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Syndicate Bank was established on October 20, 1925, at Udupi, a small town in coastal Karnataka. Three like-minded individuals, TMA Pai, Upendra Pai, and Vaman Kuduva, established a syndicate known as Canara Industrial and Banking Syndicate Limited. The primary objective of the company was to collect small savings from various sections of the society and provide financial assistance to local handloom weavers. The bank got its name Syndicate Bank in 1964. Starting with a capital investment of 8,000, Syndicate Bank has grown into a large bank with more than 3,600 branches and almost an equal number of ATMs situated all over the country. Syndicate Bank was among the first lot of banks to be nationalised in 1969. The Government has recently announced that Syndicate Bank will merge with Canara Bank to form the 4^th largest banking institution in the country.

Syndicate Bank offers a variety of deposit and loan products to cater to all sections of Indian society. The housing loan is a popular Syndicate Bank loan product. Syndicate Bank offers different types of Home Loans for purchase and construction of houses. There are also individual products for home improvement and extension. Syndicate Bank has a sizeable presence in the states of Karnataka, Maharashtra, and Goa. The bank is also a premier member lending institution under the Pradhan Mantri Awas Yojana or PMAY. One of the highlights of Syndicate Bank Home Loans is its attractive rate of interest. The bank has been quick to adapt to the Repo rate-linked lending rate system by announcing various retail products linked to the RLLR.

Repo Linked Lending Rate - RLLR

Syndicate Bank offers a high level of transparency in its interest rate pricing. The bank has announced that it will be introducing retail loan products linked to an External Benchmark Rate. With effect from August 12, 2019, Syndicate Bank has launched the Repo Linked Lending Rate (RLLR) to cover housing loans and other specific retail advances.

Marginal Cost of Funds- based Lending Rate - MCLR

The bank will continue to charge MCLR-lined interest rate on existing and new Home Loans at the same time. Existing and new borrowers have the choice of switching over to the RLLR-linked interest rates at any time. This MCLR-linked interest rate is the base rate for all loans sanctioned by Syndicate Bank after April 01, 2016.

Base Rate - BR

Before April 2016, Syndicate Bank used to follow the Base Rate method for computing the interest rate on its loans. Though borrowers were provided with the option to switch over to the MCLR-linked rates, the bank has many Home Loans linked to the Base Rate. The Base rate structure came into force from July 2010.

Benchmark Prime Lending Rate - BPLR

Before July 2010, the Benchmark Prime Lending Rate concept was in force. Syndicate Bank has many Home Loans in this category, as well. Therefore, Syndicate Bank announces these rates from time to time.

With effect from August 12, 2019, Syndicate Bank has announced the following interest rates:

• Benchmark Prime Lending Rate - BPLR: 13.85%
• Base Rate: 9.50%
• Marginal Cost of Funds-based Lending Rate: MCLR

• Repo Rate: 5.40%

• Base Rate Linked Home Loans

• Marginal Cost of Funds-Based Lending Rate - MCLR

• Repo Rate Linked Lending Rate - Home Loans

• For Loans under Commercial Real Estate - Additional 0.50% to be loaded under each category

• Customers can opt to switch over from the BPLR and Base Rate linked interest rate structure to the MCLR by paying a conversion fee.
• Similarly, switch over from the MCLR-linked rates to RLLR-linked rates is also permissible
• New customers have a choice between opting for MCLR-linked rates or RLLR-linked rates
• Both MCLR and RLLR are floating rates of interest. Hence, the effective rate of interest will change with an alteration in the MCLR and repo rates.
• In the case of a change in the repo rate announced by RBI, the rate of interest on the loan account will change from the first day of the following month.
• Syndicate Bank might change the spread on the RLLR from time to time depending on factors like net interest margin. However, once fixed for a customer, it will remain for the entire tenure of the loan.

Syndicate Bank calculates Home Loan interest on the daily reducing balances in the loan account. The ideal method of repayment of Home Loan is the EMI.

EMI Concept

• EMI stands for Equated Monthly Instalment. It comprises of two components, principal repayment and interest repayment.
• In the initial years of repayment, the interest component will be high. As you continue with regular repayment, the principal amount keeps decreasing gradually until the end of the loan repayment tenure.
• Any delay in the repayment of EMI will result in Syndicate Bank charging penal interest on the default portion.
• Syndicate Bank does not charge any prepayment or foreclosure penalty on Home Loans, especially those with floating rates of interest.

Syndicate Bank is a prominent lender under the PMAY Scheme. The method of calculating EMI in the PMAY accounts is different because of the involvement of an upfront interest subsidy portion. Every PMAY loan account is eligible to receive a subsidy from the Central Government. The rate of subsidy and the maximum amount of subsidy depends on the categorisation of the borrower under PMAY.

• The subsidy received from the Central Government is an upfront subsidy. It is to be credited to the loan account immediately.
• Due to the crediting of subsidy to the account, the principal amount of loan reduces. Therefore, EMI will change.
• The bank will continue charging interest at the contracted rate of interest for the entire tenure of the loan.
• The subsidy is calculated using the 'Net Present Value' formula with interest rate @ 9% for a maximum period of 20 years.

What are the criteria for women to qualify for the interest rate benefit?

Women should satisfy the following criteria to qualify for the interest benefit:

• They should either be the principal borrower or a co-applicant to the Home Loan
• The property should either be in their sole names or jointly with the other co-owners

Do salaried persons and women get the benefit of interest rate concessions in the MCLR-linked interest rate?

Salaried persons and women do not get any additional benefit in the interest rate in the MCLR-linked interest rates. They get these benefits in the RLLR-linked rates.

What are the factors that affect the spread on the RLLR-linked interest rates?

The factors affecting the RLLR-linked rate are as follows:

• Repo rate: The RBI announces the repo rates from time to time
• Net interest margin: It is an average of the last ten years net interest margin of the bank
• The credit rating of the borrower: The CIBIL score plays a vital role in this regard

When will the interest rates on the accounts change with a change in the repo rates?

The Reserve Bank of India could announce the changes in the repo rates at any time. However, Syndicate Bank will reset the interest rate on loans on the first day of the following month.

Is the RLLR a beneficial concept for the consumer?

As RLLR is direct fallout of the market rates, it should benefit the customer a lot. It is a new concept today. Time alone will tell whether it will be beneficial or not.

How is the RLLR different from the MCLR?

RLLR has a direct link to the repo rate. Hence, it is a truly externally benchmark rate. The MCLR links to the repo rate indirectly.

What made RBI come up with the RLLR concept?

RBI noted that banks were lagging in passing on the benefits of market rates to the customers. Hence, they came up with the RLLR concept, whereby the customer gets the immediate benefit of any reduction in the rates.

What will happen if the RBI hikes repo rates?

Under such circumstances, the banks will have to hike the loan interest rates, as well. Anyway, the MCLR also has an indirect link to the market rate. Therefore, any change in the market rates will influence the MCLR, as well.

Will the spread on the RLLR change with time?

One of the factors that decide the spread is the average net interest of the last ten years rounded off to the nearest 5 basis points. The average can change, but the rounding off to the nearest 5 basis points protects it from extreme fluctuations. However, there are possibilities of the spread changing in the future. It will be subject to review every year.

How will the change in the spread affect existing customers?

It will not affect the existing customers in any way because the spread remains constant after the bank determines it for a borrower. It does not change throughout the loan repayment tenure.

Syndicate Bank announces the linking of its Home Loans and other retail loans with the repo rate.

After State Bank of India, Syndicate Bank has also announced the linking of its Home Loan and other retail loans with the repo rate. Syndicate Bank has stated that its housing loans will start from 8.30%. The bank also proposes to link its savings deposits over 25 Lakhs with the repo rate.