The largest lender in the country, State Bank of India has reduced the processing fees on the home loans to half. The move will definitely be appreciated by the home loan customers.

SBI being a bellwether in the industry has the potential to bring upon new trends in the space. The move from the bank is bound to attract attention of the borrowers and it also will heat up the competition.

A senior bank official said, "The decision is aimed at creating goodwill. With regards to fees charged from retail customers, SBI will charge only to the extent of covering its cost and not earn profit on it."

The bank will now charge only 0.25% processing fees on the home loans upto 30 lakh. For loans between Rs. 30 lakh and Rs. 75 lakh the processing fees has been slashed down to Rs. 6,500 from Rs. 10,000. Similarly, the loans above Rs. 75 lakh will attract processing fees of Rs. 10,000 as against 20,000 charges earlier.

The head of Consumer lending and payments at Axis bank, Mr. Jairam Sridharan said, "In an environment where all banks are moving towards zero pre-payment charges, we believe processing fee in the industry would tend to rise over a period of time."

The head of research - institutional equities at Nirmal Bang, a broking fir, Hemindra Hazari said, "Therefore, it is not sustainable to have a lower processing fee." "At a time when corporate sector is going through a lot of pain, SBI may prefer to decelerate its corporate loan book and expand its retail loan book. And this move may be aimed at that."