Citi India launches home loan linked to T-Bill rate

Citi India has become the first bank in India to launch a home loan product linked to the three-month Government of India Treasury Bill benchmark rate (T-Bill).

This is seen to be a better deal for home loan borrowers from the transparency point when compared to the current system of linking home loan rates to the marginal cost of funds-based lending rate (MCLR).

In the current MCLR regime, a home loan borrower will have to take the word of the bank on what the MCLR is and go with the rate offered without being able to externally validate it. However, in the new system of an external benchmark, a borrower can have transparency by seeing the underlying rate.

The newly introduced T-Bill linked home loan is based on the three-month T-Bill rates published on the 12th of each month by Financial Benchmarks India Pvt Ltd (FBIL) and is available to all new and existing home loan customers. FBIL is recognised by the RBI as an independent benchmark administrator.

Shinjini Kumar, Country Business Manager, Global Consumer Banking, Citi India, said that the Treasury Bill-linked home loan is in line with global best practices, local regulatory expectations on the use of external benchmarks and also offers a better client experience.

“Citi is proud to partner its customers looking for a mortgage product that is simple and transparent. We look forward to continuing to participate in this growing segment of borrowers,” she said.

“We are not stopping our existing MCLR-based home loans. They will continue. We are only adding to customer choice by offering a product to those who want to be involved in understanding what the interest rates will be like over the tenor of their loans,” Shinjini told.