When the Reserve Bank of India (RBI) made its bold move by cutting the policy repo rate for the third time in row, latest being yesterday, (June 2019 policy), it was only a matter of time for lenders to make their move. State Bank of India (SBI) has created headlines in the past over its short term and home loan moves, boosting its retail segment. Once again, SBI did not fail  to surprise with gifts for its customers! Today, SBI not only passed the benefit of RBI’s 25 basis point rate cut during second bi-monthly monetary policy for FY20, in its short term loans, but also introduced a new form of interest rates for home loans. 

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Guess what! SBI has just introduced Repo Linked Loan Product for Home Loans. This means, now every change in RBI’s policy repo rate, the same impact will be witnessed in SBI’s home loan interest rates. The new repo linked home loan product comes into effect from July 01, 2019, hence, we will get more understanding of the new interest rates on this loan. But, one thing is for sure, SBI will bring down its home loan interest rate further, stirring massive competition among other lenders. One can even expect showers of attractive home loan in coming months. Hence, EMIs will also become cheaper and better on home loans.

RBI had earlier asked every bank to link their loan products with external benchmarks. These were - RBI’s policy repo rate or government’s 91 days treasury bill yield produced by Financial Benchmarks India Private Ltd (FBIL); or government’s 182 days treasury bill yield produced by FBIL; or any other benchmark market interest rates developed by FBIL.  However, in previous policy, RBI governor Shaktikanta Das decided to put the new regime on hold, for further discussion and analysis. But looks like, SBI has once again walked the talk of making home loans cheaper for borrowers, by consistently passing on repo rate cut benefit to them.

From July 01, 2019, SBI’s home loan will be linked with policy repo rate, and the product’s interest rates will change accordingly.

For now, here’s what SBI offers to their customers in home loan.

At SBI, home loan interest rates are set in two categories namely salaried and non-salaried separately for men and women. In case of loan upto Rs 30 lakhs, SBI charges interest rate between 8.55% to 8.65% on salaried women, while the non-salaried ones here get between 8.70% to 8.80%. While, for loans above Rs 30 lakhs but up to Rs 75 lakhs - a salaried women gets 8.80% to 8.90%, while the non-salaried one 8.95% to 9.05%. Similarly, a salaried woman gets rates ranging from 8.90% to 9% and that for non-salaried one the rates are 9.05% to 9.15% on above Rs 75 lakh loans. 

In case of men for similar loans mentioned above, interest rates are just 5 basis points higher in the same manner. So that means, a salaried man will get 8.60% to 8.70% on home loan below Rs 30 lakhs. The same applies on other home loan limit as  well. 

Post RBI policy, Rajnish Kumar, Chairman, SBI said, “The RBI policy decision to change the policy stance to “ accommodative” will simultaneously help the financial system to navigate to a lower term structure of interest rates and also accommodate growth concerns. On the regulatory front, the decision to lower the Basel III Leverage Ratio will augment the lendable resources of the Banks. Also the move to scrap transaction charges for RTGS & NEFT will boost digital transactions. The decision to issue draft for “on-tap” licensing of small finance banks will add depth to this sector. Launching of the on-line trading platform for retail participants is a positive development for small & medium forex customers. The RBI intent to harmonize existing regulations for different money market products augurs well for market transparency.”