State Bank of India hiked its external benchmark lending rate (ELBR) and repo-linked lending rate (RLLR) by 50 basis points or half a percent. The state-owned lender’s hike mirrors the Reserve Bank of India’s move of raising repo rates by 50 basis. The central bank’s repo rate, at which it lends to commercial banks, has increased to 5.9% after the hike.
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The new SBI EBLR stands at 8.55% and RLLR stands at 8.15%—the rates will become effective from October 1, 2022. SBI defines EBLR as 8.55%+ Credit Risk Premium (CRP)+BSP and RLLR as 8.15%+CRP, as per the lender’s website. It is customary for banks to add CRP over the EBLR and RLLR while providing any loans to borrowers, including home loans and car loans.
From 2019, all banks including SBI have migrated to interest rates linked to the external benchmark such as RBI’s repo rate or Treasury Bills Yield. SBI gives home loans on a “floating rate of interest” which is pegged either to ELBR or MCLR interest rate regime.
The changes will lead to increased EMIs for existing and future borrowers as the rate hike is implemented. All loans linked to SBI ELBR will become expensive.
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So, the minimum interest rate on home loans, which generally bear the least interest rates among all types of loans, will now be 8.55% for SBI borrowers.
An EMI on a home loan of Rs 50,00,000 amount for a repayment period of 25 years on the earlier 8.05% comes to Rs 38,757. However, the new interest rate of 8.55% increases the EMI amount to Rs 40,430, according to the SBI Home loan calculator.
The Credit Risk Premium depends on various factors and differs from borrower o borrower, therefore it cannot be considered for the sake of calculation.
Not just SBI all major lenders such as ICICI Bank and HDFC have hiked interest rates after RBI’s hike. So borrowers across the spectrum can anticipate an increase in their loan EMIs.
