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    Home loan rates: Here are top 10 banks' home loan interest rates in 2022

    Synopsis

    These 10 banks are offering the lowest home loan interest rates for salaried individuals.

    house-loan-gettyGetty Images
    As per RBI's circular, banks are required to reset the home loan interest rates linked to the external benchmark at least once in three months.
    The Reserve Bank of India (RBI) has directed all scheduled commercial banks (except regional rural banks), local area banks and small finance banks to link interest rates of all retail loans, including home loans, offered by them, to an external benchmark with effect from October 1, 2019.

    Complying with this directive, most commercial banks have opted for the RBI's repo rate as the external benchmark to which all floating rate loans are linked. Interest rates linked to the repo rate is called repo rate linked lending rate or RLLR. The RLLR comprises of repo rate plus bank's spread or margin. As per RBI, banks are allowed to charge a spread or margin plus risk premium over and above the external benchmark rate from borrowers.
    Do keep in mind that the repo rate is subject to revision by the RBI in every two months.

    While the spread charged by a particular bank remains same for all borrowers, the risk premium will differ from one individual to another. For instance, it is usually seen that banks charge a higher risk premium from self-employed borrowers as compared to salaried individuals.

    Here are 10 banks offering the lowest home loan interest rates for salaried individuals
    BANK NAMERLLRMinimum Interest rate (%)**Maximum Interest rate
    SBI Max Gain6.656.657.15
    Bank of Maharashtra7.206.808.20
    Bank of Baroda6.906.908.25
    Union Bank of India7.206.908.60
    Punjab & Sind Bank6.606.907.75
    Bank of India7.256.908.60
    Punjab National Bank6.906.908.10
    Kotak Mahindra Bank6.557.007.50
    Axis Bank6.757.007.30
    Canara Bank7.307.059.25

    **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 amount; minimum Rs 1,500 and maximum Rs 20,000
    * PNB charges 0.35% (min Rs 2,500 and maximum Rs 15,000) plus documentation charges Rs 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 (additional premium charged based on risk profile)
    * Canara Bank charges 0.50% as processing fees - minimum Rs 1,500 and and maximum Rs 10,000.
    *ICICI Bank charges processing fees in the range of 0.50% and 2% subject to a minimum of Rs 1,500

    Here are 10 banks offering the lowest home loan rates for self-employed individuals
    BANK NAMERLLRMinimum Interest rate (%)**Maximum Interest rate
    SBI Max Gain6.656.857.35
    Bank of Baroda6.906.908.25
    Union Bank of India7.206.908.60
    Bank of India7.256.908.75
    Punjab National Bank6.907.008.20
    Bank of Maharashtra7.207.058.70
    Punjab & Sind Bank6.607.058.00
    Kotak Mahindra Bank6.557.057.60
    Axis Bank6.757.057.35
    Indian Overseas Bank6.857.057.30

    ** 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 amount as processing fees; Min Rs 1,500 and Max Rs 20,000/-
    * PNB charges 0.35% (min Rs 2,500 and maximum Rs 15,000) plus documentation charges Rs 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% as processing fees - minimum Rs 1,500 and maximum Rs 10,000.

    *HDFC Bank charges up to 0.50% of the loan amount or Rs 3,000 whichever is higher, plus taxes
    *IDFC First Bank charges up to Rs 10,000 (additional premium charged based on risk profile)

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


    Why RBI took this decision
    The central bank took the decision to link the interest rate of home loans and other retail loans to an external benchmark for greater transparency and faster transmission of the policy rate changes.

    Previously, under the MCLR (marginal cost based lending rate) regime, whenever RBI cut the repo rate, banks did not pass on the benefits to customers swiftly. On the other hand, when RBI hiked the repo rate, banks swiftly raised interest rates on loans.

    In its circular mandating banks to link loans to an external benchmark, banks can choose from any of the following benchmarks:

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

    When can borrowers' EMI change?
    As per RBI's circular, banks are required to reset the home loan interest rates linked to the external benchmark at least once in three months. This would imply that any change in the external benchmark rate would have to be mandatorily passed on to the customer within three months of the change in the external benchmark.

    Also Read: How your EMI's will reset for loans linked to external benchmark

    Another thing that can affect the interest rate on your loan charged by the bank is your risk grade. Some banks have internal risk assessment teams who grade the risk category of the individual. Some banks also rely on credit score reports generated by credit bureaus. Therefore, while taking a loan it is important that you have a good credit score for a bank to charge lower risk premium from you.

    Also, if there is a change in the spread i.e. the margin charged by the bank over and above the external benchmark rate, then it would impact the interest rate charged on the loan taken by you.

    Also Read: 5 lesser known facts that can push up your home loan interest rate

    Do keep in mind that if your credit-risk assessment undergoes substantial changes during the tenure of the loan, then your bank can revise the risk premium charged.

    For any queries or changes, please write to us on etigdb@timesgroup.com or call us at 022 - 66353963

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