The largest lender in the country, the State Bank of India, has stopped the repo- rate linked home loan scheme and they made the announcement through their Twitter handle when a customer had a query for them. The tweet said that, and it is quoted, “Kindly note that RLLR based home loan scheme have been withdrawn. You can get the home loan migrated to MCLR based home loan.”
The Repo Linked lending rates were the rates that reflected any changes in the key interest rate by the Central Bank and they are directly passed on to the customers. The MCLR, or the marginal cost based lending rates is the rate to which all the home loans of all the banks are linked.
More on the product itself and its introduction
SBI had introduced the repo- linked home loans in July 2019. Earlier in September, the Reserve Bank of India required banks to link certain loans to the external benchmark based interest rate from 1st October onwards. That would allow quicker transmission of its rate cuts to the consumers. The RBI had also stated it was not satisfied as the banks were not transferring the cuts in the policy rates.
In 2019, the RBI had reduced the repo rate by 110 basis points so far this year which is the interest rate at which the central bank loans out money to commercial banks. On the other hand, the state run IDBI Bank had announced that it would be introducing the repo- linked retail loans and they would be effective from 1st of October. The bank earlier announced that repo- linked home and auto loans would be introduced from 10th September.
SBI is expected to once again come up with a new and improved repo rate based product which will be pattern followed by other banking and financial services providers in the future as predicted by industry experts.