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Top 10 banks' home loan interest rates

These 10 banks are offering the lowest home loan interest rates for salaried individuals.

ET Online|
Updated: Dec 13, 2019, 11.53 AM IST
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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.
The Reserve Bank of India (RBI) has directed all scheduled commercial banks (except regional rural banks), local area banks and small finance banks to link interest rates of all retail loans, including home loans, offered by them, to an external benchmark with effect from October 1.

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
Syndicate Bank 5.15 7.85 8.15
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
Canara Bank 8.05 8.05 10.05
UCO Bank 8.05 8.05 8.15
Bank of India 8.00 8.10 8.40
Corporation Bank 7.90 8.10 8.35
Bank of Baroda 8.15 8.15 9.15
*Bank of India charges 0.25% of loan as processing fees, minimum Rs 1500 and maximum Rs 20,000
*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
Syndicate Bank 5.15 7.85 8.20
Bank of India 8.00 8.10 9.00
Indian Bank 7.95 8.30 8.55
SBI Term loan 8.05 8.35 8.70
IDBI Bank 8.25 8.35 8.80
SBI Max Gain 8.05 8.60 8.95
Fedral Bank 5.15 8.60 8.70
Axis Bank 5.15 8.65 9.40
ICICI Bank 5.15 8.75 9.10
*Bank of India charges 0.25% of loan as processing fees, minimum Rs 1500 and maximum Rs 20,000
*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.

For any queries or changes, please write to us on etigdb@timesgroup.com or call us at 022 - 66353963

Also Read

Top 5 banks' home loan interest rates

Home loan interest rates linked to repo rate

5 lesser-known factors that can push up your home loan interest rate and lower credit score

SBI links home loan interest rates to repo rate: Will borrowers gain?

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