Borrowers who have taken loans linked to SBAR (State Bank Advance Rate or the prime lending rate) are paying as much as 2-3 % more than existing floating rates that are linked to the Base Rate.

This is because the Base Rate is lower than the SBAR. SBI's Base Rate is currently at 10 %, while the SBAR is 14.75 %. Besides, the bank has also reduced the spread it charges over the Base Rate for home loans. Because of this, new home loan rates have moved southwards, said the official.

"It was a choice between retaining customers from walking to another bank, or forgoing interest income,'' said an SBI official who did not want to be identified. "SBI chose the latter as it will also create some goodwill."

SBI home loan is initiating steps to turn customer-friendly, including becoming the first to waive pre-payment penalty. It is on a customer-acquisition drive, even at the cost of sacrificing some profitability.

The current floating rates are 10.5 % for loans up to Rs 30 lakh, 10.75 % for loans between Rs 30 and 75 lakh, and 11 % for loans above Rs 75 lakh.

If a customer chooses to move to the new structure by paying 1% of outstanding as conversion fee, he would be charged the same as new borrowers.