Punjab National Bank Home Loan Interest Rates

Punjab National Bank has a variety of deposit and loan products to offer to its Indian and non-resident Indian customers. The Punjab National Bank Home Loan is a popular product that has received widespread acceptance amongst Indian customers. Some of the salient features of PNB Home Loan are its transparency in services and attractive rates of interest. The bank offers various Home Loan products to suit the requirements of each individual. Right from purchasing a new house to constructing your own or carrying out repairs and renovations, Punjab National Bank has a dedicated product. The bank also provides Balance Transfer facilities where you can shift your Home Loans from other banks and financial institutions to Punjab National Bank.

Punjab National Bank follows the Marginal Cost of Funds-based Lending Rate (MCLR) on all its loan products including the Home Loan. This rate concept is effective from 01st April 2016. Before the adoption of the MCLR concept, the bank was following the Base Rate Concept and the Prime Lending Rate Concept. From 01st October 2019, all banks will shift to the Repo Rate Linked Interest Rate for Home Loans. Punjab National Bank has already announced its decisions to adhere to this new concept with immediate effect.

MCLR is an internal reference rate for Indian banks below which no bank can lend to its customers. This rate considers various factors that make it an extremely competitive one. The MCLR has replaced the erstwhile Base Rate calculation because the Base Rate did not have a risk-based approach. The MCLR is thus an improvised version of the Base Rate, where it considers the following external factors:

• Tenure Premium: It is a non-borrower-specific premium and uniform for all kinds of loans.
• Marginal Cost of Funds: It is the average rate of interest at which bank deposits with similar term/maturities were raised during a specific period before the review date.
• Operating Cost: It includes the cost of raising funds for the bank.
• Negative Carry on Cash Reserve Ratio (CRR): Banks have to maintain a specific CRR with the Reserve Bank of India (RBI). They do not earn any interest on this amount. Hence, any excess deposit with the RBI carries a negative cost. It affects the MCLR of the bank.

The Repo Rate Linked Lending Rate (RLLR) does away with the complex calculations of the MCLR. Here the bank calculates a premium that it loads over the Repo Rate announced by the RBI from time to time. Thus, you can call the RLLR as the ultimate market-linked lending rate of all. This rate is effective from 27.08.2019.

• The Base rate of Punjab National Bank is 9.25% with effect from 01.06.2018
• The Benchmark Prime Lending Rate is 14% with effect from 01.05.2012
• The MCLR of Punjab National Bank is as follows:

Punjab National Bank offers fixed rate as well as floating rate facility on Home Loans. The above table indicates that the fixed rate of interest is 0.50% more than the corresponding floating rate.

The characteristics of the Fixed Rate of Interest are as follows:

• The rates of interest remain fixed for the entire loan tenure
• The borrower has the option to switch over to a floating rate option on paying a prescribed fee
• It is advantageous in case the floating rate witnesses and upward trend
• Your EMI remains the same, and so does the loan repayment tenure
• Prepayment or foreclosure charges do not apply for Home Loans availed by individuals

The floating rate of interest is beneficial for individuals because the rates can come down when the MCLR reduces. At the same time, the rates can also increase with an increase in the MCLR.

The characteristics of Floating Rate of Interest are:

• The EMI can change with every revision in the MCLR or the corresponding reference rate
• Alternatively, banks prefer to keep the EMI constant and vary the repayment tenure. Therefore your tenure can increase if the rates go up and vice versa.
• There are no part-payment and foreclosure charges applicable to Home Loans availed on a floating rate of interest.

Punjab National Bank is a prominent lender under the Pradhan Mantri Awas Yojana or PMAY. The rate of interest applicable on Home Loans sanctioned under the PMAY scheme is the same as that for other Home Loans. However, there is an interest subsidy component involved in the Pradhan Mantri Awas Yojana that makes it different from the others.

Punjab National Bank calculates interest on daily reducing balances on Home Loans. Therefore, prompt repayment of your EMI is beneficial.

The EMI Concept

The EMI is the amount that you have to repay the bank every month. The loan amount, rate of interest, and repayment tenure are the factors that determine your EMI. The EMI comprises of two components, the interest repayment component and the principal repayment component. Any payment you make towards the repayment of your Home Loan initially goes towards repaying the interest component. The excess amount after servicing the interest goes towards the principal repayment. Therefore, if there is an undue delay in the payment of the EMI, the interest amount increases, thereby reducing your principal repayment.

How to Calculate the EMI?

The EMI Calculator is not available on the Punjab National Bank official website. However, customers can use the MyMoneyMantra website to check out the EMI on their Home Loans.

• Access MyMoneyMantra and select Financial Tools
• Choose EMI Calculator
• Enter the loan amount, rate of interest, and the loan repayment tenure
• Click on the 'Calculate' option
• You get the EMI and the overall breakup of principal and interest for the entire loan tenure

Concessions are available under various sections of the Income Tax Act 1961 for repayment of interest and the principal amount of Home Loans.

• Section 24: A maximum deduction of 2 Lakhs per annum is available on the interest portion of your EMI.
• Section 80C: A maximum deduction of 1.50 Lakhs can be claimed towards repayment of the principal component of your EMI every year.
• Section 80EEA: This benefit is applicable only on Home Loans availed between 01.04.2019 and 31.03.2020. The stamp value of the property should not be more than 45 Lakhs. The individual should not have any other house in his/her name, and should not be eligible to claim deduction under Section 80EE. The maximum deduction available is 1.50 Lakhs.