Mumbai: Recently, the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points, bringing it down to 5.25 percent. This move has raised expectations among borrowers that their EMI burden might
reduce. Following this cut, eight major banks – SBI, Canara Bank, PNB, Indian Overseas Bank, Bank of Baroda, Bank of India, Indian Bank, and Bank of Maharashtra – have already lowered their interest rates. This reduction may benefit home loan, auto loan, and personal loan borrowers.
EBLR, RLLR, and MCLR: What They Mean
However, not everyone will see an immediate drop in EMI. Whether your loan benefits immediately depends on the benchmark your loan is linked to – EBLR, RLLR, or MCLR.
EBLR (External Benchmark Linked Lending Rate) is tied to external market rates such as the RBI repo rate or treasury bill yields. Loans linked to EBLR see interest changes almost instantly when the repo rate changes.
RLLR (Repo Linked Lending Rate) is a type of EBLR linked specifically to the repo rate. Changes in the repo rate directly affect RLLR, offering borrowers quick relief.
MCLR (Marginal Cost of Funds based Lending Rate) is the minimum rate banks can charge for loans. MCLR-linked loans do not immediately benefit from repo cuts. The impact is felt only at the next reset date, which is usually after 6–12 months.
Recent Rate Cuts by Banks
Several banks have already reduced their benchmark rates. For example, Canara Bank and PNB cut their RLLR by 25 and 25–30 basis points, respectively. SBI lowered both EBLR and RLLR by 25 basis points. Indian Overseas Bank, Bank of Baroda, Indian Bank, Bank of India, and Bank of Maharashtra also reduced their rates, benefiting various types of loans. Bank of Maharashtra specifically reduced home loan rates to 7.10 percent and car loans to 7.45 percent, waiving processing fees as well.
Check Your Loan Benchmark
To know whether your loan will see an immediate reduction in EMI, check your loan statement for the interest rate type or contact your bank’s customer care. This will tell you whether your loan is linked to EBLR, RLLR, or MCLR and how soon you can benefit from the RBI’s repo rate cut.
