- SBI cuts external benchmark-based rate (EBR) by 0.25%, making home loan cheaper
- State Bank may levy additional interest on the customer from 0.10% to 0.75% depending on the loan amount above EBR.
State Bank of India (SBI) on Monday has cut the external benchmark based rate (EBR) on home loans by 25 basis points i.e. 0.25% to 7.80%. With this, home loan rates were also reduced to 7.90%. Earlier SBI had the lowest home loan rate of 8.15%. These new rates will be applicable from January 1, 2020 and after that taking home loan will attract interest of 7.90%.
SBI issued a statement saying that this deduction will not only be available to the customers taking home loans but also to the borrowers of MSME (Medium & Small Enterprises) who have taken EBR linked loans.
Interest rate will be at least 7.90%
State Bank has now kept its external benchmark based rate (EBR) at 265 basis points higher than the Reserve Bank’s repo rate (currently 5.15%). SBI levies 10 to 75 basis points higher rates on customers taking loans. That is, if the bank has an EBR rate of 7.80%, then the customers will have to pay interest at the rate of 0.10% to 0.75% above the EBR depending on the loan amount. That is why the bank will now offer home loans to new customers at a rate of at least 7.90%. This rate can be up to 8.65% depending on the loan amount.
There are 4 types of benchmarks; Home and personal loan rates are determined by EBR
RBI has set 4 types of benchmarks for banks. First- RBI repo rate. Second- the rate to be given on the 3-month Treasury Bill of the Central Government. Third- the rate to be paid on the 6-month Treasury Bill of the Central Government and the fourth- any benchmark rate issued by Financial Benchmarks India Private Limited (FBIL). Banks are free to follow any of these benchmarks. RBI issued a circular in October 2019, stating that the rates of personal, home, retail loans and loans to small businesses will be fixed under EBR.