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| Edited By: Anurag Shah |Source: Zee Business |Updated: Jun 18, 2019, 06:50 AM IST
Customers coming to us for a home loan will be offered both options, MCLR-linked home loan as well as repo rate-linked home loan, to choose from, says P K Gupta, managing director, State Bank of India (SBI). Gupta in an interview with Anurag Shah said, if you opt for the repo rate-linked home loan, you will see a direct impact whenever the repo rate changes. In case of repo rate-linked home loan, you must repay a minimum of 3% principal loan amount every year, he added. Edited excerpts:
Till date, we were receiving complaints saying why the banks don' t change their lending rates, whenever the policy rate changes. In response to it, the bank, earlier, linked some saving bank accounts with the repo rate. Now, we are bringing a new product under which home loan rate will be linked with the repo rate, this means that any change in the repo rate by the central bank would be passed on directly to the home loan rate. The facility will be offered only to the individual whose annual income is more than Rs 6 lakh. In addition, we are also providing an extended loan repayment period to our customers in which the customer will have to go for the repayment of up to 3% annually. He/she can repay it until 30 years and, if needed, this repayment period can be increased up to 35 years. So, after this, I do not think that customers will complain that why the policy rate changes are not visible in their home loan rates.
On the liability side, we have certain products in our balance sheet, which were not linked with the repo rate to date. Our CASA deposit rates and saving bank rates have been fixed to date. There is no interest rate in the current account. The fixed deposits usually come for a period of 1-2 years old, a timeline in which the bank rate remains constant. Secondly, the repo rate that is announced by the RBI doesn't bring huge borrowings to the bank. In fact, 1-2% of the balance sheet was linked with the repo rate. So if we want to offer some products especially on the asset side, that is linked with the repo rate, then it is necessary for the bank to link some products of the liability side with the repo rate. So, the savings rate is now linked with the repo rate to a considerable extent and that is why we will be able to transfer its benefit into the asset side through the home loan product.
Under the scheme, the existing product will continue as it is, this is an additional option. Thus, the customers have the choice where they can opt between the MCLR-linked loan or the repo rate-linked loan. So, the spread will be fixed on the date when the loan is provided to them under which the interest rate of the repo rate linked loan will change in accordance with the change in the repo rate. In the case of MCLR-linked loans, the interest rates will be changed in accordance with the change in MCLR.
No, but we have a different criterion under which an individual with a minimum income of Rs 6 lakh can be a part of the scheme. The criteria have been specified to minimum Rs 6 lakh because we think that any person who takes a loan under this scheme will have to understand the product clearly. The MCLR-linked loan provides an EMI-based repayment facility while the repayment structure is slightly different in this scheme and under this, the person will have to repay 3% of the principal loan amount annually, plus the interest. Initially, our existing customers will be offered an opportunity to shift his/her loan from the ongoing product to this product at a nominal charge.
Auto loan product is a short-term loan of 5-7 years and it is provided at a fixed rate, which is market practice. So, it is a fixed EMI-based product and I don't think that there is a need to link it with repo rate, because that is not a floating rate product but is a fixed-rate product.
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