Naveen Agarwal
SBI Home Loans are cheaper effective from this May 1st.
Cheer up! Now you can enjoy cheaper interest rate on SBI home loan. The RBI (Reserve Bank of India) reduced repo rate by 0.25% (repo rate is the interest charged by the RBI from commercial banks for lending money) for the financial year of 2019.
State Bank of India reduces home loans interest rates
After the RBI announced new repo rate, the State Bank of India (SBI) linked its key pricing for short term loans to that of RBI with effect from 1st May 2019. Hence, SBI home loans will be cheaper. In a statement, SBI said it has taken this step in order to address the concern of rigidities in the balance sheet structure and for quick transmission of changes in the RBI policy rate.
Here are the new rates
State Bank of India reduces its interest rates by 0.10 per cent on home loans of up to Rs. 30 lakhs. The interest rate on SBI home loans or housing loans below Rs. 30 lakhs stands between of 8.60 to 8.90 per cent from 8.70 to 8.90 per cent earlier. In addition, SBI also reduced marginal cost of funds-based lending rate (MCLR) by 0.05 per cent across all tenors. Now the MCLR will at 8.50 per cent for the one-year tenor.
Let’s understand the repo rate and its impact on loans offered by commercial banks.
Current RBI Repo Rate
Repo rate is the rate at which central bank of country, in India the Reserve Bank of India (RBI), lends money to commercial banks and other financial institutions when they approach the Central Bank in the event of shortfall of funds. The current repo rate offered by the RBI is 6% p.a. In case of inflation, the Reserve Bank of India increases repo rate to control the inflation as it disincentivises banks to borrow from the central bank. This reduces the money supply in the country, thereby curbing inflation. When inflation is down, the central bank reduces the repo rate.
Here is the snap shot of RBI’s repo rate and SBI’s MCLR
History of Changes to Repo Rate
Repo Rate Offered by RBI
Source: BankBazaar
History of changes to State Bank of India MCLR
SBI One-Year MCLR for last since April 2018
Impact of Repo Rate on Loans offered by Lenders
Since MCLR is linked to repo rate, any hike in repo rate will increase the MCLR. And this will result in high rates of interest for potential loan borrowers or existing borrowers who opted for floating interest rate on their home loan, personal loan or business loan.
As the RBI cuts the repo rate and State Bank of India reduces its interest rates by 0.10 per cent, home loans, car loan and personal loans from SBI are cheaper now. So, aspiring home loan aspirants, it’s time to save. And ensure to apply through Pradhan Mantri Awas Yojana – Credit Linked Subsidy Scheme as it may help you save Rs 2,67,280 on the interest component of your home loan.
This post is written by Naveen Agarwal
Naveen, a technology architect and leader in Afinoz Digitalizing Finance, believes everything is possible to build technically. He has demonstrated history in comprehending business requirements, designing and creating innovative systems from scratch. In his leisure time, he loves reading global tech news and developments, and watching bollywood movies.
