Repo rate linked home loan: Here are the interest rates of home loans linked to repo rate

Interest rates on home loans offered by banks are now linked to an external benchmark. This is because the Reserve Bank of India (RBI) has asked all scheduled commercial banks (except regional rural banks), local area banks and small finance banks to link interest rates on retail and MSME loans to an external benchmark rate with effect from October 1, 2019.

RBI, in its circular, has directed banks to link their retail lending interest rates to any of the following external benchmarks:

• RBI's repo rate
• Government of India 3-months Treasury bill yield published by Financial Benchmarks India Pvt. Ltd. (FBIL)
• Government of India 6-months Treasury bill yield published by FBIL
• Any other benchmark market interest rate published by the FBIL

Most banks have chosen RBI's repo rate as their choice of external benchmark. The lending interest rate linked to repo rate is known as Repo Rate Linked Lending Rate (RLLR). RLLR is made up of RBI's repo rate plus spread or margin

RLLR = Repo rate + Margin charged by the bank.

The Central Bank reviews the repo rate in every two months.

The margin charged by a bank will remain same for all home loan takers, however, as per the RBI circular, banks are allowed to charge a risk premium from borrowers. Risk premium charged by the bank will depend on how risky your bank perceives you to be and will therefore vary from one borrower to another.

Here are home loan interest rates offered by top banks for salaried individuals

**Sorted on minimum interest rate charged by the bank after adding risk premium
*Bank of Maharashtra charges a processing fee of 0.25% of Loan amount Max Rs.25,000/-
*Bank of Baroda processing fees is 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Punjab & Sindh Bank offers a full waiver of processing and inspection charges
*Bank of India charges 0.25% of loan; minimum Rs 1,500 and maximum Rs 20,000
*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000 plus documentation charges 1,350/-
*Kotak Mahindra Bank charges a processing fee of max 2% + GST and any other statutory charges plus documentation charges up to Rs.10,000/-
*Union Bank of India charges a processing fee of 0.50% of loan amount, Max. Rs 15000
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium is charged based on risk profile)
*Canara Bank charges 0.50%; minimum Rs 1,500 and maximum of Rs.10,000/-
*ICICI Bank charges processing fees in the range of 0.50% and 2% subject to a minimum of Rs 1,500
*Axis Bank charges up to 1% of the loan amount subject to a minimum of Rs 10,000.
*IDBI Bank charges a processing fee of Min Rs.2,500/- Max Rs.15,000/- (Plus GST)
*HDFC Bank charges upto 0.50% of loan amount as processing fees or Rs 3,000 whichever sis higher, plus applicable taxes.
*Indian Bank charges 0.230 per cent on loan amount as processing fees with a maximum amount of Rs 20,470.
*SBI charges 0.40 per cent plus GST as processing fees. Minimum Rs 10,000 and Maximum Rs 30,000 plus GST. (Exception builder-tie up projects)
*Central Bank of India charges 0.50% processing fee subject to Max Rs 20,000
*J&K Bank charges 0.25% plus GST Minimum Rs 5,000; maximum Rs 25,000 (NIL PC for takeover loans)
*Indian Overseas Bank charges 0.50% as processing fees; max Rs 25,000
*UCO Bank charges 0.5% of the loan amount, minimum Rs 1500 & maximum Rs 15,000.
*Karur Vysya Bank charges minimum Rs 2,500 and maximum Rs 7,500 plus GST as processing fees
*South Indian Bank charges 0.40 per cent of loan amount
*Karnataka Bank charges 1 per cent with minimum Rs 500.
*Federal Bank charges 0.50% of the loan amount as processing fees; min Rs 10,000 and max Rs 45,000
*Dhanlaxmi Bank charges 1.25 per cent of loan amount
*DCB Bank charges up to 2% of the loan amount; minimum Rs 5,000
*Yes Bank charges 2% or Rs 10,000 whichever is higher

Here are home loan interest rates offered by top banks for self-employed individuals

**Sorted on minimum interest rate charged by the bank after adding risk premium
*Bank of Baroda processing fees is 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Bank of India charges 0.25% of loan; minimum Rs 1,500 and maximum Rs 20,000
*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000 plus documentation charges 1,350/-
*Kotak Mahindra Bank charges a processing fee of max 2% + GST and any other statutory charges plus documentation charges up to Rs.10,000/-
*Union Bank of India charges a processing fee of 0.50% of loan amount, Max. Rs 15000
*Bank of Maharashtra charges a processing fee of 0.25% of Loan amount Max Rs.25,000/-
*Punjab & Sindh Bank offers a full waiver of processing and inspection charges
*Canara Bank charges 0.50%; minimum Rs 1,500 and maximum of Rs.10,000/-
*HDFC Bank charges upto 0.50% of loan amount as processing fees or Rs 3,000 whichever sis higher, plus applicable taxes.
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium is charged based on risk profile)
*ICICI Bank charges processing fees in the range of 0.50% and 2% subject to a minimum of Rs 1,500
*IDBI Bank charges a processing fee of Min Rs.2,500/- Max Rs.15,000/- (Plus GST)
*Central Bank of India charges 0.50% processing fee subject to Max Rs 20,000
*Axis Bank charges up to 1% of the loan amount subject to a minimum of Rs 10,000.
*Indian Bank charges 0.230 per cent on loan amount as processing fees with a maximum amount of Rs 20,470.
*J&K Bank charges 0.25% plus GST Minimum Rs 5,000; maximum Rs 25,000 (NIL PC for takeover loans)
*Indian Overseas Bank charges 0.50% as processing fees; max Rs 25,000
*SBI charges 0.40 per cent plus GST as processing fees. Minimum Rs 10,000 and Maximum Rs 30,000 plus GST. (Exception builder-tie up projects)
*UCO Bank charges 0.5% of the loan amount, minimum Rs 1500 & maximum Rs 15,000.
*Karur Vysya Bank charges minimum Rs 2,500 and maximum Rs 7,500 plus GST as processing fees
*Karnataka Bank charges 1 per cent with minimum Rs 500.
*South Indian Bank charges 0.40 per cent of loan amount
*Federal Bank charges 0.50% of the loan amount as processing fees; min Rs 10,000 and max Rs 45,000
*DCB Bank charges up to 2% of the loan amount; minimum Rs 5,000
*Dhanlaxmi Bank charges 1.25 per cent of loan amount
*Yes Bank charges 2% or Rs 10,000 whichever is higher

All data sourced from Economic Times Intelligence Group (ETIG)
Data as on May 19, 2022

How will your EMI change in the new external benchmark linked lending rate regime?
To categorise the borrower on the basis of credit risk, some banks have internal risk assessment teams while others rely on credit scores to grade the risk of each borrower. As per RBI's circular, if your credit score undergoes substantial changes, the bank can revise the risk premium charged on the home loan.

Also Read: 5 lesser known things about credit score that can impact your home loan interest rates

As leading interest rates are linked to an external benchmark, banks are required to reset the interest rates at least once in three months. Therefore, any change in the external benchmark rate, will mandatorily have to be passed on to the borrower within three months of the change.

Also Read: How your EMI will be reset under external benchmark lending regime

Why RBI asked banks to link lending interest rates to an external benchmark
Under the previous marginal cost of lending rate (MCLR) regime, home loan borrowers and others often complained that banks did not pass on the benefit of a lower rate whenever RBI cut the key policy rates but often raised the interest rates quickly whenever policy rates were hiked. Linking the interest rates to an external benchmark is supposed to bring in more transparency and faster transmission of changes in key policy rates.

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