SBI, other banks raise interest: Know how much your loan is likely to increase

The repo rate at which the central bank lends to other banks has been increased to 5.9 percent. It’s not just the SBI which has increased the interest rates after RBI’s hike. Major lenders like ICICI Bank and HDFC have also done the same

FP Trending October 03, 2022 19:54:26 IST
SBI, other banks raise interest: Know how much your loan is likely to increase

Representational image. PTI

The State Bank of India (SBI) has raised its external benchmark lending rate (ELBR) and repo-linked lending rate (RLLR) by 50 basis points or half a percent. The hike comes after the Reserve Bank of India’s (RBI) move to raise repo rates by 50 basis points.

The repo rate at which the central bank lends to other banks has been increased to 5.9 percent. It’s not just the SBI which has increased the interest rates after RBI’s hike. Major lenders like ICICI Bank and HDFC have also done the same. The new SBI EBLR is 8.55 percent and RLLR stands at 8.15 percent. The rates came into effect from 1 October, 2022.

EBLR is defined by SBI as 8.55 percent Credit Risk Premium (CRP) + BSP. The state-owned lender has defined RLLR as 8.15 percent + CRP. For the banks, it is customary to add CRP over the EBLR and RLLR while giving any loans to the borrowers, including home loans and car loans.

The Credit Risk Premium is dependent on various factors and differs from borrower to borrower. Since 2019, all banks including SBI have migrated to interest rates linked to the external benchmark like RBI’s repo rate or Treasury Bills Yield. The SBI provides home loans on a “floating rate of interest” which is fixed either to ELBR or MCLR interest rate regime.

The changes are going to increase EMIs for current and future borrowers as the rate hike comes into play. All ELBR linked loans will become more expensive. The earlier 8.05 percent interest rate meant that an EMI on a home loan of Rs 50 lakh for a repayment period of 25 years would be Rs 38,757. The new 8.55 percent interest rate raises the EMI to Rs 40,430 as per the SBI Home loan calculator.

The Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das decided to hike the repo rate based on their assessment of the macroeconomic situation. As a consequence, the standing deposit facility (SDF) rate was adjusted to 5.65 percent, and the marginal standing facility (MSF) rate and the bank rate to 6.15 percent.

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