Interest Rate Cut: Following the RBI’s repo rate cut, four of the country’s largest banks have reduced their repo-based lending rates (RBLR) and repo benchmark rates. The new lending rates will reduce interest rates on long-term loans like home loans, thereby easing the EMI burden on borrowers.
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Interest Rate Cut: The Reserve Bank of India (RBI) cut the repo rate by 25 basis points on December 5, reducing it from 5.5% to 5.25%. Following the RBI’s repo rate cut, four of the country’s largest banks have reduced their repo-based lending rates (RBLR) and repo benchmark rates. The new lending rates will reduce interest rates on long-term loans like home loans, reducing the EMI burden on borrowers.
What is the repo rate?
The repo rate is the interest rate at which banks borrow money from the RBI. When banks face a cash shortage, they borrow against government bonds. The interest charged by the RBI on these loans is called the repo rate. If the RBI increases the repo rate, borrowing becomes more expensive for banks. If the RBI decreases it, banks receive cheaper loans.
1. Bank of Baroda
State-owned Bank of Baroda (BoB) announced a 0.25% reduction in the interest rate on repo-linked loans. The Baroda Repo Linked Lending Rate (BRLLR) will be reduced to 7.90% from the current 8.15%. The new rate will be effective from December 6.
2. Indian Bank
State-owned Indian Bank announced a reduction in its repo-linked benchmark lending rate following the RBI’s decision. The public sector bank stated that its repo-linked benchmark lending rate has been reduced from 8.2% to 7.95%. According to the bank, the new rates are effective from December 6th.
3. Bank of India
Following the RBI’s decision to cut the benchmark repo rate, Bank of India has also reduced its repo-based lending rate (RBLR) by 25 basis points to 8.1%. The state-owned bank stated in a stock exchange filing that the new rates are effective from December 5. The bank said the change is due to the repo rate cut announced by the RBI in its monetary policy today.
4. Karur Vysya Bank
Private sector Karur Vysya Bank has also provided relief to its customers. Following the RBI’s decision, the private bank has reduced its External Benchmark Rate (EBR-R) by 0.25%. The EBR-R has now come down from 8.80% to 8.55%. The new rates came into effect on December 6th.
What is RLLR?
The repo-linked lending rate (RLLR) is the interest rate at which banks lend to customers, which is based on the RBI’s repo rate. The term repo-linked lending rate refers to an interest rate linked to the repo rate. An RBI circular issued in October 2019 mandated that banks link their retail loans to external benchmark lending rates, known as e-BLR. As a result, the repo rate has become the benchmark for most banks.
How will your EMI be reduced?
If your loan is linked to the repo rate, or based on the RLLR, you will receive a direct benefit in your EMI. The bank will either reduce your EMI or shorten the loan term, or the tenure. However, if the bank is only reducing the tenure and you want a lower EMI, you can request it.
