State Bank of India (SBI) has withdrawn the repo-rate linked home loan scheme. The country’s largest bank said this on Twitter while responding to a customer’s query. SBI was the first bank in India to introduce a home loan scheme linked to Reserve Bank of India’s repo rate when it launched the new product in July. A Twitter user @yashuk22 wanted to know modalities and charges (if any) of converting his existing home loan to the repo-rate linked product. SBI responded: “Kindly note that RLLR based home loan scheme have been withdrawn. You can get the home loan migrated to MCLR based home loan.” RLLR refers to repo-linked lending rate.
The withdrawal of repo rate linked home loan scheme from SBI comes ahead of the RBI’s mandate to banks to link new floating rate home, auto loans with external benchmarks, from October 1.
An SBI official, on the condition of anonymity, said that those who have already borrowed under the repo rate linked scheme can continue under the scheme.
Earlier this week, SBI chairman Rajnish Kumar said the bank will be seeking clarifications from RBI whether it can offer long-term home loans with fixed rates in the beginning and convert the same into floating rates later.
RBI has mandated banks to shift all retail lending to floating rates that will be determined by external benchmarks like the repo rate.
SBI chairman said there is a lack of clarity on how it can go ahead with the fixed rate products, after the RBI’s new regulations on floating rates.
State-run IDBI Bank on Monday said the introduction of repo-linked retail loans would be effective from 1 October. The bank had earlier said that it would introduce repo rate-linked home and auto loans with effect from 10 September
Some analysts had said that linking loans to external benchmarks could lead to a lot of volatility in EMIs as and when the benchmark change. But the new regime will bring in a lot of transparency and enable faster transmission of RBI rate revisions to borrowers. (With Agency Inputs)