During the period of Corona epidemic, the economy of countries around the world has slowed down. India’s economy has also suffered due to prolonged lockdown. Hence the Reserve Bank of India (RBI) has drastically reduced the repo rate to boost the economy between Kovid-19. After this decision of RBI, the home loan linked to the repo rate has also decreased. Now compared to this, the rates of MCLR (Marginal Cost of Funds based Lending Rate) linked loans have become expensive. It was only after the RBI reduced the repo rate that Public Sector Banks (PSB’s) offered a repo rate linked home lane.
What is repo rate and MCLR
For information, let us know that under this scheme, the interest rates (interest rate) of the home loan are linked to the repo rate instead of the MCLR. In such a situation, customers taking home in MCLR can redeem their benefits. Repo rate is the rate at which the Reserve Bank gives loans to many commercial banks. RBI pays interest to banks on this amount. The rate at which the Reserve Bank of India pays interest to banks on this amount is called reverse repo rate.
The RBI has cut the repo rate and reverse repa rate by 0.40 per cent in June 2020. After this, the repo rate has come down to 4 percent. The reverse repo rate is at the level of 3.35 percent. Earlier in March, the repo rate was cut by 0.75 percent. The next monetary policy review meeting of the RBI is scheduled to take place in the month of August.
Understand how customers taking home loans can increase
For example, suppose a person has taken MCLR linked home loan bank at the rate of 8.2 percent. There is a balance of Rs 25 lakh in 180 months on this loan. If there is no change in this interest rate, then the total interest will be around 18.52 lakh rupees. Its EMI will be around Rs 24,180.
On the other hand, if it is converted into a repo linked loan at an interest rate of 7.1 per cent, then the total interest for these 180 months will be around Rs 15.69 lakh. In this way, there can be a savings of Rs 2.83 lakh on a repo linked loan. Thus, customers will have to pay EMI of Rs 1,570 less every month, which will be Rs 22,610.
In addition, if the borrower continues to deposit EMI of Rs 24,180 per month on the loan that has been refinanced, the loan period will be reduced to only 161 months. This can save an additional Rs 1.92 lakh on interest.
This is how customers can earn
After the continuous reduction in the repo rate by RBI, customers are also taking profits through banks. After the RBI cut, many banks have reduced loan rates. With this, the loan has also become cheaper. In some banks, the rate of home loan has come down to more than 7 percent. The country’s largest bank SBI is also offering home loans at less than 7 percent. Let us know which other banks are there including SBI, from where a home loan can be taken at an interest rate of less than 7% per annum.