SBI home loan EMIs will rise from next month as the bank raises interest rates. Know the details

SBI EBLR hike: India’s largest public sector bank, the State Bank of India, or SBI, has announced that it has raised its external benchmark lending rate (EBLR) on home loans by 50 basis points to 7, 05% and that the repo-linked lending rate (RLLR) would be revised to 6.65% plus the CRP. According to the official SBI website, the new tariffs will come into effect from June 1, which is next week. The rise in the SBI’s EBLR comes close to the Reserve Bank of India’s decision to raise repo rates by 40 basis points at an off-cycle monetary policy committee meeting earlier this month.

New SBI rate hikes, according to the lender’s website

EBR (effective June 1) is 7.05%; EBLR = 7.05% + CRP

The RLLR (effective June 1) would be 6.65% + CRP.

Previously, the SBI had an EBLR rate of 6.65%, while the RLLR was 6.25%.

According to SBI, “External Benchmark Lending Rate (EBLR) = External Benchmark Rate (EBR) + Credit Risk Premium (CRP)”. It is customary for banks to add a credit risk premium (CRP) over EBLR and RLLR while granting loans to borrowers, including home loans and car loans.

What is the External Benchmark Lending Rate or EBLR?

According to the SBI website, “EBLR stands for External Benchmark Lending Rate. SBI has adopted the Repo Rate as an external benchmark to link its variable rate mortgages from 01.10.2019. The EBLR rate fluctuates with the Reserve Bank‘s benchmark interest rate and remains unchanged outside of it.

EBLR is a new interest rate model, whereby variable rate mortgages will have interest rates tied to the external benchmark. On the other hand, the Repo Linked Loan Rate (RLLR) is based on and linked to the RBI repo rate, which is adjusted regularly. The RLLR is adjusted once the repo rate is raised or lowered. This varies from bank to bank.

Can existing borrowers take advantage of the new interest rate?

“Yes, variable rate mortgage borrowers with regular account driving on the changeover date can be migrated to the new interest rate structure,” the SBI website says.

The SBI website states that the one-time switch fee for migrating to the new interest rates is Rs 1000. In addition to this, relevant taxes are applicable.

SBI MCLR rate hike

The State Bank of India had also raised its marginal cost of lending rate (MCLR) earlier this month by 10 basis points across all mandates. The new tariffs came into effect from May 15, Sunday. This is the second rate hike by the public lender in the past month. The MCLR is the minimum interest rate that banks are allowed to lend to their customers.

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