The home loan question: should you opt for sixmonth or oneyear MCLR?
Recently, when large commercial banks reduced their interest rates on home loans by 25-30 basis points (bps), the actual lending rates remained unchanged.
One basis point is one hundredth of a percentage point. More banks have started linking home loan rates to the sixmonth marginal cost of funds based lending rate (MCLR). Here is what you should know as a borrower:
When you decide to take a home loan, know that the interest rate on a home loan is not the same as the benchmark lending rate offered by banks. From April 2016, MCLR is the benchmark lending rate for new borrowers. All new floating rate home loans offered by banks are now linked to an MCLR.
Prior to April 2016, all floating rate home loans were linked to the base rate. Base rate had only one rate for each bank. But when MCLR came into effect, banks had to set at least five MCLR rates: overnight, 1 month, 3 month, 6 month and 1 year. Out of these, banks are using 6-month and 1-year MCLRs for providing home loans to their customers.
For instance, recently when ICICI Bank Ltd, one of the country’s largest private sector banks, reduced the interest rate on its home loans, it gave borrowers two options to choose from—1-year- and 6-monthlinked MCLRs.
Banks such as State Bank of India have linked home loans to 1-year MCLR.
On the other hand, Kotak Mahindra Bank Ltd and now ICICI Bank are offering home loans linked to 6-month MCLRs.
The main difference between these two sets of MCLRs is the reset duration.
If you are on a 6-month MCLR, your home loan will get reset in 6 months and in case of 1-year MCLR, it will get reset in 1 year.
Trying to choose between the two is not easy, largely because you cannot time the market.
Experts say one should opt for shorter MCLR durations in the current scenario, that is, in a falling interest-rate regime.
From here on, there is one more component that you have to factor in. To know whether the rates will go up or down is anybody’s guess.
However, what you can do is to decide based on the final home loan interest rate that you get from your bank. Every home loan comes with a spread, basically a mark-up on the MCLR.
In the case of ICICI Bank, where it offers both the options to home loan borrowers, the final home loan rate is the same. Though ICICI Bank’s 6-month MCLR is at 8.15% and 1-year MCLR is at 8.20%, in both cases, the home loan interest rate is at 8.35-8.40% for salaried borrowers for up to ₹30 lakh.
If there is no difference in the final home loan rate you get, you can pick any of the MCLRs. Also, there is only a marginal difference of 5-10 bps in the underlying lending rates. Now, if you end up opting for a rate that tends to increase over time, you still have the option to switch to another bank if you are on floating rate loan.
Solar panel equipment will attract the lowest tax rate of 5% under the GST regime, as against the initially proposed 18%, Revenue Secretary Hasmukh Adhia has said.
Responding to industry queries on twitter, Adhia said, “All solar equipment and parts would attract 5% GST only”.
Senior officials on Monday said that the GST Council, headed by Union Finance Minister Arun Jaitley and comprising state counterparts, is likely to reconsider the decision of levying 18% tax on solar equipment.
These equipment fall under Chapter 85 of the GST Rate Schedule for Goods and include diodes, transistors and similar semiconductor devices, photosensitive semiconductor devices including photo voltaic cells, light emitting diodes (LED) and mounted piezoelectric crystals.
The GST Council has already decided on a 5% tax rate on solar water heater and system, renewable energy devices and spare parts for their manufacture, biogas plant, solar power-based devices, solar power generating system and wind mills and wind operated electricity generator.
There was confusion in the industry that if these were put in 5% bracket, why the equipment for solar panel manufacturing have been slapped with 18% GST.
India is targeting 175 gigawatts of renewable energy generation by 2022. Of this, 100 GW would be from solar power, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro power.
To achieve the proposed capacity of 100 GW target by 2022, the overall investment required would be close to ₹6 lakh crore and so keeping the duties down on solar equipment is necessary.
The GST Council had brought down the levy on coal to 5 %from the current tax incidence of 11.69%.
With the lower GST rate on coal, the net value of dry fuel to the consumer is likely to come down. The GST Council had earlier this month fitted over 1,200 goods and 500 services in the tax brackets of 5, 12, 18 and 28%.