RBI has directed all scheduled commercial banks and small finance banks to link interest rates of home loans

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, 2019.

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.

Do keep in mind that the repo rate is subject to revision by the RBI in every two months.

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 name RLLR Minimum home loan interest rate (%) Maximum home loan interest rate (%)
Union Bank of India 6.80 6.70 7.15
Bank of India 6.85 6.85 7.15
Central Bank of India 6.85 6.85 7.30
Canara Bank 6.90 6.90 8.90
Punjab & Sind Bank 6.90 6.90 7.25
ICICI Bank 6.95 6.95 7.95
SBI Term Loan 6.65 6.95 7.45
HDFC Bank 6.95 6.95 7.85
Bank of Baroda 7.00 7.00 8.35
IDFC First Bank 7.00 7.00 8.00
**Sorted on minimum interest rate charged by the bank after adding risk premium
*Union Bank of India charges a processing fee of 0.50% of loan amount, max.Rs.15000
*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/-
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Canara Bank charges 0.50% subject to a maximum of Rs.10,000/-
*Punjab & Sindh Bank is offering full waiver of processing &inspection charges
*ICICI Bank charges 0.50% of loan amount plus applicable taxes
*SBI as processing fees charges 0.40% plus GST minimum Rs 10,000 and Maximum Rs 30,000 + GST (Exception: Builder Tie-up projects)
*IDFC First Bank charges up to Rs 10,000 as processing fees (additional premium is charged based on risk profile)

Here are 10 banks offering the lowest home loan rates for self-employed individuals
Bank name RLLR Minimum home loan interest rate (%) Maximum home loan interest rate (%)
Bank of India 6.85 6.85 7.75
Central Bank of India 6.85 6.85 7.30
Union Bank of India 6.80 6.85 7.15
Canara Bank 6.90 6.90 8.90
Punjab & Sind Bank 6.90 6.90 7.25
HDFC Bank 6.95 6.95 7.85
Bank of Baroda 7.00 7.00 8.35
IDFC First Bank 7.00 7.00 8.00
Indian Overseas Bank 6.85 7.05 7.30
SBI Term Loan 6.65 7.10 7.60
** Sorted on minimum interest rate charged by the bank after adding risk premium
*Union Bank of India charges a processing fee of 0.50% of loan amount, max.Rs.15000
*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/-
*Bank of Baroda charges 0.25% to 0.50% of loan; Min. Rs.8500/- Max. Rs.25000/-
*Canara Bank charges 0.50% (Min Rs.1500/- and Max. Rs.10,000/-)
*Punjab & Sindh Bank offers full waiver of processing & inspection charges
*IDFC First Bank charges up to Rs 10,000 as processing fees (Additional premium charged based on risk profile)
*UCO Bank charges 0.5% of the loan amount, minimum Rs.1500/- & maximum Rs. 15000/-
*Processing fees for Indian Overseas Bank is 0.50 % (max. Rs 25,000/-)
*Processing fees for SBI Term Loan is 0.40% + GST Min Rs.10,000 and Max Rs.30,000 + GST.(Exception Buildertie-up Projects)

Input All: data sourced from Economic Times Intelligence Group (ETIG)
Data as on September 19, 2020.