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Home loan interest rate linked to external benchmark: Check calculation, features of SBI repo rate linked loan

Sunil Dhawan
SBI home loan,SBI RLLR, interest rate, repo linked lending rate, sbi home loan calculation, sbi ebr, repo rate, home loan features, eligibility, home loan, car loaN, external benchmark rate, EBR,

SBI RLLR Home Loan: The State Bank of India (SBI) has re-launched its regular SBI home loan scheme with the interest rate linked to an external benchmark. From October 1, 2019, all banks including SBI have to lend only at an interest rate linked to an external benchmark such as such as RBI’s repo rate or Treasury Bill yield. Most banks have opted to link their home loan, car loan and other retail loans to the the RBI’s repo rate. Such loans where the interest rate is linked to the repo rate are called repo linked lending rate (RLLR) and will be different for each bank. It may also be known by different names by different banks. In the case of SBI, it is called external benchmark rate (EBR) or External benchmark based lending rate (EBLR), which replaces SBI RLLR, although the concept remains the same.

Home loan schemes based on external benchmark replaces the lending based on bank’s Marginal Cost of Funds based Lending Rate (MCLR), which essentially is an internal benchmark of the bank based on its own cost of funds. Existing loans linked to MCLR will, however, continue unless the borrower shifts to the new mode of lending.

Eligibility and Charges

Any one between 18 years and 70 years can apply for the SBI home loan and the loan tenure can be up to 30 years. The processing fee including tax is 0.35 per cent of the loan amount with the maximum capped at Rs 10,000. Additionally, there will be charges for valuation report, Advocate’s fee for property search and title investigation report, CERSAI Registration, etc. which are to be paid separately.

SBI home loan interest rate

(Effective October 1, 2019)

Must Watch: What is Repo Linked Lending Rate, Home Loan? RLLR meaning, comparison vs MCLR

For loan amount up to Rs 30 lakh, the effective rate (ER) is 8.20 per cent as there is a CRP of 15 basis points. For loan amount above Rs 30 lakh and up to Rs 75 lakh, the effective rate (ER) is 8.45 per cent as there is a CRP of 40 basis points. For loan amount above Rs 75 lakh, the effective rate (ER) is 8.55 per cent as there is a CRP of 50 basis points.

A CRP of 15 bps will be added to the ER for Non-Salaried Customers, while a CRP of 10 bps will be added to the ER for Loan up to Rs 30 lakh if LTV ratio is more than 80 per cent and below 90 per cent. Further, a premium of 10 bps will be added to the ER if the borrower falls under Risk Group 4 to 6. On the ER, there will be a 5 bps concession available to women.

How is SBI home loan interest rate calculated

  • As on October 1, the RBI repo rate was 5.4 per cent.
  • SBI has set a Spread of 2.65 per cent over the repo rate to arrive at SBI EBR.
  • The EBR for SBI is therefore – Repo rate plus 2.65 per cent i.e. 5.4 per cent + 2.65 per cent = 8.05 per cent. From October 1, the SBI external benchmark rate (EBR) for its retail loan borrowers is 8.05 per cent.

What it means

This means, the base rate for the loan from SBI will be 8.05 per cent as of now. On October 4, RBI has cut repo rate by 25 basis points. The EBR of SBI will be reset on the 1st day of of every quarter on the basis of the prevailing RBI’s repo rate so the EMI accordingly will see a revision in January 2020.

What borrowers pay

Over and above the EBR, the bank keeps a Credit Risk Premium (CRP) or a Mark-Up depending on the profile of the borrowers. The actual home loan interest that a borrower pays may, therefore, not be on the EBR. The effective home loan interest will typically be higher depending on loan amount, loan-to-value ratio (LTV), gender, profession and risk group. Effectively, the interest rate on SBI home loans is in the range of 8.20 per cent to 8.55 per cent.