Foreign banks vie for a large share of the home loan market

 – nixatube

Foreign banks vie for a large share of the home loan market – nixatube

Foreign banks vie for a large share of the home loan market

Balance transfer has become a preferred option for foreign banks as they are easy to source.  They are also considered safe, as the lender gets a snapshot of the borrower's repayment track record.Balance transfer has become a preferred option for foreign banks as they are easy to source. They are also considered safe, as the lender gets a snapshot of the borrower’s repayment track record.

Taking advantage of the record low interest rates and high affordability of homes, foreign banks with a presence in India are making an aggressive effort in the home loan market. During the festive season, some of these lenders have announced lending rates at par with the lowest in the business.

HSBC India reduced home loan interest rates by 10 basis points (bps) to 6.45% per annum. This rate will be applicable on balance transfers by existing customers of other lenders. Like the South Korea-headquartered Shinhan Bank, Citi is offering home loans starting at 6.5%.

Kunal Sodhani, AVP, Global Trading Centre, Shinhan Bank India, said the lender is offering home loans starting from 6.5% for a maximum tenure of 30 years. The bank has been active in the retail loan segment for the last four years and currently has more than 4,500 customers across six branches in India. “The interest rate trajectory may be at its lowest level and the festive season is on, so this is the best time to get home loans at such attractive rates,” Sodhani said.

Balance transfer has become a preferred option for foreign banks as they are easy to source. They are also considered safe, as the lender gets a snapshot of the borrower’s repayment track record.

In addition, migration to an external benchmark-linked pricing regime has led to better transmission of lower rates through banks. Forced to link their home loan rates directly to the repo rate or other external benchmark, banks have become more competitive in terms of pricing than their non-bank counterparts. This is another factor driving the increasing trend in balance transfers.

Of course, low credit demand in other sectors is also playing a role. Prakash Agarwal, director and head of financial institutions, India Ratings and Research, said that while some foreign banks have always been active in the home loan market, their presence is increasing for two reasons. “One, there is limited offtake in other segments. Secondly, this asset class has proven its resilience over time. Debt costs and delinquencies in this segment were among the lowest even during the pandemic. This is an added incentive for the lenders to get into this segment.”

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