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Last Updated : Oct 01, 2019 09:52 PM IST | Source:

SBI to adopt repo rate as external benchmark from today

Loans from SBI are expected to turn cheaper from this week by 30 basis points

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State Bank of India (SBI) is set to adopt the repo rate as its external benchmark for all floating rate loans from October 1. The bank said on September 23 that it would adopt a repo rate-linked mechanism for faster transmission of policy rates, as per Reserve Bank of India's mandate.


In a September 4 circular, RBI said, "it is mandatory for banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs (micro, small and medium enterprises) to an external benchmark, effective October 1."

Post this, loans are expected to become cheaper from this week by 30 basis points (100=1 percentage point) in some cases, reports The Economic Times.

SBI will charge a spread of 265 bps (bps) above RBI's repo rate, which currently stands at 5.4 percent. This will bring its external benchmark-based lending rate to 8.05 percent.

For salaried class borrowers, the effective home loan rate will change. SBI will charge a premium of 15 bps on loans up to Rs 30 lakh, taking the effective home loan rate to 8.20 percent. The interest on loans between Rs 30 lakh to Rs 75 lakh will now stand at 8.45 percent after levying a premium of 40 bps.

Similarly, all loans drawn above Rs 75 lakh will attract a premium of 50 bps, bringing the effective lending rate to 8.55 percent. Apart from that, a five bps reduction in the rate will be offered to woman borrowers on home loans.

Also read: RBI's new loan pricing norm may put banks in a fix

For non-salaried borrowers, SBI said a premium of 15 bps will be added to the card rate. If the ratio of the loan to value of the asset purchased is between 80 and 90 percent, a premium of 10 bps will be added to the card rate for loans up to Rs 30 lakh.

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First Published on Oct 1, 2019 11:18 am
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