Banks are now applying a new system of linking loan with the benchmarks prescribed by RBI.

It will impact the loans by reducing the funding costs by 0.30% in some cases.

SBI is having spread at 2.65% above the Repo Rate, which is right now at 5.40% which comes to around 8.05%, this bring out the effective rate to be 8.20% vs 8.30% floating Intt rate under previous marginal cost of funds based lending rate (MCLR) for Salaried borrowers of Home Loan upto Rs. 30 lakhs. According to customer profile there could be some additional charges.

For Non Salaried borrowers SBI charges additional 0.15% interest and further 0.10% is charged to higher risk grade customers. On 4th Sep RBI has announced that bank have to link loans of Retail Customers, Micro Small and medium Enterprises with external intt rate benchmarks in order to boost Credit growth, consumption and investment in a move to drive growth of economy.

Risk premiums generally change according to customer’s credit assessment. The repo rate presently is set at 5.40% which is lowest in last 9 years.

It’s estimated that a 0.50% basis point rise in the repo rate could lead to a Rs 2,200 increase in monthly payments on a Rs 75 lakh loan payable over 15 years. A 1% climb could pinch the pocket by as much as Rs 4,500 a month.

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