Top 10 banks' home loan interest rates

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.

Synopsis

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

By ET Online

Last Updated: Aug 27, 2020, 01:31 PM IST

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, 2019.

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.

Do keep in mind that the repo rate is subject to revision by the RBI in every two months.

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 NAME	RLLR	Minimum home loan interest rate (%)	Maximum home loan interest rate (%)
Union Bank of India	6.80	6.70	7.15
Bank of India	6.85	6.85	7.15
Central Bank of India	6.85	6.85	7.30
Canara Bank	6.90	6.90	8.90
Punjab & Sind Bank	6.90	6.90	7.25
ICICI Bank	6.95	6.95	7.95
SBI Max Gain	6.65	7.00	7.35
IDFC First Bank	7.00	7.00	8.00
Punjab National Bank	6.65	7.00	7.60
Bank of Baroda	7.00	7.00	8.10

**Sorted on minimum interest rate charged by the bank after adding risk premium
*Union Bank of India charges a processing fee of 0.50% of loan amount, max.Rs.15000
*Bank of India charges 0.25 % of loan; Min. Rs. 1500/- Max. Rs. 20000/-
*Central Bank of India charges 0.50% subject to maximum Rs.20,000/-
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Canara Bank charges 0.50% subject to a maximum of Rs.10,000/-
*Punjab & Sindh Bank is offering full waiver of processing &inspection charges
*ICICI Bank charges 0.50% of loan amount plus applicable taxes
*SBI as processing fees charges 0.40% plus GST minimum Rs 10,000 and Maximum Rs 30,000 + GST (Exception: Builder Tie-up projects)
*IDFC First Bank charges up to Rs 10,000 as processing fees (additional premium is charged based on risk profile)
*Processing fees for PNB is 0.35%; min Rs 2,500 and max Rs 15,000 plus documentation charges Rs 1,350/-

Here are 10 banks offering the lowest home loan rates for self-employed individuals

BANK NAME	RLLR	Minimum home loan interest rate (%)	Maximum home loan interest rate (%)
Union Bank of India	6.80	6.85	7.15
Bank of India	6.85	6.85	7.75
Central Bank of India	6.85	6.85	7.30
Canara Bank	6.90	6.90	8.90
Punjab & Sind Bank	6.90	6.90	7.25
IDFC First Bank	7.00	7.00	8.00
Punjab National Bank	6.65	7.00	7.60
Bank of Baroda	7.00	7.00	8.10
SBI Max Gain	6.65	7.15	7.50
UCO Bank	6.90	7.15	7.25

** Sorted on minimum interest rate charged by the bank after adding risk premium
*Union Bank of India charges a processing fee of 0.50% of loan amount, max.Rs.15000
*Bank of India charges 0.25 % of loan; Min. Rs. 1500/- Max. Rs. 20000/-
*Central Bank of India charges 0.50% subject to maximum Rs.20,000/-
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Canara Bank charges 0.50% (Min Rs.1500/- and Max. Rs.10,000/-)
*Punjab & Sindh Bank offers full waiver of processing & inspection charges
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium charged based on risk profile)
*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000 plus documentation charges Rs 1,350/-
*SBI Max Gain: 0.40% + GST Min Rs.10,000 and Max Rs.30,000 + GST.(Exception Builder tie-up Projects)
*UCO Bank charges 0.5% of the loan amount, minimum Rs.1500/- & maximum Rs. 15000/-

All data sourced from Economic Times Intelligence Group (ETIG)
Data as on August 27, 2020

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, if there is a change in the spread i.e. the margin charged by the bank over and above the external benchmark rate, then it would impact the interest rate charged on the loan taken by 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

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