrowers by 25 bps, contradicting RBI's repo rate cuts. Low-credit-score applicants face higher EMIs.

"Banks might continue to face pressure on their profit margins – SBI Report"

New Delhi, Aug 16

Despite the RBI’s repo rate cut to 5.5 per cent, aimed at easing borrowing costs, India's largest mortgage lender, State Bank of India (SBI), has increased home loan rates by 25 basis points for new borrowers.

The bank raised the upper band of interest rates by 25 basis points. SBI's interest rates for home loans have increased from the earlier band of 7.50 per cent-8.45 per cent to a new band of 7.50 per cent-8.70 per cent. The new rates will particularly impact customers with low credit scores, as the maximum interest rate limit has been raised.

Public sector banks like Union Bank of India, Bank of India, Bank of Maharashtra, and Central Bank of India offer loans starting at 7.35 per cent and going up to 10.10 per cent or more, depending on the borrower’s credit profile.

Other public sector banks may follow SBI's lead. The repo rate was cut three times consecutively to provide relief to the public. The reduction in the repo rate by the RBI leads to lower interest rates on loans, including home loans, benefiting the public indirectly.

The bank had earlier released a report saying that the RBI's cutting the repo rate will make home loans cheaper. The change will be felt most immediately in loans linked to the External Benchmark Lending Rate (EBLR), which account for around 60 per cent of all loans given by Scheduled Commercial Banks (ASCBs), as per the data compiled by State Bank of India (SBI) Research.

As of August 2025, SBI home loans predominantly link to the External Benchmark Lending Rate (EBLR) for new borrowers, aligning with the RBI's repo rate plus a spread.

Looking ahead, SBI warned that although lower rates benefit borrowers, banks might continue to face pressure on their profit margins.

- IANS

Share this article:

Reader Comments

P
Priya S
As someone who was planning to take a home loan next month, this news is heartbreaking 💔 Why punish new borrowers? The timing couldn't be worse with festival season approaching when many Indians plan home purchases.
A
Aman W
Banks always find ways to protect their profits at customers' expense. First they delay passing RBI rate cuts, now they're increasing rates despite repo rate reduction. Time to look at smaller banks or NBFCs for better deals.
S
Sarah B
The article mentions this affects low credit score customers more. This is actually fair - higher risk borrowers should pay higher rates. Banks need to protect themselves from defaults too. Maintain good CIBIL score people!
V
Vikram M
This is why I tell my friends - never depend only on SBI for loans. Compare rates across banks. Some private banks are offering better rates than PSUs now. Do your research before committing!
D
Divya L
The real estate market is already so slow... this will make it worse. Builders are sitting on unsold inventory, now buyers will postpone purchases further. Not good for economy overall.
M
Michael C
As an NRI looking to buy property in India, these rate hikes make the decision more complicated. The spread between Indian home loan rates and global rates is already quite wide.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50