MUMBAI: State Bank of India has decided to introduce home loans linked to the repo rate.
Repo or the policy rate, at which Reserve Bank of India lends to banks, was earlier linked to the savings deposits and cash credit advances above Rs 1 lakh by the bank.
That was a first after the RBI asked banks to move to an external benchmark for advances so as to pass on the rate cuts effectively to borrowers.
“We will introduce repo-linked home loans from July 1,” SBI said in a late evening statement.
SBI said it is passing on the 25 basis points, or 0.25 per cent, cut in repo rate by the RBI on Thursday in its entirety to the cash credit/over draft customers with limits above Rs 1 lakh, making the effective Repo-Linked Lending Rate 8 per cent.
“The benefit of reduction in the repo rate by 25 bps has been passed in its entirety to our CC/OD customers (limits above Rs 1 lakh), with effect from July 1,” SBI said.
The RBI monetary policy committee had unanimously decided to reduced repo rate by 25 basis points to 5.75 per cent in the second bi-monthly policy Thursday, taking it down to a nine-year low, citing sagging growth and to cushion the rising headwinds to the economy. It was the third consecutive repo rate cut by the RBI, with cumulative reduction of 75 basis points in 2019, so far.
The repo-linked home loan products, the State Bank of India said, would be introduced from July 1. SBI had earlier said it was difficult to move to external benchmark for EMI-based loans.
In March, SBI had linked all cash credit accounts and over drafts with limits above Rs 1 lakh to the repo rate plus a spread of 2.25 per cent.
For above Rs 1 lakh, it had set its savings deposit rates to 2.75 per cent below the repo rate.
(With inputs from PTI)