Come July, and you will get access to one-of-its-kind Home Loan product that is linked to repo rate in India. The latest home financing product is introduced by none other than the country’s largest public bank and lender the State Bank of India.
This is a commendable step in the direction of transparent lending terms in the country.
In the press note, the banking major states that it will pass on the latest 25 bps repo rate cut entirely to the consumers. The SBI has announced reduced repo-linked lending rate for CC/OD (cash credit/overdraft), effective from July 1, 2019. The news comes a day after the RBI announced a repo rate cut in its third bi-monthly monetary policy of the year. The current benchmark rate at 5.75% is the lowest in the 9 years.
The new SBI Home Loan product is linked to repo rate and offered at a larger tenure than the regular SBI Home Loan. So, the effective interest rate for this new Home Loan product for Rs 75-lakh amount would be 8.40%, as against 8.55% on the existing SBI Home Loan. The tenure can go up to 35 years as against previous 30 years cap.
The existing Home Loan customers can shift to Repo Rate-Linked Home Loan Product by paying a 0.25% charge.
Gradually the SBI intends to successfully link all loan rates to external factors like repo rates.
In the past, despite apex bank’s directions on the faster transmission of the benefit of a benchmark rate cut, not all banks could reduce the rate of loans as quickly as policy rate cuts. RBI Governor Shaktikanta Das had also noted that the banks could only reduce lending rates by 21 basis points, in place of combined 50-basis point reduction in policy rates. However, they look forward to faster transmission of the rate cut benefit to the consumers.
With the latest rate cut, the combined repo rate cut stands at 0.75 %.