State-owned banks have begun tweaking the spreads on home loans, recalibrating them upward to counter the impact of falling external benchmark-linked rates (EBLR).
This shift comes as public sector banks (PSBs), notably the State Bank of India (SBI), face pressure from aggressive pricing and immediate repricing of loans tied to repo rates.
SBI, India’s largest lender, has raised its fresh home loan rates by 25 basis points, now ranging between 7.50% and 8.70%, effective August 1, 2025. The bank’s EBLR has dropped from 8.90% in February to 8.15% currently, prompting adjustments in credit risk and business strategy premiums to maintain healthy spreads.
Chairman CS Setty emphasised SBI’s disciplined approach to credit and its robust low-cost deposit base, which supports sustainable growth. Home loans now constitute 23.5% of SBI’s domestic advances, up from 22.69% last year.
Private banks, meanwhile, are opting for slower disbursal growth, citing irrational pricing in the sector. HDFC Bank and Kotak Mahindra Bank executives noted their focus on long-term customer relationships over aggressive rate competition.
This recalibration signals a broader trend among PSBs to balance competitiveness with financial prudence, especially in a soft interest rate environment where deposit repricing lags behind loan adjustments.
