Soon after the Reserve bank of India [RBI] slashed the repo rate yesterday, the State Bank of India the biggest financial lender in the country has decided to pass its benefit to the end-users.
The bank has decided to bring in transparency in the consumer loan segment by linking the cost of home-financing products with that of the policy rate fixed by the Reserve bank of India in order to widen the debt cost in the economy.
SBI headquartered at Mumbai issued a letter and informed that from 1st July, the customers will get the option to avail SBI home loans according to the repo rate disclosed by the RBI. This information was shared after the fund cost closed at the lowest level since 2010. This decision is also seen as the follow up of its earlier decision of linking its savings bank rate with the short-term lending rates to the repo.
PK Gupta, managing director in charge of retail banking at SBI said, that the bank will continue its services to offer the home-loan products that are linked to the marginal cost of lending rate i.e. MCLR while giving the customers an option of a repo linked home loan rate.
He also said that this is completely a different product as it is linked to the repo rate and also has a greater timeframe in comparison to the regular home loan. The rate has fallen down to 8.40% for a property of Rs. 75-lakh from 8.55% on the present home loan he informed. Apart from this, the tenure also witnessed extension as it can go upto 35 years inspite of the regular 30 years and this is because the customer has to make 3 percent outstanding amount along with the interest every year.
Presently, the State Bank of India is offering home loans till Rs 75 lakh at a rate of 8.55% and the new loan product is being offered at a base of 2.25% above the 5.75% repo rate calculating to 8 percent. Also, the bank is charging 40 bps i.e. basis point on this rate and 1 bps is 0.01 percentage point.
Also, the existing borrowers can switch to the repo rate-linked product by making a payment of 0.25% charge, Gupta informed.
Prashant Kumar, SBI CFO said that earlier this year, the bank has already linked the overdraft and cash credit rates with the repo rate. He further said that we have introduced the home loan product and are planning to link the loan rates with that of the RBI rates to fasten the work pace.