SBI has withdrawn its home loan product linked to repo rate which the leading state-run lender introduced in July this year. In a twitter reply to a user's query, the lender informed that the RLLR based home loan product stands withdrawn. And the bank has stopped any new lending under the scheme.

The State Bank of India was the first to launch repo-linked lending rate (RLLR) home loans and other banks followed suit to launch home loan schemes with interest rate linked to repo rate. With effect from September 1, 2019, SBI's RLLR stood at 7.65%. While the effective rate of interest on RLLR home loan would depend on a host of factors including risk profile of the borrower, quantum of the loan and the loan to value of the loan.

In MCLR-based loan products, interest rate on the loan is decided basis the marginal cost of funds for the bank and it is an internal benchmark. And as it failed to effectively transmit the monetary policy rate to the end consumers or borrowers, RBI has mandated all banks to peg their retail loan products carrying floating rate (home and auto loan) and SME loans to external benchmark with effect from October 1, 2019. Banks are free to choose any of the internal benchmark such as RBI repo rate, GOI 3-months T-bill yield, GOI 6-months T-Bill yield or any other benchmark interest rate published by the FBIL.

For now, the bank is lending loans pegged to only MCLR rate. Base rate-based lending is not allowed and borrowers with loans linked to base rate may either continue their lending regime on the base rate or transfer their loan to MCLR regime of the same bank.

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