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About Indian Overseas Bank

Indian Overseas Bank is a South India-based bank having its headquarters in Chennai. The bank has a considerable presence in South India with a large number of branches in almost every district of Tamil Nadu. Indian Overseas Bank owes its establishment to a reputed businessperson by the name of M C M Chidambaram Chettiar. He was a pioneer in many fields. The objective of the bank was to specialise in the foreign exchange business. Starting simultaneously with a branch each in Chennai, Karaikudi, and Rangoon, Indian Overseas Bank was one of the first Indian banks to have overseas branches. At the time of India's independence, seven of its 45 offices were situated overseas.

Indian Overseas Bank was nationalised in the first batch in 1969. Today, the bank has more than 3000 branches, of which more than a third are in Tamil Nadu alone. Maybe, this factor weighed in the mind of the Government, as it did not merge Indian Overseas Bank with any other during the most recent bank merger exercise.

Indian Overseas Bank Home Loan

Indian Overseas Bank offers an array of deposit and loan products. The Home Loan is a favourite with customers because of the relaxed eligibility norms, documentation procedure, and attractive rates of interest. Indian Overseas Bank provides Home Loans for all housing requirements, including purchasing a plot of land and construction of a house. Financial assistance is available for purchasing new and second-hand homes, as well. Home Loans include those for repairs, renovations, and extensions to existing dwellings.

Indian Overseas Bank Home Loan Products

Home Loan Product Description

IOB Shubha Griha

  • Salaried employees and self-employed individuals are eligible for Home Loans.
  • Purpose of finance is to buy, build, or renovate a home/flat
  • Loans available up to 75% to 90% of the value of property
  • Flexible repayment period up to 30 years
  • Moratorium period for up to18 months

Home Improvement Loans

  • Repairs and renovations to existing home
  • The maximum loan amount for repairs is 15 Lakhs
  • Repayment tenure can be up to 144 months

NRI Home Loan

  • NRIs and PIOs are eligible for loan under this product
  • The purpose of the loan is to buy, build, or repair/renovate the home
  • Loans available up to 80% of the cost of the house
  • Repair and renovation loan for a maximum of 15 Lakhs

Shubha Griha Pre

  • Pre-approved Home Loans to help the applicant negotiate a better rate with the seller/builder.

Shubha Griha Top-Up Loan

  • Additional finance to existing customers with good repayment record

Shubha Griha Housing Loan CC

  • An overdraft type of Home Loan that enables the borrower to park additional/surplus funds and use them when required.
  • It provides liquidity and saves Home Loan interest burden at the same time.

Shubha Griha Gen-Next Home Loan

  • Salaried employees of Government, MNCs, and reputed companies under 45 years of age are eligible for a Home Loan under this product.
  • The loan amount can extend to up to 20% more than their eligibility amount.

Indian Overseas Bank Home Loan Interest Rates

Repo Rate Linked Lending Rates - RLLR

Indian Overseas Bank has announced the linking of its retail products and MSME loans with the repo rates with effect from October 01, 2019. The retail products include Home Loans, education loans and personal loans.

RLLR Concept

The RBI has brought the repo rate down to 5.40%. It has notified all banks to link all retail loan products to an external benchmark rate.

The rate could be any one of the following:

  • Repo rate - RBI controls the repo rate
  • 3/6 months Treasury bill rate - FBIL publishes these rates based on the repo rate and other market-rate fluctuations daily.
  • Any benchmark rate published by Financial Benchmarks Pvt Ltd (FBIL)

Indian Overseas Bank has decided to link the retail loans to the repo rate as it is comparatively less volatile.

The RLLR comprises of the following components:

  • Repo rate - Controlled by RBI
  • The average net interest margin for the last ten years (differ from one bank to another)

The bank can load a premium over the RLLR that could consider various factors such as credit rating of a borrower, LTV ratio, and so on.

Indian Overseas Bank has not declared their RLLR as on date.

Marginal Cost of Funds based Lending Rate - MCLR

The RLLR will come into effect from October 01, 2019. The bank follows the MCLR rate structure today. This MCLR concept is in force since April 01, 2016. All loans sanctioned after April 01, 2016 are linked to the MCLR of the bank. The MCLT itself is a market-related interest rate that depends on various factors.

  • The marginal cost of funds - Marginal cost of borrowing + return on the net worth of the bank
  • Tenor Premium - Not borrower or loan-specific, but similar for all loans
  • Operating cost - Cost incurred by the bank to raise money for the loan
  • Negative carry on CRR

Indian Overseas Bank revises its MCLR almost every month. The latest revision of the MCLR of the bank was on August 10, 2019.

Tenor Overnight MCLR 1-month MCLR 3-month MCLR 6-month MCLR 1-year MCLR 2-year MCLR 3-year MCLR

MCLR

8.05%

8.20%

8.35%

8.40%

8.50%

8.60%

8.70%

Indian Overseas Bank links its Home Loan interest rate to its 1-year MCLR. The effective rates of interest on its Home Loan products with effect from August 10, 2019, are as follows:

Home Loan Product Rate of Interest Effective rate of interest

Housing Loans

Up to 30 Lakhs

1Y-MCLR

8.50%

Above 30 Lakhs and <= 75 Lakhs

1Y-MCLR + 0.10

8.60%

Above 75 Lakhs

1Y-MCLR + 0.25

8.75%

Shubha Griha Top -Up

Up to 1 Crore

1Y-MCLR + 2.20

10.70%

Above 1 Crore

1Y-MCLR + 2.70

11.20%

Home Improvement

Up to 2 Lakhs

1Y-MCLR + 0.20

8.70%

Above 2 Lakhs

1Y-MCLR + 0.35

8.85%

Indian Overseas Bank Home Loan Interest Rates - Points to Note

  • The MCLR-linked Home Loan interest rate is a floating rate of interest
  • The interest spread depends on the amount of the loan and the purpose
  • Top-up loans have a higher interest rate when compared to the regular Home Loan interest rate
  • The gender of the borrower or the occupation does not have any bearing on the interest
  • The same interest rates apply to NRI loans and PMAY loans, as well

Indian Overseas Bank Home Loan - PMAY

Indian Overseas Bank has a dominant presence in Tamil Nadu with more than a 1000 branches located in the state. Hence, it is an active player in PMAY in these areas. The bank follows the Government of India guidelines in the PMAY loans. The rate of interest in PMAY loans is the same as it is for other Home Loans. However, the interest subsidy available in the PMAY accounts differentiates it from the others.

PMAY - Subsidy Effect

PMAY Subsidy depends on various factors:

  • Category of the borrower - Depends on annual family income from all sources
Category of the borrower Economically Weaker Section - EWS Low-Income Group - LIG Middle-Income Group - MIG-I Middle Income Group - MIG-II

Annual family income

3 Lakhs

6 Lakhs

12 Lakhs

18 Lakhs

  • Maximum loan amount eligible for a subsidy
Category of the borrower Economically Weaker Section - EWS Low-Income Group - LIG Middle-Income Group - MIG-I Middle Income Group - MIG-II

Maximum loan eligible for subsidy calculation

6 Lakhs

6 Lakhs

9 Lakhs

12 Lakhs

  • Rate of subsidy and Maximum amount of subsidy
Category of the borrower Economically Weaker Section - EWS Low-Income Group - LIG Middle-Income Group - MIG-I Middle Income Group - MIG-II

Rate of subsidy

6.50%

6.50%

4.00%

3.00%

Maximum subsidy amount

2.67 Lakhs

2.67 Lakhs

2.35 Lakhs

2.30 Lakhs

  • PMAY interest subsidy is an upfront subsidy
  • On credit to the loan account, the loan liability reduces instantly
  • EMI is calculated on the principal loan amount outstanding after deduction of subsidy

Indian Overseas Bank Home Loan - Method of Interest Calculation and Home Loan Repayment

Indian Overseas Bank calculates Home Loan interest on the daily reducing balance method. The best mode of repayment of Home Loan is EMI. The borrower can repay the Indian Overseas Bank Home Loan EMI in many ways.

  • Set up a standing instruction in your savings or current account with Indian Overseas Bank
  • Submit post-dated cheques in advance
  • Register for an ECS mandate
  • Pay cash into the account
  • Use net banking or mobile banking facilities
  • Remit funds through NEFT/RTGS/IMPS from other banks

Indian Overseas Bank Home Loan Interest Rate - Frequently Asked Questions

How do I calculate the Home Loan EMI of Indian Overseas Bank?

You can use the EMI Calculator provided on the MyMoneyMantra website to determine the EMI.

  • Access MyMoneyMantra
  • Go to Financial Tools
  • Select EMI Calculator
  • Enter the loan amount, rate of interest, and repayment tenure
  • Click on 'Calculate'
  • Get your EMI instantly

How do you determine the EMI in the case of PMAY loans?

The procedure to calculate the EMI is the same as described above. However, the loan amount is the net loan amount after deduction of upfront interest subsidy.

How do you calculate the interest subsidy in PMAY accounts?

Visit the official website of PMAY-Urban and access the PMAY subsidy calculator. Enter the loan amount, rate of interest, and tenure. You get the subsidy amount.

Is there any other way to calculate PMAY subsidy?

Borrowers can use MS Excel tables and calculate the NPV of interest @ notional rate of 9% for 20 years. However, the best way is to use the PMAY subsidy calculator.

Can I foreclose the Home Loan with Indian Overseas Bank?

Indian Overseas Bank allows prepayment or foreclosure of the Home Loan at any time. Individual borrowers with a floating rate of interest do not incur any penalty for foreclosure. Non-individuals, including proprietorship concern, must pay 2% of the foreclosure amount as prepayment charges. Individuals with a fixed rate of interest also incur a fee of 2%.

What is the maximum loan amount that I can avail under PMAY?

There is no restriction on the maximum Home Loan availed under PMAY. Borrowers can avail Home Loan up to their eligibility levels depending on their income. However, the limits apply only to calculating the PMAY interest subsidy. Any loan amount more than this prescribed limit is an unsubsidised loan.

What is the repayment tenure for PMAY loans?

The interest subsidy is calculated on repayment tenure of 20 years. However, the borrowers can extend the repayment tenures beyond 20 years if it is otherwise permissible.

Does my Indian Overseas Bank Home Loan EMI fluctuate with the changes in the MCLR?

The MCLR might change every month. However, Indian Overseas Bank has an MCLR reset date for the Home Loan. The individual rates of interest on Home Loans vary only when the bank resets the interest rate. At that moment, your EMI can go up or down depending on the movement of the MCLR. Alternatively, you can opt to change the tenure and keep your monthly liability constant.

Will I be able to shift from the MCLR to RLLR?

Indian Overseas Bank is in the process of introducing the RLLR structure. It has declared that the RLLR will apply to new loans sanctioned after October 01, 2019. However, the bank might provide existing borrowers with an option to switch over from the MCLR to RLLR.

Are there any processing fees for Home Loans under PMAY?

The bank charges processing fees on Home Loans under PMAY in the following manner.

  • EWS and LIG - 0.50% of the loan amount of which NHB will reimburse 3,000
  • MIG-I and MIG-II - 0.50% of the loan amount with NHB reimbursing amounts up to 2,000. The borrower will bear the processing for the unsubsidised portion of loans. The maximum amount of processing fees in PMAY accounts is 20,000.

Indian Bank Home Loan - Interest rates - Latest News and Snippets

Indian Overseas Bank has agreed to offer repo rate linked rate of interest on retail loans

Indian Overseas Bank has confirmed that it will offer RLLR for new loans under the retail segment. These loans include housing loan, education loan, and personal loans. They also plan to extend the benefit to MSMEs. The bank will be announcing the respective loan products before October 01, 2019.

Indian Overseas Bank plans to offer cheaper Home Loans to women

Indian Overseas Bank is planning to offer more affordable Home Loans to women borrowers. Many banks have already started offering this concession to women. The only condition is that the property should be registered in the name of the woman in sole or joint names. This endeavour can encourage women to purchase property in their names.

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