SBI to move RBI to offer fixed-floating rate home-loans

The largest lender State Bank of India will be seeking clarifications from the Reserve Bank whether it can offer long-term home loans with fixed rates in the beginning and convert the same into floating rates later, chairman Rajnish Kumar has said.

The move comes after the Reserve Bank has mandated banks to shift all retail lending to floating rates that will be determined by external benchmarks like the repo rate.

Rajnish said there is a lack of clarity on how it can go ahead with the fixed rate products, after the RBI's new regulations on floating rates.

Hinting at the volatility in the repo rate, he said some home buyers may want their loan rates to be fixed.

For such buyers, it can offer a 'fixed-floating' product, wherein the rates are locked in for an initial period of say five to ten years, and then turns floating.

The need for making the product floating in the latter part arises out of the bank's inability to project the liability movements in the future, he said, adding typically, home loans are for about 30 years.

It can be noted that the repo rate at which the central bank lends to the system is at a nine-year low of 5.40 per cent.