All You Need To Know About Citibank's T-Bill-Linked Home Loan
Now that the Reserve Bank of India has mandated banks to switch to an external benchmark to offer home and auto loans from April 1 next year, one expects the market to be soon filled with such products. Home-grown banks would simply be doing in the country what a global giant has already done.
US-based banking major Citi in March this year launched India’s first market benchmark rate-linked lending product. The bank’s new home-loan product will be linked to the rate of treasury bills (T-bills), which is used by the government for its short-term borrowings.
The bank, which had a gross home-loan book of Rs 9,000 crore as of December last year, already offers external benchmark-linked products in markets such as the US and Singapore. The bank’s overall India home-loan book stood at Rs 57,000 crore in the same period.
Here is what you need to know about the product:
*Loans will be sold at a fixed spread above the T-bill rate which will be maintained throughout the loan tenure.
*There will be a range of spread above the T-bill rate which the bank will follow. The average spread will be two percentage points.
*If you buy this product, you home loan rates will be reviewed every three months. India banks typically do that annually.
* The interest rate on the linked loan will be reset on a quarterly basis. The interest rate resets of the T-Bill-linked home loan are on March 1, June 1, September 1 and December 1.
*The three-month T-Bill rates are published by Financial Benchmarks India Pvt Ltd (FBIL), an RBI-recognised body, on 12th of each month. The bank will also publish the rates on its website every month.
*Old customers of the bank will also be able to enjoy the benefits offered by its new product. They will not have to pay any additional cost for making the switch.
With inputs from Housing News