New Delhi: After increasing the repo rate of the Reserve Bank, now the country's largest state-owned bank SBI has also increased the loan burden on its customers. The bank has increased the interest rates on external benchmark and repo rate-linked loans by 0.50 percent.
According to the bank's website, the interest rates on all types of loans linked to External Benchmark (EBLR) and Repo Rate (RLLR) including home and auto loans have increased from August 15.
This will have a direct impact on the EMI of the customers. Earlier in the month, the Reserve Bank had also increased the repo rate by 0.50 percent to control inflation. SBI has also increased its MCLR by 0.20 percent from August 15.
After the increase in MCLR, the interest rate for one year has gone up to 7.70 percent, which was earlier 7.50 percent. Similarly, the two-year MCLR has become 7.9 percent and the three-year 8 percent. Currently, most of the bank's loans are linked to the one-year MCLR rate.
Following the instructions of RBI, most banks including SBI have been linking the interest rates of their loans to external benchmark or repo interest rates since October 2019.
This is the reason that the decisions of the Monetary Policy Committee of RBI have a direct impact on the interest rates of loans. The 50 basis points increase in the repo rate in the past is also being directly linked to home loans and auto loans.
After the increase of 50 basis points of SBI, the interest rate i.e. EBLR for loans linked to external benchmark has increased to 8.05 percent, while the interest rate of loans linked to repo rate RLLR has gone up to 7.65 percent.
The bank also charges a credit risk premium on top of this. That is, if you are taking a home or auto loan, then the credit risk premium (CRP) will also be added to this interest rate.
All banks including SBI also add CRP to the interest rates of the loan according to the CIBIL score of the customers. If someone's CIBIL score is above 800, then no CRP will be added to it, but if the CIBIL score is less than that, CRP can be added from 10 basis points to 60 basis points. In this case, your effective interest rate can go up to 8.65 percent.
If your home loan of Rs 30 lakh is running for 20 years at 7.8 percent interest, then the current EMI will be Rs 24,721. In this way, you will pay Rs 29,33,060 as interest for the entire period. Now the bank has increased the interest rate by 50 basis points, so the effective interest rate will be 8.30 percent.
Now your EMI will come to Rs 25,656. That is, your expenditure will increase by Rs 935 every month and Rs 11,220 in a year. Looking at this interest rate, Rs 31,57,490 will have to be paid as interest on the new home loan for the entire tenure.