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Vipul Das

These banks hike home loan interest rates: Here’s how much your EMI will go up

As a result of the repo rate hike, several banks, including ICICI Bank, Bank of Baroda and Canara Bank, have already begun raising interest rates on their loans.

ICICI Bank

ICICI Bank announced on August 5th, 2022, that it has increased its external benchmark-based lending rates (EBLR). The bank has mentioned on its website that “ICICI Bank External Benchmark Lending Rate" (I-EBLR) is referenced to RBI Policy Repo Rate with a mark-up over Repo Rate. I-EBLR is 9.10% p.a.p.m. effective August 5, 2022." Your EMI cost will rise along with the increase in I-EBLR if you a taken a loan from ICICI Bank. You will start paying a higher EMI starting the next month if your home loan is linked to the I-EBLR. Suppose you are a salaried or self-employed individual and have taken a home loan of 35 lakhs for a period of 20 years. I-EBLR previously stood at 8.60 per cent, and after a 50 basis point increase, it currently stands at 9.10 per cent. Taking into account the same, you were paying an EMI of around 30,596 before, but following a 50 bps increase, you will pay an EMI of 31,716 approx a hike in EMI amount of 1,120.

Bank of Baroda

With effect from 06.08.2022, Bank of Baroda has increased the interest rate on a variety of retail loans linked to the Baroda Repo Linked Lending Rate (BRLLR). BoB has mentioned on its website that “In terms of guidelines issued by Reserve Bank of India regarding implementation of External Benchmark Based Lending rates. Bank has introduced Baroda Repo Linked Lending Rate (BRLLR) in respect of all Retail Lending products w.e.f 01.10.2019. RATE OF INTEREST ON VARIOUS LOANS LINKED WITH BARODA REPO LINKED LENDING RATE (BRLLR)- w.e.f. 06.08.2022. For Retail Loans applicable BRLLR is 7.95% w.e.f. 06.08.2022 (Current RBI Repo Rate: 5.40% + MarkUp/Base Spread 2.55%)." The Bank of Baroda's home loan interest rates presently varies from 7.95 per cent to 9.30 per cent as a result of the increase in the Baroda Repo Linked Lending Rate [BRLLR]. To determine how much the EMI would rise, use the example from above.

Canara Bank

As of August 7th, 2022, Canara Bank's MCLR has increased. Currently, 6.80 percent is the overnight to one-month MCLR. Three-year MCLR is 7.10 per cent, six-month MCLR is 7.60 per cent, and one-year MCLR is 7.65 per cent.

Canara Bank MCLR (canarabank.com)

Canara Bank has said on its website that “The above MCLRs shall be applicable only to new loans/advances sanctioned/first disbursement made on or after 07.08.2022 and those credit facilities renewed/reviewed/reset undertaken and where switchover to MCLR linked interest rate is permitted at the option of the borrower,on or after 07.08.2022."

Considering the impact of RBI repo rate hike on the loan sector, the brokerage firm Edelweiss has said in a note that “We believe the ongoing interest rate hikes may not have a material impact on margins because a significant proportion of loans are EBLR linked. Hence, asset prices are largely reset on an immediate basis but deposit rates increase with a lag. Therefore, in the initial phases of the monetary policy tightening, net interest margin should witness an expansion."

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