Top 10 banks' home loan interest rates
These 10 banks are offering the lowest home loan interest rates for salaried individuals.
Complying with this directive, most commercial banks have opted for the RBI's repo rate as the external benchmark to which all floating rate loans are linked. Interest rates linked to the repo rate is called repo rate linked lending rate or RLLR. The RLLR comprises of repo rate plus bank's spread or margin. As per RBI, banks are allowed to charge a spread or margin plus risk premium over and above the external benchmark rate from borrowers.
Currently, the repo rate is at 5.15 per cent.
While the spread charged by a particular bank remains same for all borrowers, the risk premium will differ from one individual to another. For instance, it is usually seen that banks charge higher risk premium from self-employed borrowers as compared to salaried individuals.
Here are 10 banks offering the lowest home loan interest rates for salaried individuals
|BANK||RLLR||Minimum Interest Rate**||Maximum Interest Rate|
|Punjab National Bank||7.80||7.95||8.70|
|Central Bank of India||8.00||8.00||8.30|
|United Bank of India - EBLR||7.85||8.00||8.15|
|Oriental Bank of Commerce||7.95||8.00||8.55|
|Bank of India||8.00||8.10||8.40|
|Bank of Baroda||8.15||8.15||9.15|
*Central Bank of India charges 0.50% of loan as processing fees subject to maximum of Rs 20,000
* Bank of Baroda charges risk premium as per risk rating
**Sorted on minimum interest rate charged by the bank after adding risk premium
Here are 9 banks offering the lowest RLLR linked rates for self-employed individuals
|BANK||RLLR||Minimum Interest rate**||Maximum Interest rate|
|Bank of India||8.00||8.10||9.00|
|SBI Term loan||8.05||8.35||8.70|
|SBI Max Gain||8.05||8.60||8.95|
*SBI charges additional premium of 0.10 per cent from customers under risk grade 04 to 06
*ICICI bank charges one per cent of the loan amount plus taxes as processing fees.
** Sorted on minimum interest rate charged by the bank after adding risk premium
All data sourced from Economic Times Intelligence Group (ETIG)
Data as on December 12, 2019
Why RBI took this decision
The central bank took the decision to link the interest rate of home loans and other retail loans to an external benchmark for greater transparency and faster transmission of the policy rate changes.
Previously, under the MCLR (marginal cost based lending rate) regime, whenever RBI cut the repo rate, banks did not pass on the benefits to customers swiftly. On the other hand, when RBI hiked the repo rate, banks swiftly raised interest rates on loans.
In its circular mandating banks to link loans to an external benchmark, banks can choose from any of the following benchmarks:
- RBI's repo rate
- Government of India 3-month Treasury bill yield published by Financial Benchmarks India (FBIL)
- Government of India 6-month Treasury bill yield published by FBIL
- Any other benchmark market interest rate published FBIL
When can borrowers' EMI change?
As per RBI's circular, banks are required to reset the home loan interest rates linked to the external benchmark at least once in three months. This would imply that any change in the external benchmark rate would have to be mandatorily passed on to the customer within three months of the change in the external benchmark.
Also Read: How your EMI's will reset for loans linked to external benchmark
Another thing that can affect the interest rate on your loan charged by the bank is your risk grade. Some banks have internal risk assessment teams who grade the risk category of the individual. Some banks also rely on credit score reports generated by credit bureaus. Therefore, while taking a loan it is important that you have a good credit score for a bank to charge lower risk premium from you.
Also Read: 5 lesser known facts that can push up your home loan interest rate
Do keep in mind that if your credit-risk assessment undergoes substantial changes during the tenure of the loan, then your bank can revise the risk premium charged.
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