CURRENT AFFAIRS

Detailed explanation-1: -Gradually several other Public Sector Banks (PSBs) moved away from home loans linked to the Marginal Cost of Lending Rate (MCLR) and introduced repo-rate linked loan products. Some of these financial institutions include Syndicate Bank, Bank of India, Bank of Baroda and Indian Bank.

Detailed explanation-2: -What is repo rate? Just like borrowers have to pay a certain interest, to avail of credit from banks, financial institutions also have to pay interest, for the money they borrow from the central bank. This interest is known as the repo rate.

Detailed explanation-3: -With the reduction, SBI’s home loan rate now stands at 7.75% as against 7.85% earlier. Do note here that all new home loans at the bank are now linked with the RBI repo rate.

Detailed explanation-4: -Repo rate is the rate at which the central bank lends money to banks. For existing borrowers, home loan rates will increase equal to increase in repo rate as their rates are directly linked with it. But new buyers borrow at rates fixed by banks, adjusting for hike in repo rate.

Detailed explanation-5: -The bank’s Base Rate has been revised from 8.80% pa. to 9.10% pa. effective from January 1, 2023. How does the RBI’s decision affect loans? The cost of funds for banks often increases when the RBI raises the repo rate.