SBI to increase EMIs on Home Loans

June 29, 2007: State Bank of India, the largest bank in India, is considering revising the equated monthly installments (EMIs) on its home loans as interest rates have risen up by two per cent in the past 1 year.

Interest rates have been constantly rising for the last 1 year. Till now, banks have resisted the option of increasing the EMIs but there is no option left now but to increase it, says Yogesh Agarwal, SBI managing director.

However, no possible hikes in property rates are expected to come in near future. SBI is waiting for the RBI’s move in the forthcoming quarterly review of its credit policy. The bank will then decide upon its rates accordingly.

SBI states to take any decision on rates in regard to the developments and the RBI standpoint. As per the current parameters, home loan interest rates are believed to touch the peak.

The bank is also preparing to hit the capital market by the end of 2007 and will decide on the capital raising plans and also the plan to hit the capital market once the Act is amended, says OP Bhatt, chairman of SBI.

SBI may require a capital of Rs 15,000 crore in the current financial year. Of this, the bank has already raised Rs 2,600 crore upper tier II from the domestic market and $225 million tier I capital from cross border.

The bank requires Rs 5,000 in hand to meet the operational risk requirements under the Basel II requirements. Add to that, it would further need another Rs 5,000 for accounting standard 15 norms and rest to support the bank’s asset growth of over 25% per year to support the funds for its present associates and also to have capital for the possible new ventures.

Mr. Bhatt also announces to open a non banking finance company (NBFC) which will hold SBI’s stakes in SBI Life and the asset management company.

Source: Indian Express