Country's biggest lender SBI or State Bank of India has announced the modalities of its new repo rate-linked home loan scheme. SBI, which was the first bank in India to launch a repo rate-linked home loan scheme in July, had earlier withdrawn the earlier scheme. SBI had earlier said that it has decided to adopt Reserve Bank of India’s repo rate as the external benchmark for all floating rate loans for MSME, home and retail loans effective October 1, 2019. According to new RBI rules, banks have to link all new floating rate home, auto and other retail loans to external benchmarks from 1 st October 2019.
Key things to know about SBI's new repo-linked home loan scheme:
1) SBI will charge a spread of 265 basis points over the RBI's repo rate (currently at 5.4%) to calculate its external benchmark-based lending rate, which comes to 8.05%. SBI will charge a premium of 15 basis points for effective home loan rate, which comes 8.20%. This applies to home loans up to ₹30 lakh and for salaried class borrowers.
2) For SBI home loans between ₹30 lakh to ₹75 lakh for salaried class, the premium goes up to 40 basis points which means the effective rate is 8.45%.
3) For SBI home loans above ₹75 lakh for salaried class, the premium over external benchmark-based lending rate will be 50 basis points, meaning the effective rate will be 8.55%.
4) SBI also said that a premium of 15 basis points will be added to the card rate for non-salaried borrowers.
5) A concession of 5 basis points on home loan rates will be given to woman borrowers, SBI said.
6) If the loan to value ratio is between 80% and 90%, a premium of 10 bps will be added to the card rate for loan up to ₹30 lakh, SBI said.
7) For borrowers who fall under RG or risk grade (4 to 6), a premium of 10 bps will be added to the card rate.
Under the new RBI guidelines, banks are free to decide the spread over the external benchmark in case of new floating rate retail loans. The RBI also said that existing floating rate term loans sanctioned to borrowers who are eligible to prepay a floating rate loan without pre-payment charges will be eligible for switch to external benchmark without any charges/fees, except reasonable administrative/legal costs. And the final rate charged to this category of borrowers, post switchover to external benchmark, shall be same as the rate charged for a new loan of the same category, type, tenor and amount, at the time of origination of the loan.