Reasons Influencing Home Loan Interest Rates In India
Imagine a situation, you purchased plot/land, and earned money to construct the house in India. Now your task is to approach home loan companies/agencies in India offering the home loans at affordable rates.
Rate of Interest is the main component, depending on factors like credential of the individual, nature of loan, and other factors.
Moneymindz is terrific in giving the personalise financial guidance to customers in India. Banks/financial institutions in India are good in offering grand home loans at rates appealing to your wallet.
Many factors emerge, while arriving at the lowest lending rates offered by the banks in India. They are:
MCLR (Margin Cost of Funds Lending Rates): Let’s venture into the foremost constituent of the home loans, the MCLR. The MCLR is known as the base rate. Base rate is a rate introduced by the RBI in India. The banks are not sanctioned to offer home loans to the applicants in India, below the base rate. Motive behind this great move is to make sure banks give low cost of the funds to their customers.
From April 1, 2016 onwards, RBI has launched a new phenomenon, where in lending rates for banks is calculated.
Base rates is analysed and assessed by the MCLR calculations, consisting of chief factors like premium tenures, marginal cost of the funds, negative carry on account of CRR (Cash Reserve Ratio) and the operations costs.
Cost of Funds: Cost of money is major aspect of any financial institution in India. Cost of funds is influenced by liabilities, rising cost, image of the banks/financial institution in the Indian market.
Repo Rate: The rate where, RBI (Reserve Bank of India) offers money to banks/financial institutions due to any shortage is the Repo Rate.
èUsed by RBI to control the inflation.
èWhenever, RBI raises/lowers repo rate, will have great impact on interest rate on banking products like the loans/mortgages.
Benchmark Prime Lending Rate (BPLR):
BPLR is the rate, where banks offer money to the credit-worthy customers in India. Good in order to provide the transparency in calculating value of loans.
Interesting Case Study: Consider a situation, where in BPLR is 10 percent. Mr. Singh, having excellent credit rating and never defaulted on any loans, applies for home loans. Bank will offer the home loan to Mr. Singh at lesser rate than the BPLR (Benchmark Prime Lending Rates). Banks in India is offering home loans at rate less than BPLR to big corporate houses, because credit rating is good.
Cash Reserve Ratio (CRR): A portion of total deposits of customers, where banks will be holding as reserves. CRR rates will vary with economic changes. The reserves will be cash/deposits with the RBI.
èIt helps in controlling money flow.
èMake sure banks do not run out of money.
Statutory Liquidity Ratio (SLR): Ratio between the liquid assets and Net Demand and Time Liabilities (NDTL) is Statutory Liquidity Ratio (SLR).
Hence, you should be careful in selecting genuine and proper home loans in India.
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