From time to time, SBI has promptly altered their interest rates on their financial products. Recently, SBI has made it to the headlines as they cut their lending rates on home loans. This is not the first time in 2017 that SBI has reduced their interest rates.
|Month||MCLR rate for overnight||MCLR rate for 1 month||MCLR rate for 3 months||MCLR rate for 6 months||MCLR rate for 1 year||MCLR rate for 2 years||MCLR rate for 3 years|
SBI home loan interest rate cut is definitely influencing other banks to reduce their lending rates on home loans too. If you are planning on buying a home, this is the right time to apply for a home loan with SBI.
Buying a home is a dream for many. With frequent rate cuts from leading banks like SBI, millions of people who dream of owning a home are able to fulfill their dreams. In the last two months, SBI has reduced their lending rates on home loans twice, which is a good news for everyone who wants to buy a new house.
For the financial year 2017-2018, the Reserve Bank of India conducted the second bi-monthly review meeting on 7 June 2017. At this meeting, the repo rate was unchanged. What is a repo rate? Repo rate is the rate at which banks borrow funds from the central bank. Despite RBI not reducing the repo rate or lending rates on home loans in any of their meetings, many banks took an extra mile and cut their interest rates.
Starting from 1 April, 2016, the Reserve Bank of India had asked all the banks to follow the MCLR system to charge interest on home loans. RBI has introduced this new methodology as they noticed that whenever RBI increases the interest rates, all the banks quickly followed the trend and increased the rates. On the other hand, when RBI reduces the interest rates, banks were too slow or did not reduce the interest rates. In which case, the rate cut did not reach the borrowers. To play a fair game, RBI introduced the MCLR system.
Under the MCLR system, all the loans, including home loans will be linked to the marginal cost of funds based lending rate. Before MCLR system was introduced, banks were linking all their loans to their base rate. Banks following the MCLR system will be required to calculate their marginal cost of funds based lending rate based on the sources of borrowings of the bank and the return on the equity. In general, RBI has prescribed the below formula to calculate MCLR:
The marginal cost of funds= Marginal cost of borrowings x 92% + Return on net worth x 8%
All banks will be required to calculate at least 5 MCLR, namely overnight MCLR, 1- month MCLR rate, 3 months MCLR rate, 6 months MCLR rate, and one year MCLR rate. People who have availed loans before 1 April, 2016 and are charged under the base rate system can also switch to the new MCLR system. However, your bank may charge a fee to switch you to MCLR system.
To attract home loan customers and to promote affordable housing, SBI has recently cut their interest rates. The interest rates were reduced by 10 to 25 basis points. Experts in the banking industry believe that this move will force other lenders to also cut their home loan rates.
For salaried individuals with home loan amount up to Rs.30 lakhs, the bank will charge an interest rate of 8.35% p.a. which was 8.60% previously. For home loan amount above Rs.30 lakhs, the bank has reduced the lending rates by 10 bps and are now charging 8.50% p.a. SBI has not changed the lending rates on home loans above Rs.75 lakh. Home loans above Rs.75 lakh will be charged 8.60% p.a.
Not to forget, in the month of January, State Bank of India had cut their MCLR across all tenors by 90 basis points which was the highest rate cut in several years. With this recent rate cut, SBI strongly believes that they will gather many home loan customers as they have noticed an increase in their sales when they reduce the rates.
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