1. MCLR Reset (Marginal Cost of Funds-based Lending Rate)
MCLR (Marginal Cost of Funds-based Lending Rate)
✔ How often is it revised by banks?
Banks typically revise MCLR every month, based on:
RBI policy rate changes
Cost of deposits
Liquidity conditions
Internal funding costs
So, the benchmark MCLR changes monthly.
✔ When does your loan rate change?
Even if MCLR changes monthly, your EMI changes only at your reset period, which is usually:
6 months
12 months
or sometimes 1–3 years (older loans)
👉 Example:
If your reset is every 6 months, your loan will adjust only twice a year, even if MCLR changes in between.
2. EBLR Reset (External Benchmark Lending Rate)
EBLR (External Benchmark Lending Rate)
✔ How often is it revised?
EBLR is directly linked to external benchmarks like:
RBI Repo Rate (most common)
Treasury bill yields
External market benchmarks
👉 Whenever RBI changes the repo rate, banks usually adjust EBLR very quickly (often within a month or even same month).
✔ When does your EMI change?
For EBLR loans:
Reset is typically every 3 months (common)
Some banks use monthly reset cycles
Rarely, up to 6 months depending on agreement
👉 So EBLR loans are much faster to adjust than MCLR loans.
3. Key Difference in Reset Speed
Feature
MCLR
EBLR
Benchmark
Internal bank cost
RBI / external rate
Revision speed
Slow
Fast
Borrower reset
6–12 months typical
3 months or less
Rate transmission
Delayed
Near real-time
4. Why EBLR Replaced MCLR (Mostly)
RBI introduced EBLR to ensure:
Faster transmission of policy rate cuts/hikes
More transparent loan pricing
Better benefit to borrowers when repo rate falls
So now:
New loans = mostly EBLR-linked
Older loans = still MCLR unless switched
5. Important Practical Insight
Even if rates change frequently:
Your EMI doesn’t change every time
Only principal vs interest portion adjusts after reset
Loan tenure may also change instead of EMI in some cases
6. Bottom Line
MCLR loans: reset based on bank cycle (usually 6–12 months)
EBLR loans: reset faster (usually 3 months or linked closely to RBI repo changes)
Your actual EMI change depends on your loan agreement reset period, not just rate revision frequency
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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