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MCLR vs EBLR: Which Are You On, and Should You Switch?
One benchmark is set by your bank and cannot be checked. The other is set by the RBI and is published. Guess which one passes on rate cuts.
The short answer
MCLR is your bank's internal benchmark. Resets annually. Passes on cuts slowly, and often only partly.
EBLR is an external benchmark — the RBI repo rate. Resets at least quarterly. Passes on cuts in full.
If you borrowed before October 2019, you are probably on MCLR — and probably paying 0.3–0.8% more than a new borrower at your own bank.
The comparison
| Base Rate | MCLR | EBLR / RLLR | |
|---|---|---|---|
| When | Before April 2016 | April 2016 – Sept 2019 | October 2019 onwards |
| Set by | The bank, internally | The bank, internally | An EXTERNAL benchmark — usually the RBI repo rate |
| Can you verify it? | No | No — you cannot audit a bank's internal cost of funds | Yes. The repo rate is published by the RBI. |
| Reset frequency | At the bank's discretion | Usually annually, on your anniversary date | At least every 3 months — mandated |
| When RBI cuts rates | You may never see it | 6–12 months, and often only partly passed on | Passed on in full, within a quarter |
| Who it applies to | Legacy borrowers | Legacy borrowers | All new floating-rate retail loans from BANKS |
Since October 2019 the RBI has required banks to link new floating-rate retail loans to an external benchmark. If you borrowed BEFORE that, you are probably still on MCLR — and probably paying more than a new borrower with your exact risk profile. That is worth checking today.
Why the gap exists — and why it hasn't closed
Two reasons, and they compound.
1. MCLR never caught up. When the RBI cut rates, EBLR loans took the full benefit within a quarter. MCLR loans took a year or more, and often received only part of the cut. That gap never closed.
2. Different starting points. MCLR was built on banks' cost of funds in a higher-rate era. EBLR is built on the repo rate. Even as MCLR fell, it fell from a higher base.
The same bank. The same borrower profile. The same security. A worse rate — purely because of the year you signed.
Nobody is going to write to you about this. The bank is not obliged to move you, and it is not in their interest to suggest it.
You have to ask.
What the switch is actually worth
A 0.5% difference, on a real loan
₹40 lakh outstanding. 15 years remaining.
- Roughly, per lakh, per year
- ₹500
- On ₹40 lakh, per year
- ≈ ₹20,000
- Over 15 years (declining balance)
- Well over ₹2 lakh
- Conversion fee
- A few thousand rupees, once
- Worth doing?
- Yes. Overwhelmingly.
Illustrative — your gap may be larger or smaller. But the shape of the answer is almost always the same: if you have five or more years left, switching pays for itself many times over.
How to switch
- Find out what benchmark you're on. Sanction letter, or ask the bank.
- Find out your current effective rate.
- Ask your bank what they'd offer you on EBLR today, and what the conversion fee is.
- Get quotes from two or three other lenders for a balance transfer.
- Compare. Include the processing fee on any new loan.
- Decide. Either convert internally, or transfer out.
The leverage you have — and probably don't know about
RBI has banned foreclosure and prepayment charges on floating-rate home loans to individual borrowers.
Which means your bank cannot charge you to leave.
So: get a written offer from a competitor. Take it to your own bank. Ask them to match.
Banks lose money when a good borrower walks. A borrower with a clean record and fifteen years of interest still to pay is a valuable asset, and they know it. They will frequently match rather than lose you.
The whole exercise costs you a few phone calls and can be worth lakhs. It is, without much competition, the highest-return hour available to an Indian home loan borrower.
Home loan rates and the RBI's repo rate move. A page that says 'the rate is X%' is wrong within months, and quietly misleads everyone who reads it afterwards.
So we explain how the mechanism works — which does not change — and leave the number to you.
For the current repo rate, check the RBI's own website. For current home loan rates, check three or four lenders directly. Both take five minutes, and both are more reliable than anything a content site tells you.
Frequently asked questions
What is the difference between MCLR and EBLR?
MCLR is the bank's own internal benchmark, which it calculates and you cannot verify; it resets annually and historically passed on rate cuts slowly and only partly. EBLR is an external benchmark — the RBI repo rate — which is published, resets at least quarterly, and passes on cuts in full.
Should I switch from MCLR to EBLR?
Almost certainly, if you have five or more years remaining. MCLR borrowers typically pay 0.3-0.8% more than a new EBLR borrower at the same bank with the same risk profile. On a Rs 40 lakh outstanding balance over 15 years, a 0.5% gap is well over Rs 2 lakh — against a one-time conversion fee of a few thousand rupees.
How much does it cost to switch from MCLR to EBLR?
Usually a modest one-time conversion fee — a few thousand rupees — if you switch within the same bank. A balance transfer to a different lender carries no foreclosure charge at all on a floating-rate home loan, because RBI has banned them for individual borrowers.
Will my bank tell me I'm overpaying on MCLR?
No. They are not obliged to move you, and it is not in their interest to suggest it. You have to ask.
What leverage do I have with my bank?
More than you think. A balance transfer on a floating-rate home loan is free — RBI has banned foreclosure charges. So get a written offer from a competitor and take it to your bank and ask them to match. A borrower with a clean record and fifteen years of interest still to pay is a valuable asset, and banks frequently match rather than lose one.