SBI trims housing loan processing fee

Country's largest lender State Bank of India has halved the home loan processing fee, a move which could be followed by other public sector lenders in the coming days.

The bank has slashed processing fee on home loan above Rs 75 lakh to Rs 10,000 from Rs 20,000, while for loans between Rs 30-75 lakh, the fees has been reduced to Rs 6,500 from Rs 10,000 earlier, a senior SBI official said.

The new fee structure is applicable starting January 11, the official added.

The official, however, added that the processing fee for loans below Rs 30 lakh continues to be 0.25% of the loan amount.

The reason for slashing fee is to promote home loan products of the bank, the official said.

Competitors like ICICI Bank and Axis Bank charge 0.5% of the loan amount for home loans -- both floating and fixed both.

At the same time, Bank of Baroda levies a charge of 0.4% of the loan amount or maximum limit of Rs 50,000, while Bank of India charges Rs 20,000 flat fee for housing loans between Rs 25-75 lakh.

According to another public sector bank official, banks could offer some incentive to promote home loan product above Rs 30 lakh as there has been some moderation in this segment.

It could be in the form of lowering of fee or some concession in rates if interest rates don't come down by the end of the current fiscal, the official added.

In other retail loans, particularly auto loans, some banks are offering concession in rate as well as waiving of processing charges to garner higher share.

Some bankers also feel that the processing fee may go up in the medium term. However, charges are likely to remain stable for the next couple of months.

"Since most of the banks have done away with pre-payment charges, I feel the processing charge in the industry as a whole would tend to go up in the medium term if not in the short run," Axis Bank Head (consumer lending and payments) Jairam Sridharan said.

Last year, housing finance regulator National Housing Bank had directed all housing finance companies to desist from imposing a pre-payment penalty on home loan borrowers. Subsequently, many banks announced abolition of such charges.

SBI, Bank of Baroda, Bank of India, Punjab National Bank are some banks which scrapped pre-payment charges.

Source: Business Standard