To comply with this rule, most commercial banks have opted to link their floating rate loans to the RBI’s repo rate as an external benchmark. Repo Rate Linked Lending Rate, or RLLR, is the name of the interest rates linked to the repo rate. Repo rate plus bank spread or margin makes up RLLR. According to RBI, banks are allowed to charge spread, margin and risk premium from borrowers in addition to the external benchmark rate.
Note that RBI can revise the repo rate every two months. The spread that a specific bank has is the same for all borrowers, but the risk premium varies from person to person. For example, it has often been observed that banks charge higher risk premiums from self-employed borrowers as compared to salaried borrowers.
These 10 banks are giving home loans at the lowest interest rates
Salaried Home Loan Interest Rate
| Name of bank | rllr | Minimum interest rate% | Maximum interest rate% |
| Punjab National Bank | 7.50 | 6.80 | 8.05 |
| bank of india | 7.25 | 6.90 | 8.60 |
| axis Bank | 7.00 | 7.00 | 7.30 |
| Canara Bank | 7.30 | 7.05 | 9.25 |
| Indian Overseas Bank | 6.85 | 7.05 | 7.30 |
| Karur Vysya Bank | 7.45 | 7.15 | 9.35 |
| Bank Of Maharashtra | 7.70 | 7.30 | 8.70 |
| Union Bank of India | 7.70 | 7.40 | 9.10 |
| Punjab And Sind Bank | 7.50 | 7.40 | 8.25 |
| Indian Bank | 7.70 | 7.40 | 8.15 |
All data is taken from Economic Times Intelligence Group (ETIG).
Data as on 23rd June 2022
Self Employed Home Loan Interest Rate
| Name of bank | rllr | Minimum interest rate% |
Maximum interest rate% |
| Punjab National Bank | 7.50 | 7.00 | 8.15 |
| bank of india | 7.25 | 6.90 | 8.75 |
| axis Bank | 7.00 | 7.05 | 7.35 |
| Indian Overseas Bank | 6.85 | 7.05 | 7.30 |
| Canara Bank | 7.30 | 7.10 | 9.30 |
| Karur Vysya Bank | 7.45 | 7.15 | 9.35 |
| Union Bank of India | 7.70 | 7.40 | 9.10 |
| UCO Bank | 7.80 | 7.40 | 7.60 |
| Bank Of Baroda | 7.45 | 7.45 | 8.80 |
| Bank Of Maharashtra | 7.70 | 7.55 | 9.20 |
All data is taken from Economic Times Intelligence Group (ETIG).
Data as on 23rd June 2022
When can the EMI of the borrowers be changed?
As per the RBI circular, banks should reset home loan interest rates tied to external benchmarks at least every three months. Consequently, any change in the external benchmark rate would need to be legally notified to the consumer within three months of the change.
Your risk rating is another factor that can affect the interest rate a bank will charge you on a loan. Some banks employ internal risk assessment teams to rank each customer’s level of risk. Credit score reports prepared by credit bureaus are also used by some banks. As a result, having a strong credit score is important if you want the bank to charge you a low-risk premium when you apply for a loan.
Additionally, the interest rate paid on the loan taken by you will fluctuate if there is a change in the spread, which is a margin over and above the external benchmark rate set by the bank.
Important FAQs to note on Home Loan as per ICICI Bank.
1. What is Policy Repo Rate?
“Repo Rate” or “Policy Repo Rate” means the rate of interest published by RBI from time to time on the RBI website as Repo Rate or Policy Repo Rate.
2. How will the benchmark reset affect the current interest rate (ROI) in case the repo rate rises or falls?
On the reset date, if the applicable repo rate is increased, the effective ROI of the loan account will increase which in turn will affect the EMI/tenure of the loan. In case of reduction in the repo rate, the ROI will be reduced which in turn will affect the tenure of the loan.
Example: Consider a scenario where the first disbursement of loan under RBI repo linked benchmark rate is done on October 15, 2019, with RBI repo rate of 5.15% per annum (as on October 14, 2019) with a spread/margin of 400 it occurs. Aadhaar Points (bps). In such case the effective rate will be 9.15% p.a.
In the above scenario, the effective rate of 9.15% p.a. will remain constant till the next reset date i.e. January 01, 2020. As on January 01, 2020, the loans will be reset with the RBI repo rate applicable as on December 31, 2019. ,
3. Is the full tenure fixed rate loan linked to an external benchmark?
Full term fixed rate loans are not linked to any benchmark. The rate is fixed for the tenure of the loan.
4. What is meant by reset of floating rate loan linked to external benchmark?
As per the Master Direction – RBI (Interest Rate on Advances) Directions, 2016, Floating Rate Loan means a loan on which the rate of interest does not remain constant during the tenure of the loan. Therefore, in case of floating interest rate loans, the benchmark rate of the loan gets revised at a pre-determined frequency. As per RBI guidelines, floating interest rate loans linked to external benchmarks should be reset at least once in three months.
4. What is the minimum part prepayment amount that I need to pay while availing the home loan?
The minimum part prepayment amount should be equal to 1 EMI.