Along with this, the bank has increased the Marginal Cost of Funds Lending Rate (MCLR) by 0.05% across all tenors. The bank has announced a hike of 5 bps in the base rate. “The base rate has been revised from 8.75% to 8.80% with effect from 01-10-2022,” the bank’s website said.
PNB MCLR rate as on 1st October 2022
The hike in interest rate, generally charged on home loans, comes after the Reserve Bank of India (RBI) hiked the key policy rate for the fourth time since May 2022.
How much will the home loan EMI increase?
All home loans disbursed by banks are currently linked to an External Benchmarking Lending Rate (RLLR). With the latest hike in RLLR of 50 bps, here’s an example showing how your EMI outgo is likely to be impacted.
Suppose Mr. X has taken a home loan of Rs.30 lakh for a tenure of 25 years. The old interest rate charged on the home loan is 7.90% and the new interest rate is 8.40%.
For the purpose of calculation, it is assumed that no credit risk premium is charged by the bank.
What is the difference between MCLR and RLLR lending regime?
If you have taken a home loan before October 1, 2019, your home loan may be linked to the MCLR regime. Under MCLR-based lending regime, the home loan is usually linked to the one-year MCLR rate.
As per RBI guidelines, “The Marginal Cost Based Lending Rate (MCLR) of funds prevailing on the date of first disbursement, whether partial or full, shall be applicable till the next reset date, irrespective of the change in the benchmark during the interim future The reset dates will be determined accordingly. The periodicity of reset under MCLR will be commensurate with the period/maturity of MCLR to which the loan is linked. The periodicity of reset will be one year or less. The exact periodicity of reset will form part of the terms of the loan agreement.”
On the other hand, if you have taken a home loan on or after October 1, 2019, then the interest rate on your home loan is determined on the basis of the external benchmark lending rate. As per RBI guidelines, the benchmark can be any one of the following:
- RBI Policy Repo Rate
- Government of India 3-Month or 6-Month Treasury Bill Yield published by Financial Benchmark India Private Limited (FBIL)
- Any other benchmark market interest rate published by FBIL.
The interest rate under the external benchmark will be reset at least once in three months. Thus, any change in the external benchmark is passed on to the borrowers faster as compared to the MCLR based lending regime.