After the fourth time at a stretch interest rate cut in the country, the rate of interest on home loans decreased. The decreased rate on home loan is truly a monsoon bonanza for the borrowers. It is a bad news for creditors but very good news for the customers seeking home loans to buy a new property and also for the existing home loan customers.
The country’s largest bank the State Bank of India stated that it is expecting the consideration of passing out the benefit of the repo-linked rate also to its existing borrowers of home loans. The State Bank of India had already introduced repo-linked interest rate for home loans from July onwards. The new customers are taking the advantage of the bank’s lower policy rates.
Answering to ET’s question whether the advantage of repo-linked loans will be passed also to the existing borrowers, the SBI Chairman Rajnish Kumar said, “We are examining this.”
In the year 2014, when banks announced marginal-cost based lending rate every bank provided their existing borrowers the option to switch over from base-rate linked loans to MCLR-linked loans.
At present, repo-linked lending rate (RLLR) of SBI is 5.40% which is a 2.25% mark-up over the repo rate. The current RLLR is 7.65%. There is a 40 basis points and 55 bps spread over the repo-linked lending rate. Therefore, the SBI customers can apply home loans at 8.05% or 8.20% per year. Also, do remember that a single basis point equals to one-hundredth of 1%.
For the loan amount for home loans linked to MCLR up to Rs. 75 lakh are 8.35% to 8.90%. The Reserve Bank of India lessen policy rate by 110 bps while SBI reduced MCLR by 30 basis points from February month.
According to Kumar, in the first quarter the demand for bank credit had remained on hold. But with the favorable impact of monsoon, the demand may revive in the second half of the financial year.
The largest bank in the nation, State Bank of India is contemplating approximate 12% growth in loans this financial year over INR 23 lakh crore outstanding while the effort to contain fresh slippages from MSME sectors, farm, and retail sectors.
In the first quarter, fresh slippages of Rs. 16000 crore was reported.