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How SBI Repo-Rate Linked Home Loan Works? Research Team | Posted On Friday, October 04,2019, 12:47 PM

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How SBI Repo-Rate Linked Home Loan Works?



SBI the largest public sector lender in India dominates the home loan market in India. SBI which was the first bank in India to introduce repo-rate linked home loan, has now revised it. From October 1st, SBI has marginally increased interest rates for salaried and non-salaried borrowers.

SBI introduced the repo-rate linked home loan in July. SBI withdrew the scheme on September 16th, to make changes in the product and also the interest rates. According to RBI guidelines, banks must link all floating rate home loans, auto loans and any other retail loan to external benchmarks from October 1st 2019. Now, several banks offer repo-linked lending rates.

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How SBI Repo-Rate Linked Home Loan Works?

SBI has now got the new look repo-linked home loan. SBI has adopted repo rate as its external benchmark for MSMEs, retail customers and even housing firms.

What is SBI Repo-Rate Linked Home Loan?

In the past, floating home loan rate borrowers had just one option, Loan linked to MCLR (Marginal Cost of Funds based lending rates). Borrowers now enjoy home loans linked to repo rate.

To get SBI repo-rate linked home loan, you must have a minimum annual salary of Rs 6 Lakhs. Loan tenure is a maximum of 33 years. Under-construction projects have a maximum moratorium period of 2 years above the maximum tenure. This means the total loan tenure cannot exceed 35 years.

See Also: Mortgage Loan Calculator

Under SBI repo-rate linked home loan, you (borrower) must repay a minimum of 3% of the principal home loan amount each year in EMIs. Let’s say you avail a home loan of Rs 50 Lakhs. You must repay a minimum principal plus interest cost of at least Rs 1.5 Lakhs each year. There are additional costs like bank processing fees of 0.35% of loan amount + service tax. The minimum fees are Rs 2,000 and the maximum fees are Rs 10,000 + service taxes.

How SBI Repo-Rate Linked Home Loan Works?

SBI charges a spread of 265 basis points over and above the repo rate. The repo rate currently stands at 5.4%. The external benchmark-based lending rate stands at 5.4% + 2.65% = 8.05%. Till last September, new borrowers could get home loans from SBI at interest rates starting from 8.05%.

See Also: Home Loan EMI Calculator

SBI has changed the home loan rates for salaried borrowers. SBI now charges a premium of 15 bps for home loans up to Rs 30 Lakhs. The effective home loan rate moves up to 8.2%. SBI charges a spread of 40 bps for home loans between Rs 30 Lakhs and Rs 75 Lakhs. The effective home loan rate stands at 8.45%. For home loans above Rs 75 Lakhs, SBI has a premium of 50 bps. The effective home loan rate is 8.55%. SBI charges additional premium of 15 bps, for non-salaried borrowers.

SBI Home Loan Rates:

Loan Amount (Rs)

Interest Rate (%)

Loans up to Rs 30 Lakhs


Rs 30 Lakhs - Rs 75 Lakhs


Rs 75 Lakhs


SBI also charges a 10 bps premium on interest rates if LTV ratio is more than 80%. This is only for home loans up to Rs 30 Lakhs.

SBI also looks at your credit score before sanctioning the home loan. If credit score is below 600, you are a high-risk borrower. The bank charges an additional premium of 10 bps which makes home loan costly.

Why SBI Repo-Rate Linked Home Loan is Dangerous?

SBI insists that you have good income before sanctioning SBI repo-rate linked home loan. This is because borrowers must be prepared for volatility in both tenure and EMIs. Any change in repo rate would be applicable right from the first day of the following month.

If RBI cuts repo rates, then SBI home loan rates will fall down from the next month.

The problem is if RBI hikes the repo rate, SBI home loan rates would go up. So, you must be prepared for a rise in SBI home loan rates if RBI hikes the repo rate, due to economy related factors.

If the RBI hikes repo rate by 50 bps, you could find home loan EMIs going up by Rs 2,200. This is if you borrow Rs 75 Lakhs with tenure of 15 years. Use IndianMoney Home Loan Calculator to calculate your home loan EMIs. If RBI hikes repo rate by 100 bps, your home loan EMIs go up by Rs 4,500.

See Also: Home Loan Eligibility Calculator | Housing Loan Eligibility

Points to Note on SBI Repo-Rate Linked Home Loan:

  • You must have income of at least Rs 6 Lakhs to avail SBI repo-rate linked home loan.
  • The SBI repo-rate linked home loan targets borrowers in small cities.
  • Existing SBI borrowers can switch from MCLR-linked home loan to SBI repo-rate linked home loan by paying a one-time charge of 0.25% of loan amount. Calculate real savings, additional charges and operational issues, before making the switch.
  • Don’t switch to SBI repo-rate linked home loan if you are at the end of loan tenure.
  • Apply for SBI repo-rate linked home loan only if you can handle volatility in EMIs.

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