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POSTED BY ON October 16, 2012 1:51 pm COMMENTS (2)
Hi,
I took home loan -45 laks from SBI two months ago with interest rate 10.40% under floating scheme. Last month there is decrease on base points by RBI. When i contacted SBI about this decrease, they confirmed this change will reflect automatically into my interest calculation and also it is very clearly mentioned in my loan sanction letter,this will happen into my calculation in future also, whenever RBI announce change in Basepoints.
I can find the find following statement in my loan sanction letter ¨Applicable interest rate = BASE point(whenver announced by RBI)+0.4 %¨. This will come to effect on the very first day when RBI announce.
I gone through some blogs posted in this site. Many people are discussing about the switching of the existing SBI home loans to newer interest rate by paying convertion fees.
Really it is confusing me. Could you please clarify.
Thanks,
Saravana
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Hi Saravana,
I can really appreciate your confusion. To start explaining, i would first like you to go through http://insight.banyanfa.com/fixed-or-floating-interest-loans/ which would give you the details on the two classifications of loans.
Floating interest loans are ideally supposed to increase / decrease with RBI’s interest rate. However, they are pegged to a bank’s base rate and not RBI’s base rate. If RBI decreases its base rate, doesn’t always mean that the respective bank would also automatically reduce its base rate. The base rate reduction depends upon multiple factors such as competition, bank’s own deposit / loan ratio, etc.
Regards
Banyan Financial Advisors
I think still it depend on the bank what they want to do.For example private banks do not reduce rate though RBI reduces it.
SBI’s rate is only applicable for new customers and not for old. Please check with bank once again.