Mumbai: State-run IDBI Bank has launched a new home loan and auto loan product linked to the Reserve Bank of India's (RBI) repo rate. IDBI Bank has also introduced bulk deposits linked to the repo, or the central bank's short-term lending rate for commercial banks.
The revised rates are applicable from September 10, 2019. The interest rate on the new home loan and auto loan variant will be directly linked to the repo rate and thereby help in quick monetary transmission.
The Bank's customers will have the twin options of selecting either the marginal cost of funds-based lending rate (MCLR)-linked product or the newly launched repo rate-linked one. Currently, banks price loans based on their MCLR.
However, customers will now have the option to select between the MCLR-linked rate or the repo-linked one. State-run Allahabad Bank and Punjab National Bank (PNB) have already linked their loan products to the repo rate.
The move comes days after Finance Minister Nirmala Sitharaman said that banks would launch loan products linked to the repo rate, or an external benchmark, which will lead to reduced EMIs for housing, vehicle and other retail loans.