According to the bank’s website, “ICICI Bank External Benchmark Lending Rate” (I-EBLR) is referred to the RBI policy repo rate with a mark-up higher than the repo rate. I-EBLR is 9.25% ppm with effect from 30th September, 2022.”
With regard to MCLR, the bank has increased the interest rate by 10 bps.
Source: ICICI Bank website
How it will affect the EMI outgo of the borrower
With an increase in the home loan interest rate (both EBLR and MCLR), your EMI will also increase. However, when you will get the hike depends on the benchmark to which your home loan is linked.
If you have taken a home loan before October 1, 2019, your home loan may be linked to MCLR. Generally, the MCLR home loan is linked to the one-year MCLR rate. Add the margin/spread to the MCLR rate of banks to work out the interest rate on home loan.
As per RBI guidelines, “The periodicity of reset under MCLR will be commensurate with the period/maturity of MCLR to which the loan is linked.” So, if your home loan is linked to one year MCLR, there will be a reset on a yearly basis.
In case of EBLR, the external benchmark lending rate is reviewed and reset once every three months. The increase in EBLR from today will be reflected in this month’s EMI. Therefore, any change in the external benchmark lending rate is passed on to the borrowers quicker than the MCLR.
Here is an example of how a 50 bps hike in ICICI Bank’s EBLR will affect the EMI outgo.
Suppose you have taken a home loan of Rs 30 lakh for a tenure of 20 years. The old interest rate on home loan is 8.75% and the new interest rate on home loan is 9.25%.
For the purpose of calculation, it is assumed that no credit risk premium is charged.
Can a borrower change the lending arrangement?
If a borrower has an MCLR linked home loan and wants to switch to a linked external benchmark, he/she can do so. The borrower has to inform the bank and administrative charges for the same.