Marginal increase in lending rates owing to a hike in the policy rate by the Reserve Bank of India (RBI) does not impact home loan demand, said Dinesh Kumar Khara, Chairman, State Bank of India (SBI), on Tuesday.
As a result of hike in MCLR, the equated monthly installments (EMIs) will get expensive.
The decision came after RBI's monetary policy committee (MPC) raised benchmark policy rate by 50 bps earlier this month to control inflation. This was the third rate hike by RBI after a 40 bps hike in May and a 50 bps increase in June as part of its efforts to tame inflation that recently hit a multi-year high, forcing major central banks worldwide to take the rate hike path.
SBI has raised overnight to three-month MCLR rates to 7.35 percent, from 7.15 percent. The SBI six-month MCLR has been hiked to 7.65 percent from 7.45 percent. Additionally, one-year MCLR has been raised to 7.7 percent, two-year to 7.9 percent and three-year to 8 percent.
Generally, when RBI hikes the repo rate
, it increases the cost of funds for banks. This means that banks will have to pay more for the money they borrow from RBI. Consequently, banks pass on the cost to borrowers by increasing their loan interest rates, making EMIs costlier.
"I have not seen the demand tapering off and my impression is that if at all interest rate goes up marginally, then perhaps it may not have any significant impact on the demand for homes. The kind of trend, which we have seen till now, it actually supports this belief which I have," said Khara in an interview with CNBC-TV18.
SBI on Tuesday opened its first-ever branch dedicated to startups in Bengaluru. The branch is aimed at funding and supporting early-stage entrepreneurs to set up new firms till their listing.
“The source of funding from the equity will get dry up, then perhaps, the one which are viable startups, they will need money from credible partners and that's why there is a State Bank of India, which is not a fair-weather friend, which is a friend for life," said Khara.
"We are looking at all such opportunities, where the startups have got a viable business plan, and where they have got a plan which can generate revenue from many more years, which can offer solutions," he added.
SBI stock was trading flat at Rs 525 per share on BSE at the time of writing. It has gained 9.5 percent in the last one month and 14 percent so far this year.