Indian Bank Home Loan Interest Rates
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About Indian Bank

Indian Bank shares its Foundation Day with the Republic of India. Indian Bank was established on August 15, 1907. From its humble beginnings more than 112 years ago, Indian Bank has grown substantially to have a Pan India presence with 2,872 branches, 3,022 Business Correspondents, and 3,892 ATMs. With more than 19,600 dedicated staff to serve its customers, Indian Bank is one of the most prominent mid-sized banks in India. Indian Bank is going to merge with Allahabad Bank according to the recent announcement made by the Honourable Finance Minister of India. After the merger with Allahabad Bank, a bank having a prominent North Indian presence, Indian Bank will be stamping its authority throughout India with more than 6,100 branches.

Indian Bank Home Loan

Indian Bank offers a variety of Home Loans for purchasing and construction of new houses/flats. There are loan products to acquire second-hand houses/apartments and purchase a non-agricultural plot of land for constructing house thereon. Balance transfer facilities are also available where the borrower can transfer the loan balance held with another bank/NBFC to get the benefit of better interest rates. Indian Bank offers one of the best rates of interest on its Home Loans. Home Loans with floating rates as well as fixed rates, are available with Indian Bank.

Indian Bank Home Loan Interest rates

Indian Bank links its Home Loan interest rates to its MCLR. This concept is in force since April 01, 2016. Before April 2016, Indian Bank was offering Home Loans linked to its Base Rate. Indian Bank has announced its Repo Based Lending Rate, but not yet adapted to it like some of the other prominent banks have done. However, the Reserve Bank of India (RBI) has instructed all banks to switch over to the repo rate-linked interest rate from October 01, 2016. Once Indian Bank makes a formal announcement in this regard, its Home Loan borrowers will get another option in the form of Repo Rate Linked Lending Rates (RLLR).

The MCLR of Indian Bank with effect from 03.09.2019 is as follows:

Tenor MCLR in %

Overnight MCLR

8.05%

One-month MCLR

8.15%

Three-months MCLR

8.30%

Six-months MCLR

8.35%

One year MCLR

8.45%

  • The Repo Based Lending Rate of Indian Bank with effect from 01.09.2019 is 8.20%
  • The Base Rate of Indian Bank as on 07.05.2017 is 9.45%
  • The Benchmark Prime Lending Rate (BPLR) as on 08.06.2015 is 14.20%

Indian Bank links its interest rates on retail advances to its one-year MCLR (8.45% at present).

Indian Bank Home Loan Interest Table

 Current One-year MCLR - 8.45%

Home Loan - Including NRI Home Loan and IB Home Advantage

Category of borrower

Loans up to 30 Lakhs

More than 30 Lakhs and up to 75 Lakhs

More than 75 Lakhs

Salaried Individuals

Women

8.55%

8.65%

8.80%

Others

8.60%

8.70%

8.85%

Self-Employed (Non-salaried)

Women

8.60%

8.70%

8.85%

Others

8.65%

8.75%

8.90%

Plot Loan for Residents and NRIs

Category of borrower

Loans up to 30 Lakhs

More than 30 Lakhs and up to 75 Lakhs

More than 75 Lakhs

Salaried Individuals

Women

9.55%

9.65%

9.80%

Others

9.60%

9.70%

9.85%

Self-Employed (Non-salaried)

Women

9.60%

9.70%

9.85%

Others

9.65%

9.75%

9.90%

Home Loan Under Commercial Real Estate - including HL NRI and IB Home Advantage

Category of borrower

Loans up to 30 Lakhs

More than 30 Lakhs and up to 75 Lakhs

More than 75 Lakhs

Salaried Individuals

Women

9.05%

9.15%

9.30%

Others

9.10%

9.20%

9.35%

Self-Employed (Non-salaried)

Women

9.10%

9.20%

9.35%

Others

9.15%

9.25%

9.40%

  • Ind Awas Scheme - PMAY (EWS, LIG, MIG-I, and MIG-II): 8.45%
  • IB Home Improve Loan: 10.55%

Other Home Loan-linked products

Category of borrowers

Rate of Interest

Women

Others

IB Home Loan Plus

Salaried Class with check-off facility

10.15%

10.65%

Self-employed

10.40%

10.65%

IB Home Enrich

Salaried Class with check-off facility

8.55%

8.95%

Self-employed

8.80%

8.95%

Indian Bank Home Loan Interest Rates - Points to Note

  • Indian Bank links its one-year MCLR to its Home Loan interest rates by adding the necessary premium. Thus, when the MCLR changes, the entire Home Loan interest structure will change accordingly.
  • Indian Bank Home Loan rates depend on the amount of loan availed by the borrower
  • Salaried individuals get the benefit of 0.05% over the self-employed category
  • Similarly, women borrowers in all categories get a concession of 0.05% over their male counterparts.
  • The rates of interest on PMAY loan are different from that of other Home Loans. It is equal to the one-year MCLR of Indian Bank.
  • Indian Bank has not yet linked its Home Loans to the Repo Based Lending Rates

Indian Bank Home Loan Interest Rates - MCLR vs. RLLR

With effect from April 01, 2016, all banks had to shift to a transparent interest rate mechanism, also known as Marginal Cost of Funds-based Lending rate. The MCLR computation is a complicated one comprising of various aspects.

  • Tenor Premium: The tenor premium is linked to the loan repayment tenure and has nothing to do with the type of borrower. Therefore, it is uniform for all kinds of loans.
  • Marginal Cost of Funds: The marginal cost of funds is the average rate at which the bank raises deposits with similar maturities during the specific period before the review. It depends on factors like 'Return on Net Worth' and the 'Marginal Cost on Borrowings.' The profitability of the bank has a crucial say in deciding the marginal cost of funds.
  • Operating Cost: It includes operational expenses like the cost of raising funds
  • Negative Carry on CRR: RBI announces the Cash Reserve Ratio from time to time. The returns to the banks on CRR are NIL. Hence, there is a negative carry on the CRR balances because the cost of holding the security exceeds its yield.

All these factors go into the computation of the MCLR. The idea behind the introduction of the MCLR was that the customers get the benefit of market fluctuations. However, it was found out that the existing MCLR system did not allow the effective passing over of rate cuts to the customers. Secondly, the MCLR comprised of various internal factors that affected the transparency of the computation. Therefore, RBI has come up with the concept of Repo-linked lending rate system. This system depends entirely on an external benchmark rate, the repo rate. RBI revises the repo rate at frequent intervals. Linking the crucial retail lending rates like Home Loans and auto loans to the repo rate can result in the quicker transmission of benefits to the customers.

The Repo-linked lending rates are better than the MCLR because the consumers get the benefit almost instantly. The reset period would be much less than that of the MCLR. Therefore, customers opting for a floating rate of interest on Home Loans and other loans stand to benefit if there is a downward swing in the repo rate. The borrowers opting for the fixed rate of interest will not be affected in any way.     

Indian Bank has announced its Repo-linked lending rate but has not yet linked its Home Loans and other loans to it. The Reserve Bank has mandated that banks should do so before October 01, 2019.

Indian Bank Home Loan Interest Rates - Treatment of PMAY subsidy

Indian Bank is one of the prime lending institutions for PMAY. The bank has a sizeable presence in South India. It is an active player in PMAY. Indian Bank has fixed the Home Loan interest rate on PMAY loans at the one-year MCLR figure. It implies that this loan product is the cheapest of all Home Loan products on offer by Indian Bank.

Apart from the rate of interest, there is an involvement of interest subsidy granted by the Central Government. PMAY beneficiaries are entitled to receive an upfront interest subsidy on their PMAY loans subject to specific conditions.

Category under PMAY Annual family income Eligibility Norms Maximum loan for calculation of subsidy Percentage of subsidy with the maximum amount

Economically Weaker Sections - EWS

Not exceeding 3 Lakhs

6 Lakhs

6.5% - 2.67 Lakhs

Low Income Group - LIG

3 Lakhs <= 6 Lakhs

6 Lakhs

6.5% - 2.67 Lakhs

Middle Income Group-I MIG-I

6 Lakhs <= 12 Lakhs

9 Lakhs

4% - 2.35 Lakhs

Middle Income Group-II MIG-II

12 Lakhs <= 18 Lakhs

12 Lakhs

3% - 2.30 Lakhs

The calculation of PMAY subsidy is based on the Net Present Value method. The borrowers get the credit of the subsidy upfront into their loan accounts. Hence, their effective loan amount gets reduced by the extent of subsidy received. Therefore, it results in a reduced EMI for the entire tenure of the loan.

Indian Bank Home Loan - Method of Calculation of Interest

Indian Bank calculates interest on the daily reducing balances. Therefore, the best repayment method is EMI. The EMI comprises of a principal repayment component and an interest repayment component. In the initial stages of Home Loan repayment, the interest component is substantially higher than the principal repayment component. However, as the borrower regularly repays the instalments, the principal repayment component increases and becomes more than the interest repayment portion.

Indian Bank allows its Home Loan customers to make payments over their regular EMIs. The bank does not charge any penal interest for the same. Similarly, it permits the customers to foreclose the Home Loan using their funds or by opting for a balance transfer. Indian Bank does not charge any foreclosure penalty for borrowers opting for the floating rate of interest.

Indian Bank Home Loan Interest Rates - FAQs

Does Indian Bank consider the credit score of the borrower while deciding on the rate of interest?

No, Indian Bank does not have a borrower-specific interest rate as far as credit scores are concerned. Maybe, we could see one when they announce the RLLR-based interest rates. However, Indian Bank considers the credit ratings of borrowers at the time of sanctioning the loan.

Is there any penal interest for late payment of loan instalment?

Yes, there is a penal interest of 2% per annum on the amount of overdue payment for the delayed period. This amount is debited to the loan account, thereby increasing the interest component of the EMI amount for the subsequent instalment. Therefore, it can have a cascading effect. However, the borrower can repay the overdue interest amount separately to set things in order.

Is there any option in Indian Bank to switch over from the fixed rate of interest to floating rate and vice versa?

Yes, Indian Bank provides the option to switch over from the fixed-rate to the floating-rate and vice versa subject to payment of a conversion fee. Similarly, the borrower can also switch over from the Base Rate or BPLR-linked interest rates to the MCLR-linked rates. The reverse is not allowed.

Do I get income tax concessions on repaying Indian Bank Home Loan?

Yes. Income tax concessions are permissible when you repay the principal and interest on your Home Loans availed from Indian Bank. Sec 24 of the IT Act permits the borrower to claim a deduction in the taxable income up to an amount of 2 Lakhs towards interest payment on housing loan. Similarly, the borrower gets a rebate of up to 1.50 Lakhs under Sec 80C of the Act for repayment of principal amount.

Can joint borrowers get the tax benefit as mentioned above?

Yes, joint borrowers can get the benefit provided the loan is in joint names, and the property is also jointly owned by them. Therefore, the benefits of a joint Home Loan account are that the account holders can get benefit up to 4 Lakhs ( 2 Lakhs each) under Sec 24 and 3 Lakhs ( 1.5 Lakhs each) under Sec 80C.

Among the fixed-rate and floating rate of interest, which is the better option?

Generally, the fixed rate is a minimum of one percentage point higher than the corresponding floating rate. However, the fixed-rate remains fixed for a specific pre-decided tenure. The floating rate is subject to variation depending on the MCLR. Usually, the differences are not so high to take the floating rate over the fixed rate. Therefore, the floating rate is a better option.

What are the advantages of a fixed-rate of interest?

The EMI remains fixed, and so does the loan repayment tenure. If the market becomes volatile, the fixed rate is beneficial as you can determine the exact extent of your liability. Many banks stipulate fixed-rate of interest for a specific period with a reset clause. It enables the borrowers to gauge the situation at the appropriate point.

What are the advantages of a floating rate of interest?

The floating rate of interest is less than the fixed-rate at the time of entering into the contract. Therefore, the EMI is also less. It can result in a higher loan eligibility amount. Secondly, if the market rates go down, the borrower with a floating rate of interest benefits because the EMI decreases.

Does Indian Bank reduce/increase the EMI whenever there is a change in the MCLR?

Indian Bank prefers to alter the tenure of the loan by keeping the EMI constant. However, if it is not in a position to change the tenure, it changes the EMI accordingly. Such a situation can arise when the tenure crosses the maximum age of the borrower at maturity.

Which is the better option, change the EMI or the tenure?

From the customer's point of view, changing the EMI is better than the tenure. By keeping the EMI constant, you end up increasing the interest component of the EMI while reducing the principal repayment. Therefore, you could end up paying substantially more if you prefer to keep the EMI constant.

      

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