State Bank of India (SBI) has increased home loan rates by 25 basis points for new borrowers, as lenders weigh moves on how to protect their margins in a falling interest rate regime.

The country’s largest lender, though, has not lifted home loan rates across the board. The upper band of the bank’s home loan rate has been increased, implying that the impact would be on borrowers with low credit scores. The lower rate is kept unchanged. 

New borrowers will have to pay an interest rate ranging between 7.50% to 8.70% for home loans. The earlier range was between 7.50% and 8.45%.

The home loan rates for new borrowers will be based on CIBIL scores and the external benchmark lending rate (EBLR), which is currently prevailing at 8.15%.

Home loans continue to be SBI’s main strength, standing at Rs 8.51 lakh crore out of the lender’s total retail personal loan book of Rs 15.40 lakh crore, as on 30 June 2025. Home loans grew 15.05% year-on-year in the June quarter while the retail personal loan book grew 12.56%. The bank’s gross advances reported 11.61% growth YoY to Rs 42.55 lakh crore. 

Another state-owned lender, Union Bank of India, has also raised its home loan rate. The starting interest rate has increased by 10 basis points to 7.45%, from 7.35% earlier.

For Punjab National Bank and Bank of Baroda, the home loan interest rate starts from 7.45% while in Canara Bank it is at 7.40%.

HDFC Bank, ICICI Bank and Axis Bank, India’s top three private lenders, currently offer home loan rates starting from 7.90%, 7.70% and 8.35%, respectively. 

Banks have been struggling to protect their net interest margins (NIM) in a scenario where the key benchmark rate has kept falling.

The home loan market continues to be fiercely contested, with lending margins coming under pressure as interest rates fall. Since February this year, the Reserve Bank of India (RBI) has brought down repo rate by 100 basis points to 5.5%. 

Public sector banks have seen their home loans grow faster than their private peers in FY25. SBI, the largest player in this space, grew its home loan book by 14% while Bank of Baroda and Punjab National Bank grew at 18% each.

Comparatively, HDFC Bank posted a YoY growth rate of 8% in home loans, ICICI Bank 11% and Axis Bank 6% in FY25. 

According to data from credit bureau CRIF Highmark, public sector banks have seen the share of new home loans increase to 43% in FY25 from 34% in FY22. During this period, the share for private banks has dropped to 29.8% from 42.6%.

The RBI-led monetary policy committee’s decision in August to keep repo rate unchanged after three consecutive cuts may provide banks the space to hike their home loan rates as they face pressure on protecting their NIMs in the current financial year.