Home loans may get cheaper

Recently the largest lender of the country State Bank of India (SBI) has cut the lending rates linked to the central bank’s repo rate by 25 basis points (bps) to 7.8%, which has lowered the borrowing costs for small businesses and hoamebuyers.

As per SBI, the new rates will be applicable from 1st January.

“New homebuyers will get loans at an interest rate starting from 7.90%. (previously at 8.15%),” SBI said in a statement. This rate of 7.9% factors in a premium of 10 basis points over the external benchmark-based rate of 7.8%.

A source said that the 7.9% rate will be applicable only to women borrowers for whom there is a concession of 5 basis points; other borrowers would be required to pay at least 7.95%.

When in September SBI announced the details of its repo-linked home loan scheme it said that it would charge a spread of 265 bps over the Reserve Bank of India’s (RBI) repo rate. Between February and October, The central bank also lowered its repo rate by 135 bps in five consecutive rate cuts . However, In december, RBI’s monetary policy committee decided to wait for past policy actions undertaken by the government and the central bank to play out. RBI’s repo rate now stands at 5.15%.

On 9 December, SBI announced a 10 bps reduction in its one-year marginal cost of funds-based lending rate (MCLR) to 7.9%. It was the eighth consecutive cut in MCLR in FY20. Banks used to follow MCLR norms for setting rates for retail loans before the advent of external benchmarking.