Top 10 banks' home loan interest rates

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

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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.

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.

Currently, the repo rate is at 5.15 per cent.


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 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 RLLR (%) Minimum Interest rate (%) Maximum Interest rate (%)
SBI Term Loan 7.05 7.20 7.55
Punjab National Bank 7.05 7.20 7.80
Bank of India 7.25 7.25 7.55
Central Bank of India 7.25 7.25 7.35
Canara Bank 7.30 7.35 9.30
SBI Max Gain 7.05 7.45 7.80
Indian Bank 7.20 7.55 7.85
J & K Bank 7.60 7.70 8.00
Union Bank of India 7.20 8.05 8.35
UCO Bank 8.05 8.05 8.15
*SBI as processing fees charges a premium of 10 bps for loans up to Rs 30 lakh if LTV ratio is >80% & <=90%.
*Bank of India charges 0.25 % of loan; Min. Rs. 1500/- Max. Rs. 20000/-
*Central Bank of India charges 0.50% subject to maximum Rs.20,000/-
*Indian Bank charges 0.230% on loan amount with a max. of Rs.20470/-

*Karur Vysya Bank charges Max Rs.7500/- +GST
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Indian Overseas Bank charges 0.50 % (max. ?.20,000/-)
*UCO Bank charges 0.5% of the loan amount, minimum Rs.1500/- & maximum Rs. 15000/-
*Canara Bank charges 0.50% subject to a maximum of Rs.10,000/-
*J&K Bank charges 0.15% to 0.25% of loan; Max. Rs 15 lakh
*Union Bank of India charges 0.50% of loan amount; Max.Rs 15, 000

*Sorted on minimum interest rate charged by the bank after adding risk premium

Here are 10 banks offering the lowest home loan rates for self-employed individuals
Bank RLLR (%) Minimum Interest rate (%) Maximum Interest rate (%)
Punjab National Bank 7.05 7.20 7.80
Bank of India 7.25 7.25 8.15
Central Bank of India 7.25 7.25 7.35
Canara Bank 7.30 7.35 9.30
SBI Term Loan 7.05 7.35 7.70
Indian Bank 7.20 7.60 7.90
SBI Max Gain 7.05 7.60 7.95
J & K Bank 7.60 7.70 8.00
Union Bank of India 7.20 8.05 8.35
UCO Bank 8.05 8.05 8.15
*SBI as processing fees charges a premium of 10 bps for loans up to Rs 30 lakh if LTV ratio is >80% & <=90%.
*Bank of India charges 0.25 % of loan; Min. Rs. 1500/- Max. Rs. 20000/-
*Central Bank of India charges 0.50% subject to maximum Rs.20,000/-
*Indian Bank charges 0.230% on loan amount with a max. of Rs.20470/-

*PNB charges 0.35 per cent as processing fees; minimum Rs 2,500 and maximum Rs 15,000
*Karur Vysya Bank charges Max Rs.7500/- +GST
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Indian Overseas Bank charges 0.50 % (max. ?.20,000/-)
*UCO Bank charges 0.5% of the loan amount, minimum Rs.1500/- & maximum Rs. 15000/-
*Canara Bank charges 0.50% (Min Rs.1500/- and Max. Rs.10,000/-)
*J&K Bank charges 0.15% to 0.25% of loan; Max. Rs 15 lakh
*Union Bank of India charges 0.50% of loan amount, Max.Rs 15, 000
* Sorted on minimum interest rate charged by the bank after adding risk premium

All data sourced from Economic Times Intelligence Group (ETIG)
Data as on April 3, 2020


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.
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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:
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  • 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 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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