MCLR vs EBLR — Key Differences
| Factor | MCLR | EBLR (Repo Rate Linked) |
|---|---|---|
| Benchmark | Bank's internal cost of funds | External — RBI Repo Rate |
| Transparency | Low — bank controls timing and quantum | High — repo rate is publicly known |
| Rate cut transmission | Delayed — at next reset date, partial at discretion | Mandatory within 3 months of RBI change |
| Reset period | Monthly to yearly — fixed per loan agreement | Rate changes with every RBI decision |
| Availability | Only for loans sanctioned before Oct 2019 | All new floating rate retail loans since Oct 2019 |
| Prepayment penalty | No penalty (floating rate) | No penalty (floating rate) |
Should You Switch from MCLR to EBLR?
When Switching from MCLR to EBLR Makes Sense
- Current EBLR rate is lower: Compare your current MCLR rate vs the EBLR rate the bank offers — if EBLR is 0.5%+ lower, switch
- RBI is in rate-cutting cycle: EBLR transmits cuts faster — benefit sooner than waiting for MCLR reset
- Long remaining tenure: If 10+ years remain, even small rate differences save significantly over time
- Conversion cost is reasonable: Typically 0.25–0.5% of outstanding — recoverable within 1–2 years of rate saving
How to switch: Request your bank for MCLR to EBLR conversion in writing. They will calculate the conversion fee and new rate. Get the comparison in writing — ensure the new EBLR rate is definitively lower than your current MCLR after accounting for the fee. If not satisfied, consider balance transfer to a new bank entirely.
Related Terms
Frequently Asked Questions
MCLR (Marginal Cost of Funds Based Lending Rate) is an internal benchmark banks used to price home loans from April 2016 to October 2019. It replaced the base rate system. Since October 2019, all new floating rate home loans must use external benchmarks (repo rate via EBLR). Existing MCLR-linked loans continue on MCLR until converted by the borrower.
MCLR is a bank's internal benchmark based on its own cost of funds — banks had discretion on timing and quantum of rate cut transmission. Repo rate (via EBLR) is an external benchmark set by RBI — rate changes are automatically transmitted to borrowers within 3 months. EBLR is more transparent and borrower-friendly during rate-cutting cycles.
Compare your current MCLR-based rate with the EBLR the bank offers. If EBLR is 0.5% or more lower and you have 10+ years remaining, switching usually makes sense. Conversion fee is typically 0.25–0.5% of outstanding — recoverable within 1–2 years. In a rate-cutting cycle, EBLR transmits cuts faster — adding to the case for switching.
The reset period determines how often your MCLR-linked rate is reviewed and updated. Common reset periods: 1 month, 3 months, 6 months, or 1 year. If you have a 1-year reset loan, your rate only changes once a year even if RBI cuts rates multiple times. A shorter reset period is better during rate-cutting cycles — you benefit from cuts sooner.
Yes. You can request your existing bank to convert your MCLR-linked loan to EBLR (repo rate linked) without a balance transfer. The bank charges a conversion fee — typically 0.25–0.5% of outstanding loan. After conversion, your rate is linked to repo rate and will change automatically with RBI decisions. Ask the bank to provide the new EBLR rate and fee calculation in writing before agreeing.