Ahead of the largest festival season of the country, Indian banks have welcomed a new floating rate lending regime for personal loans, home loans and loans for MSMEs and cheered customers with lowered loan rates.
The Reserve Bank of India had mandated all public and private banks to link new floating rate loans to external benchmarks: repo rate, 3-month or 6-month treasury bill yield, or other benchmarks published by Financial Benchmarks India Pvt. Ltd., from 1 October 2019.
Thus all new floating rate customers will borrow according to External benchmark lending rates EBLR/EBR, i.e., Repo Linked Lending Rate (RLLR) or Treasury Bills Lending Rate (TBLR) as against Marginal Cost of Lending Rates (MCLR).
It is observed that the new external benchmarks based lending rates will bring in more transparency and swiftness in transmitting lowered cost of lending by central bank to the final customers. The previous regime, MCLR, was based on bank’s internal policy and thus there was low transmission of lending rates to the customer.
The experts believe that new regime will result in lowered rate when external benchmarks indicate so. The existing customers will continue to pay according to the previous regime. They can however can apply for the switch on payment of a processing fee.
Let’s take a quick look at what are the latest EBR/EBLR and TBLR rates for top 5 banks now:
SBI Home Loan Interest Rate Structure (Floating): External Benchmark Rate (EBR) is 8.05%(Repo Rate+2.65%)
|Loan Amount||Effective Home Loan Rate (% p.a.) for salaried individuals|
Up to 30 Lakh
EBR + 0.15= 8.20%
30 Lakh to 75 Lakh
EBR + 0.40= 8.45%
Above 75 Lakh
EBR + 0.50= 8.55%
The effective rates vary from 9.90% to 10.75%.
Source: SBI website
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