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If you are a State Bank of India home loan customer then do not be surprised by branch officials trying to persuade you to channelise savings from the recent lowering of instalments into a recurring deposit.
The bank is drawing up plans to showcase the “lower equated monthly instalment – savings – investment” proposition to not only its existing customers but also prospective customers (including home loan customers of other banks/ housing finance companies).
The country’s largest bank has lowered the equated monthly instalments (EMIs) on home loans by Rs 15-19 across the board.
According to the revised EMI schedule, a customer with a Rs 20-lakh home loan of 20 years residual maturity will pay Rs 966 a lakh as EMI (against Rs 982 earlier). Thus, the customer saves Rs 320 in the overall monthly payout.
The bank wants this amount to flow into recurring deposits (RD) so that it receives a steady stream of long-term funds even as the depositor gets decent returns, said a senior official.
By routing the savings back into an RD every month, a customer will receive Rs 2,00,640 on maturity of a 20-year recurring deposit at 8.50 per cent interest (on the assumption that the initial 10-year RD is extended for another 10 years).
In order to attract home loan borrowers from other banks/housing finance companies (HFCs) into its fold, the bank will make a similar pitch.
SBI will seek to highlight the fact that its EMI at 19,320 for a Rs 20-lakh loan is about Rs 1,000 cheaper than the average EMI of other banks/ HFCs.
In the above case, if the Rs 1,000 saved is vested in an RD every month for 20 years at 8.50 per cent interest, then the customer will earn Rs 6,26,999 on maturity.
SBI charges 10 per cent and 10.15 per cent interest on home loans up to Rs 30 lakh and above Rs 30 lakh, respectively.
At a recent press meet, Chairman Pratip Chaudhuri observed that for most citizens who have taken home loans, the EMI payout is a very large part of family expenditure and at times, even larger than the food expenditure.
“The reduction is EMI by the bank will bring significant relief to the household budget,” he said.
As at June-end 2012, SBI had a home loan portfolio of Rs 1,05,383 crore (Rs 93,225 crore as at June-end 2011). Home loans up to Rs 30 lakh accounted for 82 per cent of the total home loans. Home loans accounted for 57 per cent of the retail portfolio of Rs 1,86,322 crore as at June-end 2012.
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