SBI, Union Bank Hike New Home Loan Rates

With sequential fall in margins between 1 bps and 67 bps across lenders, more banks are expected to follow suit

- BENN KOCHUVEEDAN @ Mumbai

WITH banks facing continuing pressure in their key profitability metric, net interest margins (NIM), which on average fell 23 basis points to 3.3-3.5% in June quarter at the system level after a steep 100 bps cut in repo rate, banks have begun raising new home loan rates to protect their margins.

In a signal that home loan rates are heading north ahead of festive seasons, the country's largest mortgage player SBI has raised the rates by 25 bps for new home loan borrowers and the second one to do so is Union Bank of India by 10 bps to 7.45%.

Margin pressures were evident in Q1 results, with the sequential fall in NIM varying between 1 bps and 67 bps across lenders but on average, at the system level, NIM fell 23 bps in June quarter. While SBI saw its NIM falling to 3.02 down 32 bps, HDFC Bank's slipped to 3.35% from 3.46%, ICICI Bank's margin slipped by 7 bps to 4.34%, and Axis Bank saw NIM falling by 17 bps to 3.80%. Among the state-run lenders, Union Bank's NIM fell to 2.76%, down 11 bps.