State Bank of India (SBI) has been one of the earliest banking entities in the country to jump onto the repo rate linked loan bandwagon and with good effect too! After all, the Reserve Bank of India (RBI) has already cut repo rates to the tune of 110 basis points this year and secondly, it has now issued a directive to Indian banks to link lending rates to external benchmarks, one of which is the repo rate.
State Bank of India (SBI) is hopeful that its new repo rate linked home loans should attract more consumers in the promise of lower rates and faster transmission of repo rate cut benefits.
Repo rate linked home loans from 8.05% interest onwards
SBI (State Bank of India) was the first Indian bank to connect short-term loans and big savings deposit rates to the repo rate of the RBI earlier in 2019 itself. It has also introduced its repo rate linked home loan from July 2019 as announced by it a month before.
Here are some of the key details that you should set store by:
- Interest rates have come down to 8.05% from 1st September, 2019, for repo rate linked home loan products from SBI as compared to 8.4% previously.
- This came after the cut in repo rate by 35 basis points last month by the RBI.
- The new loan interest rate will be applicable for all new and existing home loans at SBI which are linked to the repo rate.
- Several other banks including Bank of Baroda and PNB (Punjab National Bank) have also followed suit, introducing home loans linked to the repo rates and many other banks are expected to do so in the near future.
- The lending rate of the repo rate linked home loan at SBI, is linked to the repo rate lending rate or RLLR of the bank.
- The RLLR at SBI is 225 basis points over and above the policy repo rate of the RBI which currently stands at 5.4%.
- The RLLR will automatically change whenever the repo rate changes as announced by the RBI. As a result, the lending rates for home loans will also change automatically.
- With regard to the RLLR linked home loan at State Bank of India (SBI), it will be altered from the 1st day of the subsequent month of rate review done by the RBI.
- As a result, the RLLR at SBI will come down to 7.65% from 1st September, 2019, following this principle.
- The bank has a spread which is charged, depending on the credit score and history of the applicant for its home loans up to Rs. 75 lakh.
As a result, with effect from 1st September, 2019, 8.05% will be the interest rate on home loans for those borrowers who have a good credit score and meet all the other eligibility criteria. Repo rate linked home loan products are set to become really popular in India and you should certainly do your homework to see whether you should opt for the same.