Public sector banks Punjab National Bank (PNB) and Allahabad Bank on Tuesday launched retail loan products that are linked to the Reserve Bank of India’s (RBI) repo rate. Linking of loans with the repo rate will make them cheaper.
Under the Punjab National Bank’s PNB Advantage scheme, effective from 27 August, the interest rate will be 0.25% less than the existing rates based on MCLR (marginal cost of funds-based lending rate).
“The new rates will vary from 8.25% to 8.35% for housing loan borrowers and 8.65% for car loan borrowers," PNB said in a statement.
PNB’s existing customers can also apply for new RLLR (repo linked lending rates) with minimal charges.
Allahabad Bank
Allahabad Bank has benchmarked its loans up to Rs75 lakh with the EBLR (external benchmark linked rate) with repo rate one of its constituents.
The bank has priced its home loans up to Rs75 lakh and mudra loans sanctioned with effect from 1 September 2019 with reference to EBLR.
".....the borrowers shall have the option for either marginal cost of funds based lending rates (MCLR) linked loan or EBLR linked loan at mutually acceptable terms," Allahabad Bank said.
In May this year, Allahabad Bank had reduced the MCLR for a one-year loan to 8.60% from 8.65 %.
So far, the Reserve Bank of India has cut its repo rate four times in 2019.
Several banks, including the State Bank of India, have linked their lending rates with the repo rate. The central bank is reportedly considering making such a linkage compulsory for all banks.
The repo rate is the rate at which the RBI lends money to other banks.
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