SBI’s Base Rate Reduced by 30 BPS; Bandhan Bank Will Launch Biggest Banking IPO!

State Bank of India's reduction of base rate by 30 BPS, means around 80 lakh home loan borrowers will now pay less EMIs.

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SBI's Base Rate Reduced

At the start of the new year, India’s largest public sector bank: State Bank of India has announced a reduction in base rates, which will benefit home loan borrowers all over the country. Around 80 lakh SBI customers will now pay less for their loans.

Meanwhile, Bandhan Bank has announced their IPO launch, which has been described as India’s largest banking sector IPO.

The financial world is already abuzz with possibilities which 2018 will introduce!

SBI’s New Year Gift: Base Rate Reduced by 30 BPS!

In a twist of events which very few had expected, State Bank of India has decided to reduce base rate by 30 BPS, which means around 80 lakh home loan borrowers will now pay less EMIs.

Besides, the on-going waiver of home loan processing fees has been extended till March 31st, which is another reason to cheer.

One basis point is equal to a hundredth of a percentage point, and reduction in 30 BPS means some big-time relief for those who have taken a home loan from SBI.

PK Gupta, managing director (retail and digital banking), SBI said,

“The reduction in the base rate is a New Year gift to the bank’s loyal customers, as a large number of consumers who have their loans linked to the base rate will benefit. This reduction is part of the bank’s efforts to ensure transmission of the reduction in policy rates of the recent past.”

Say, a person has taken a loan of Rs 50 lakh for 20 years. In case his existing home loan interest rate is 9.10%, which is 15 basis points above the base rate, then his new home loan interest rate will become 8.80%.

This means that the EMI which he used to pay was Rs 45,308; will now get reduced to Rs 44,345, which is a drop of Rs 963/month, a pure saving of Rs 11, 556 annually.

After the changes, the revised base rate for the bank is now 8.65%, while the BPLR is 13.40%. Note here that the base rate is the minimum a bank can offer to its customers.

Bandhan Bank’s Biggest IPO Launch!

Meanwhile, Kolkata based Bandhan Bank has announced the launch of their IPO or Initial Public Offering, which has been valued at Rs 2500 crore.

This is the biggest banking IPO launch in India.

In a statement, Bandhan Band said,

“Bandhan Bank Ltd has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) for its proposed initial public offering of up to 11,92,80,494 equity shares of face value of Rs 10 each,”

For being book running lead managers to the issue, Bandhan Bank has appointed Kotak Mahindra Capital Company Ltd, Axis Capital Ltd, Goldman Sachs (India) Securities Pvt Ltd, JM Financial Institutional Securities and JP Morgan India Private Ltd.

In 2014, RBI approved Bandhan Bank’s license for banking; and after that, it became India’s 1st micro-finance entity transforming into a full-fledged bank.

The IPO will have:

  • 9,76,63,910 equity shares offered for sale
  • 1,40,50,780 scrips by International Finance Corporation (IFC) as offer for sale
  • 75,65,804 shares by IFC FIG Investment Company as offer for sale

We will keep you updated as we receive more information.

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