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Banks Hike Home Loan Rates to Offset Margin Pressure
17 Aug
Summary
- SBI home loan rates up 25 bps to 7.50-8.70% since August 1, 2025
- Banks offsetting impact of repo rate cuts by increasing spreads
- HDFC Bank consciously slowing mortgage growth to maintain profitability
As of August 17, 2025, Indian banks are facing a challenging situation in the home loan market. With the Reserve Bank of India's recent repo rate cuts, banks are finding it difficult to fully transmit the lower rates to their borrowers, leading to margin pressures.
To offset this impact, major banks like SBI, India's largest lender, have increased their home loan rates. SBI's fresh home loan rates now range from 7.50% to 8.70%, up 25 basis points from the previous levels. This move is part of the bank's strategy to recalibrate its spreads and protect its margins.
The article also highlights the approach of other banks, such as HDFC Bank. The private sector lender has consciously slowed down its mortgage disbursement growth, as it is unwilling to match the aggressive pricing offered by some public sector banks. HDFC Bank's CFO, Srinivasan Vaidyanathan, stated that the bank is more focused on building a holistic relationship with customers rather than competing solely on product pricing.
Kotak Mahindra Bank's Deputy Managing Director, Shanti Ekambaram, acknowledged the "irrational and highly competitive pricing" in the home loan segment. However, the bank continues to focus on this business as it helps build long-term relationships with affluent customers and increase their wallet share.
Overall, the article highlights the delicate balance banks are trying to strike between maintaining profitability and offering competitive home loan rates to their customers in the current soft interest rate environment.
