InvestorQ : What does State Bank’s repo rate linked home loan mean? Does it benefit home loan borrowers like me?
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What does State Bank’s repo rate linked home loan mean? Does it benefit home loan borrowers like me?

Answer
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Rashi Mehra answered.
1 year ago


On Friday the 07th of June, SBI announced that it would offer home loans linked to the repo rate from July 1, 2019. This will only apply to fresh loans and not to existing loans that are already sanctioned. The RBI has always pointed out that the banks don’t pass on the rate cuts to the borrowers when the RBI cuts the repo rates in the monetary policy. This defeats the purpose of cutting rates. This move by SBI will address that issue in a larger way. Repo rate is the interest rate at which commercial banks borrow short-term funds from the Reserve Bank of India (RBI). The announcement from SBI has come just 2 days after the RBI cut the repo rates by 25 basis points (0.25%)

It will be certainly beneficial for you as a home loan borrower because if you are an SBI home loan borrower then your monthly EMI will automatically goes down. Normally, banks give the option to borrowers whether they want to reduce the EMI or they want to reduce the tenure of the loan and so it will depend on your choice. Now that SBI has done it, other banks will also follow suit shortly. It means that home loan payouts will go down automatically with cut in repo rates. This makes the whole process transparent. This move by the State Bank is clearly a move in response to the statement by the RBI calling upon banks to transmit the rate cuts immediately to the borrowers.