SBI to Link the Home Loans with Repo Rates from October 1st
Sep 25, 2019 Real Estate News
India’s biggest bank, State bank of India, said that they would link the repo rates to the home loans from October 1st, 2019. The news came on September 23rd, stated that the bank would link the repo rates to the floating rates of interest for micro, small and medium enterprise, home and retail loans. Since RBI has urged the banks to provide the loan borrowers the benefit of reduced home loan rates, SBI became the first bank to introduce the repo rate based home loan rates.
On September 4th, RBI directed all the banks to link the repo rates to the rate of interest for the benefit of the customers.
This is the fifth consecutive reduction in the repo rate by the RBI in a year. The repo rate is at an all-time low at 5.4 percent. Following the suite, State Bank of India reduced their MCLR rates to 8.7 percent, which was applicable since September 10th.
Other private sector banks like PNB, HDFC Bank, and Central Bank of India have reduced their interest rates as well. ICICI Bank and HDFC Bank have brought down their home loan interest rate to 8.60 percent. Punjab National Bank and Central Bank of India have reduced their one-year MCLR by five bps across the tenors. PNB’s MCLR rate stands at 8.4 percent while Central Bank of India’s at 8.5 percent.
Government has been making continuous efforts to revive the real estate sector of the country and urging the banks to link the loan rates to repo rates is another step towards the same. The step has been taken near the festive time when the real estate in the country sees a surge in sales. The festive season lasts from October to January. This will motivate the potential homebuyers who were waiting for further reduction in the interest rates to buy the property.
However, one should remember that the repo rate linked interest rates are linked to floating rates that means that when the RBI changes the repo rate, the result will be immediately seen on the repo rate linked interest rates. If RBI increases the repo rates, the interest rate for home loans will increase immediately. If RBI reduces the repo rates, the interest rate will decrease as well. It is advised tot eh home buyers understand the terms and conditions that the loan lender is offering before taking the home loan.
On September 4th, RBI directed all the banks to link the repo rates to the rate of interest for the benefit of the customers.
Reduced rates of interest:
RBI has been reducing their lending rates since last year and to accommodate the benefits to the customers, the banks have settled for the MCLR based lending system. For the uninitiated, the repo rate is the rate at which the RBI gives out the loan to the public and private sector banks. The banks have been lagging in reducing their home loan interest rates which can benefit the customer. To make sure that the banks passed on the benefits to the loan borrowers, RBI asked the banks to link their home loan interest rate to the repo rates.This is the fifth consecutive reduction in the repo rate by the RBI in a year. The repo rate is at an all-time low at 5.4 percent. Following the suite, State Bank of India reduced their MCLR rates to 8.7 percent, which was applicable since September 10th.
Other private sector banks like PNB, HDFC Bank, and Central Bank of India have reduced their interest rates as well. ICICI Bank and HDFC Bank have brought down their home loan interest rate to 8.60 percent. Punjab National Bank and Central Bank of India have reduced their one-year MCLR by five bps across the tenors. PNB’s MCLR rate stands at 8.4 percent while Central Bank of India’s at 8.5 percent.
Government has been making continuous efforts to revive the real estate sector of the country and urging the banks to link the loan rates to repo rates is another step towards the same. The step has been taken near the festive time when the real estate in the country sees a surge in sales. The festive season lasts from October to January. This will motivate the potential homebuyers who were waiting for further reduction in the interest rates to buy the property.
However, one should remember that the repo rate linked interest rates are linked to floating rates that means that when the RBI changes the repo rate, the result will be immediately seen on the repo rate linked interest rates. If RBI increases the repo rates, the interest rate for home loans will increase immediately. If RBI reduces the repo rates, the interest rate will decrease as well. It is advised tot eh home buyers understand the terms and conditions that the loan lender is offering before taking the home loan.
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