A big step towards adopting external benchmarks for home loans was taken when the State Bank of India (SBI), the country’s largest bank, announced last week that it would begin to offer a product linked to the repo rate from July 1. The repo rate is the interest that the Reserve Bank of India (RBI) charges for lending money overnight to banks to help them meet their shortfalls.
The shortcomings of home loans linked to the marginal cost of funds-based lending rate (MCLR) are well-known. Since this is an internal benchmark determined by the banks themselves, the transmission of ...
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