All about SBI home loans


India’s largest lender SBI is currently offering the lowest home loan interest rate in the market

In a move that would reduce the cost of borrowing, India’s largest lender, State Bank of India (SBI) has reduced the interest on its home loans linked with the marginal cost of funds-based lending rates (MCLR) by 25 basis points, to 7%. It has also lowered home the loan interest on repo rate-linked loans to 6.65%.

SBI home loan interest rates

State Bank of India (SBI), the largest lender in the country, offers home buyers the most cost-effective home loans, with interest rates currently charged at as low as 6.65% per annum if the loan is linked with the repo rate.  Also, through several reductions in rate, the state-run bank has lowered home loan interest to 7% for home loans that are linked with its old marginal cost of funds-based lending rates (MCLR.)

It is worth mentioning here that the public lender switched to repo rate-linked home loans in October 1, 2019, following a mandate by the country’s banking regulator.

 

Repo rate-linked SBI home loans interest

Effective July 1, 2020

Loans up to Rs 30 lakhs: 6.65%

Loans above Rs 30 lakhs and up to Rs 75 lakhs: 6.90%

Loans above Rs 75 lakhs: 7%

Personal loan against property

Loans up to Rs 1 crore: 8.80%

Loans above Rs 1 crore and up to Rs 2 crores: 9.30%

 

The Reserve bank of India (RBI) had earlier told financial institutions to switch to an external lending benchmark by October 2019, as benefits of its policy changes failed to reach the end-users under the previous marginal cost of funds-based lending rate (MCLR) regime. The RBI gave the banks options to benchmark their floating rate loans, either to the repo rate, three-month or six-month treasury bills or any benchmark market interest rate published by the Financial Benchmarks India Private. Subsequently, a majority of banks, including SBI, linked their lending rates to the RBI’s repo rate.

For the uninitiated, repo rate is the interest the RBI charges from scheduled banks to lend funds. The repo rate currently stands at 4%.

 

SBI interest rate for self-employed and high-risk individuals

SBI home loan rate for self-employed: Self-employed individuals have to pay 15 basis points more than the average rate.  This means for loans up to Rs 30 lakhs, they have to pay 7.15% interest. Women borrowers in this category would pay 7.05% interest.

SBI home loan rate for high-risk individuals: A borrower will have to pay 10 bps extra for loans of up to Rs 30 lakhs in case the loan to value ratio is greater than 80% and lower than 90%. In this case, women borrowers will have to pay 7% interest on home loan while men will have to pay 7.05%. Individuals falling under high-risk categories will also have to pay an additional 10 bps to avail of loans from SBI.

 

SBI MCLR home loan rate

In June 2020, SBI reduced its MCLR rate to by 25 bps bring home loans rates between 7-7.35%. Before SBI made the switch and linked all its new loans to the repo rate, its home loans were linked to the marginal cost of funds-based lending rates (MCLR) regime, which became effective on April 1, 2016. This means those borrowers whose home loans were sanctioned before October 1, 2019 and after April 1 2016 still have their loans linked to the MCLR.

It is worth mentioning here that your old housing loan does not get switched to the repo-linked lending rate (RLLR) regime automatically. Old borrowers have to approach their branch and ask for a switch in case they desire to do so.

 

Benefits if you switch to RLLR regime

Let’s understand this through an example.

Mohit Sharma has his SBI home loan linked to the old regime while Aman Seth applied for his home loan at the SBI in December 2019. Both have taken Rs 30 lakhs as loan for home purchase for a 20-year tenure.  Here is a look at their yearly liabilities:

 

ParticularsMohit Sharma (MCLR)Aman Seth (RLLR)
Monthly EMIRs 25,093Rs 24,907
Total interestRs 30,22,367Rs 29,77,634

Saving under RLLR: Rs 44,733

 

Should borrowers switch to RLLR from MCLR?

In the MCLR regime, the reset period on home loan is typically one year while it is only three months in the RLLR regime. Since any changes in the monetary policy would be immediately reflected in your home loan EMI in case your loan is linked with the repo rate, it makes perfect sense to make a switch to enjoy greater transparency. However, borrowers with low appetite for swift changes might continue with the old regime.

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SBI extends home loan EMI moratorium till August 31, 2020

SBI, on May 27, 2020, announced that it was extending its home loan EMI moratorium by another three months, till August. The move by the lender, comes days after the RBI said banks should extend the moratorium period, because of the prolonged lockdown and its impact on the common man.

Following the March 27, 2020, mandate of the Reserve Bank of India (RBI), India’s largest lender State Bank of India (SBI) initially announced a three-month moratorium on repayment of home loans, to offer relief to customers during the Coronavirus outbreak. SBI has already initiated steps to defer the EMI payments on home loans falling due between March 1, 2020 and August 31, 2020.

Here is what borrowers should know about the SBI home loan EMI moratorium:

Effective period 

March 1, 2020 to August 31, 2020.

Terms and conditions 

Please note here that you can only delay paying your EMI under the moratorium plan. It does not offer you a waiver. 

Impact of home loan moratorium on EMI

If you pay a home loan EMI of Rs 25,000 every month, you do not have to pay it for the period between March and August 2020, under the moratorium. Starting September, the bank will include the outstanding amount of Rs 1.50 lakhs for these six months, in your home loan principal amount and charge interest on the entire amount. Interest will continue to accrue on the outstanding portion of the loan, during the moratorium period.

Basically, you must take into account that the interest on the loans gets postponed by six months, but continues to accrue on your account and results in higher cost. For a loan of Rs 30 lakhs with a remaining maturity of 15 years, the net additional interest would be approximately Rs 4.68 lakhs or equal to 16 EMIs.

Impact of EMI moratorium on credit score

According to the guidelines issued by the RBI, the delay in your EMI would not reflect in your credit history as a default.

How to opt for SBI EMI moratorium?

What if you want to opt for the moratorium? 

In case the EMI is deducted through National Automated Clearing House (NACH), please submit an application, along with mandate for NACH Extension to stop the installments, through an e-mail to the specified email ID.

To give standing instructions, submit an application through email, to the specified email ID.

Click here to get the application format.

Click here to get the NACH Extension format.

Click here to get the email IDs.

A hand-written application can also be submitted in the same format, to one’s home branch.

Be mindful of the fact that it would take 7 days for the action to be effected.

 

What if you have already paid the EMI for March?  

You could seek a refund from the bank, by sending an application through email, to the specified mail ID.  Click here to get the email IDs.

A hand-written application can also be submitted in the same format, to the home branch.

The bank will refund the money in approximately 7 working days.

 

What if you do not want to opt for the moratorium? 

The EMI would be deducted from your account, unless you submit an application to the bank. So, no action is required on the part of home loan borrowers who want to continue paying their EMIs.

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SBI home loan interest rate: Latest updates

(With inputs from PTI)

SBI reduces home loan rates to 7.75%

March 12, 2020: In a move that would substantially lower the EMIs for borrowers whose home loans are linked with State Bank of India’s MCLR, the public lender has announced a 10-basis points reduction in rates, effective March 10, 2020. With the reduction, SBI’s home loan rate now stands at 7.75% as against 7.85% earlier.

Do note here that all new home loans at the bank are now linked with the RBI repo rate. Majority of banks in the country linked their home loans with the banking regulator’s repo rate in October last year after the RBI made it mandatory for them to switch to an external benchmark.

 

NCDRC directs SBI to pay Rs 5 lakhs compensation for losing title deed of customer

The NCDRC has directed SBI to pay Rs 5 lakhs as compensation to a customer, for failing to return the title deeds of his property, which was deposited with the bank against a loan

January 10, 2020: The National Consumer Disputes Redressal Commission (NCDRC) has upheld an order of the West Bengal State Consumer Commission, which had directed State Bank of India (SBI) to pay Rs 5 lakhs compensation and litigation cost of Rs 30,000 to Kolkata resident Amitesh Mazumder, for failing to return the title deeds of his property. Mazumder had taken a loan of Rs 13.5 lakhs from SBI against the title deed of the property, which was not returned to him even after repaying the loan amount in full. The bank admitted that the loan had been paid by Mazumder but said that the title deeds were not traceable.

“No one in the market will agree to purchase an immovable property on payment of its prevailing market value, if he knows that the original title deed of the property will not be delivered to him by the seller. If the complainant decides to take a loan against the property, he will not be able to get a ready lender in the market unless the title deeds of the property are deposited. In fact, even a bank may be unwilling to give a loan against an immovable property, unless the title deeds of the property are deposited with it,” NCDRC presiding member VK Jain said. While awarding the compensation to Mazumder, the consumer forum also directed SBI to publish the loss of the original title deed in three leading daily newspapers and lodge an FIR.

 

SBI cuts MCLR by 0.05% and slashes deposit rates

State Bank of India has reduced its marginal cost of funds-based lending rate (MCLR) by 5 basis points across all tenors, effective November 10, 2019

November 8, 2019: The country’s largest lender, State Bank of India (SBI), on November 8, 2019, reduced its marginal cost of funds-based lending rate (MCLR) by 5 basis points (0.05%) across all tenors, effective November 10, 2019 and sharply slashed its deposit rates between 15 and 75 basis points. With this reduction, the one year MCLR, to which most of its loan prices are linked, will come down to 8%, the bank said in a statement. This is the seventh consecutive cut in lending rates by the bank this fiscal.

The bank also revised its interest rates on term deposits on account of adequate liquidity in the system. The new deposit rates will also be effective from November 10, 2019. It has reduced interest rate on retail term deposit by 15 basis points for one year to less than two years’ tenor. Bulk term deposit interest rates have been reduced by 30 to 75 bps across tenors, the bank said.

 

SBI cuts MCLR by 10 basis points

State Bank of India has reduced its MCLR by a marginal 10 basis points across all tenors, while also reducing the rate on savings deposits under Rs 1 lakh by 25 bps

October 9, 2019: The State Bank Group, on October 9, 2019, revised its marginal cost of funds-based lending rates (MCLR) by a marginal 10 basis points (0.1%) across all tenors but steeply revised down the pricing on savings deposits under Rs 1 lakh, by 25 bps to 3.25%. This is the sixth reduction in the lending rates by the largest lender, since April 2019. While the MCLR reduction is effective October 10, 2019, the revision in savings bank deposits rates will be from November 1, 2019, the bank said in a statement.

The one-year MCLR, to which all the lending rates, barring those retail loans linked to the repo rate since October 1, are linked to, is set at 8.05%, as against 8.15% earlier. “In view of the festival season and extending the benefits to customers across all segments, we have reduced our MCLR by 10 bps across all tenors,” the bank said in a statement.

The bank further said in view of the adequate liquidity in the system, it has also revised interest rate on savings bank deposits (with balances up to Rs 1 lakh) from 3.50% to 3.25% effective November 1, 2019. SBI has also slashed its retail term deposits and bulk term deposits rates by 10 bps and 30 bps, respectively, for one-year to less than two-years effective October 10, 2019.

 

SBI to link all floating rate loans to the repo rate, from October 1, 2019

State Bank of India has said that it will adopt the repo rate as the external benchmark, for all floating rate loans for MSME, home and retail loans, from October 1, 2019

September 23, 2019: “We have decided to adopt the repo rate as the external benchmark, for all floating rate loans for MSME, housing and retail loans, effective October 1, 2019,” State Bank of India (SBI) announced, in a release, on September 23, 2019. On September 4, 2019, the Reserve Bank of India (RBI) had mandated all banks to link all new floating rate personal or retail loans and floating rate loans to micro, small and medium enterprises (MSMEs), to an external benchmark from October 1, 2019, onwards. The RBI gave the banks options to benchmark their floating rate loans, either to the repo rate, three-month or six-month treasury bills or any benchmark market interest rate published by the Financial Benchmarks India Private (FBIL).

SBI said that it has also extended the external benchmark-based lending to medium enterprises, to boost lending to the MSME sector as a whole. It had introduced floating rate home loans effective July 1, 2019 but made some modifications in the scheme, effective October 1, 2019, to comply with the latest regulatory guidelines, the release said.

 

SBI to roll out co-lending model with 4-5 NBFCs

State Bank of India is expected to launch a co-lending business model soon, with 4-5 medium to large-sized NBFCs, an official of the lender said

September 22, 2019: State Bank of India (SBI) has said that it is on the verge of launching a co-lending financing model with NBFCs, in line with the Reserve Bank of India’s (RBI’s) guidelines. “We will tie-up with 4-5 medium to large-sized NBFCs and it would be finalised in 30-40 days,” SBI deputy managing director Sujit Kumar Varma said. Under the co-lending model, the bank will have an exposure between 70% and 80%, while the rest will be borne by the NBFCs but this arrangement will be only for the priority sector lending, SBI said.

Once the present hurdles relating to the integration of technology with the non-banking finance companies (NBFCs) are removed, the model of co-lending will be launched and it will be completely automated without manual intervention from on-boarding of customers to loan disbursement and monitoring, the SBI said. It has been a year since the RBI laid out the framework for co-origination of loans by banks and NBFCs in the priority sector. Co-origination is a new system introduced by the RBI, in the wake of the liquidity crisis at NBFCs, to enhance the credit flow to productive sectors.

 

SBI lowers lending rates by 0.15%, effective August 10, 2019

Following a cut in the repo rate by the RBI, SBI has announced a reduction of 0.15% in its lending rates, across all tenors, effective August 10, 2019

August 7, 2019: Within hours of a steep 35 basis points (0.35%) reduction in the repo rate by the Reserve Bank of India (RBI) to 5.4% in its fourth consecutive cut, India’s largest lender State Bank of India (SBI) announced a 15 basis points reduction in its lending rates, effective August 10, 2019, across all tenors.

See also: RBI slashes interest rate by 0.35%, making it the fourth cut in a row

The new one-year MCLR or the marginal cost of funds-based lending rate, will come down to 8.25% from 8.40% per annum, the lender said, in a statement. After this cut, home loans of the bank have become cheaper by 35 bps since April. The bank is offering repo-linked home loans, from July 1, 2019. With this reduction, the bank’s effective repo-linked lending rate (RLLR) for cash credit accounts (CC)/ overdrafts (OD) customers, will be revised downwards to 7.65%, from September 9, 2019.

 

SBI lowers lending rates by 0.05%, after RBI governor’s nudge

SBI has cut its lending rate by 0.05%, making it the third time in the financial year that it has cut rates by the same amount

July 10, 2019: A day after Reserve Bank of India (RBI) governor Shaktikanta Das said he expects faster transmission of the three successive repo rate cuts, State Bank of India (SBI) lowered its lending rates by 5 basis points (bps) across all tenors. The new rates, effective from July 10, 2019, is the third reduction by SBI in this financial year, having cut the rates by 5 bps (0.05%) each in April and May, while its home loan rates have come down by 20 bps during this period.

The one-year marginal cost of funds-based lending rate (MCLR) or minimum lending rate, to which all loans are linked, has been cut to 8.40% from 8.45%, the nation’s largest lender said in a statement, on July 9, 2019. From July 1, the bank had also introduced repo-linked home loan products. Talking to reporters after the customary post-budget meeting with the finance minister on July 8, 2019, Das had said after delivering three back-to-back rate cuts to the tune of 75 bps, the RBI expected a quicker transmission by banks.

See also: Following smaller peers, SBI cuts loan rates by a nominal 5 bps

“At the June MPC meeting, I had said by that time 50 basis points of repo rate cut had already been announced, only 21 bps had been transmitted. But one positive thing that is happening now is, earlier it used to take six months for transmission, now it is taking a much shorter period of two-three months,” Das had said. “Thereafter, we announced 25 bps cut more. So, it’s now a cumulative 75 bps cut. We are collecting the data and also you have to keep in mind that right from June, the system has more than adequate surplus liquidity,” he had said.

After the 25 bps repo rate cut in the June policy, Bank of Maharashtra, Corporation Bank, Oriental Bank and IDBI Bank had reduced their MCLR by 5-10 bps.

 

SBI to link home loans to repo rate from July 2019

After linking its short-term loans and large savings deposits rates to the repo rate, the largest lender State Bank, said it will introduce repo-linked home loans from July 2019

June 10, 2019: India’s largest lender, State Bank of India (SBI), on June 7, 2019, in a statement, said that it will introduce repo rate-linked home loans from July 1, 2019. The lender has also reduced the interest rate on cash credit account (CC) and overdraft (OD) customers with limits above Rs 1 lakh, after the RBI reduced the repo rate by 25 basis points on June 6, 2019. The monetary policy committee had unanimously decided to reduce the repo rate by 25 basis points to 5.75% in the second bi-monthly policy, taking it down to a nine-year low, citing sagging growth and to cushion the rising headwinds to the economy. It was the third consecutive repo rate cut by RBI, with a cumulative reduction of 75 basis points in 2019, so far.

See also: RBI cuts interest rates for the third time this year, to boost growth

“The benefit of reduction in the repo rate by 25 bps has been passed in its entirety to our CC/OD customers (limits above Rs 1 lakh), with effect from July 1,” SBI said. The effective repo-linked lending rate (RLLR) for CC/OD customers is 8% now, it said, while for savings deposits above Rs 1 lakh the new rate would be 3%. In March 2019, the bank had linked all CC accounts and ODs with limits above Rs 1 lakh, to the repo rate plus a spread of 2.25%. For above Rs 1 lakh, it had set its savings deposit rates to 2.75% below the repo rate.

 

SBI links pricing of loans and deposits to RBI’s repo rate

In a first-of-its kind move that will ensure faster monetary transmission, the nation’s largest lender State Bank of India, announced linking of its savings deposits rates and short-term loans to the RBI’s repo rate

March 11, 2019: State Bank of India, on March 8, 2019, announced the linking of its savings deposits rates and short-term loans to the Reserve Bank of India’s (RBI’s) repo rate, effective May 1, 2019. The move to link the new rates to the external benchmark rate, would help speed up the monetary transmission process, wherein, lenders pass on the RBI’s rate cuts, as well as hikes, to borrowers. The RBI has been unhappy with delays in transmission of rate cut benefits by the banks.

SBI said it would exempt savings bank account holders with balances up to Rs 1 lakh and borrowers with cash credit accounts and overdraft limits of up to Rs 1 lakh from linkage to the repo rate. This would insulate small deposit-holders and small borrowers from the movement of external benchmarks. “To address the concern of rigidities in the balance sheet structure and address the issue of quick transmission of changes in the RBI policy rates, effective May 1, 2019, we’ve taken the lead in linking key pricing decision for savings bank deposits and short-term loans, to the repo rate of the RBI,” the SBI said.

Savings bank deposits above Rs 1 lakh constitute around 33% of SBI’s total deposit books, SBI managing director PK Gupta said. Currently, the bank is offering interest rate of 3.50% for savings bank deposits up to Rs 1 crore and 4% for deposits above Rs 1 crore, he added. “This is a major policy decision we have taken. A 25 basis points reduction in the repo rate can result in a 7-8 basis points cut in our MCLR now,” Gupta said. The new regime would be applicable only for those with a balance of over Rs 1 lakh in their accounts. Currently, the repo rate is 6.25%. Also, the move will in fact see large depositors losing on the interest rate, as at present a savings bank holder gets paid 4% per annum, after the RBI under D Subbarao had deregulated the pricing of deposit rates. SBI said it would link the savings bank deposits, with balance above Rs 1 lakh to the repo rate, with current effective rate being 3.50% per annum, which is 2.75% below the present repo rate. The bank has also linked all cash credit accounts and overdrafts with limits above Rs 1 lakh to the repo rate plus a spread of 2.25%. The risk premia over and above this floor rate of 8.50%, will be based on the risk profile of the borrower, as is the current practice, the bank said.

In a note, Anil Gupta, vice-president and head of financial sector ratings at ICRA said “Linking the savings deposit rates with policy rate will help faster repricing of liabilities for banks and help protect their profit margins. We expect more banks, especially all the public sector ones and a few large private banks to follow suit, which will also be in line with RBI requirements to link these rates to external benchmarks.” India Ratings director and head financial institutions Prakash Agarwal said: “The move will help the bank reduce volatility in its margins.”

See also: Why the recent reduction in repo rate by the RBI will not result in a reduction in home loan rates

The saga of slow transmission of RBI interest rate cuts

Despite the recent RBI rate cut, banks were struggling to reduce their lending and deposit rates, as the deposit accretion continued to lag credit growth. Cutting deposit rates was not a feasible option, amid slowing deposit growth. It can be recalled that banks were always slow to pass on the entire benefit of RBI rate cuts to borrowers, thus, delaying the monetary transmission process. This had governors from the time of D Subbarao chiding banks for the delay. This disconnect had forced Subbarao to end the BPLR (Benchmark Prime Lending Rate) regime, which was very opaque and usher in the bank rate. This too did not have the desired effect, as the new pricing regime was opened only to new borrowers.

Following this, his successor Raghuram Rajan made bankers change the model and ushered in the base rate regime, again without much success on the monetary transmission front. The base rate regime was followed by the MCLR (Marginal Cost of Funds-based Lending Rate) regime. Again banks were slow to move on the transmission front, forcing governor Urjit Patel to announce that from April 2019, all loan pricing will move onto an external benchmark. However, present governor Shaktikanta Das has lifted the deadline, given the poor balance sheets of banks.


FAQs

What is SBI home loan rate?

SBI currently offers home loans at 7.90%.

What is repo rate?

The repo rate is the rate at which RBI lends money to banks. The repo rate currently is 5.15%.

What is SBI RLLR home loan rate?

SBI currently offers home loans at 7.90%.

What is SBI MCLR rate?

SBI MCLR home loan is currently offered at 8%.

Which repo rate linked home loan better than MCLR linked home loans?

Repo rate linked home loans offer greater transparency, and changes in policy rates are quickly reflected in your EMI payment.

What period is covered under SBI home loan EMI moratorium?

Time between March 1, 2020, and May 30, 2020, is covered under SBI home loan EMI moratorium.

 

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