When Do Banks Reset MCLR and EBLR Rates?
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 changesCost of depositsLiquidity conditionsInternal funding costsSo, 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 months12 monthsor 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 yieldsExternal 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 cyclesRarely, up to 6 months depending on agreement👉 So EBLR loans are much faster to adjust than MCLR loans.3. Key Difference in Reset SpeedFeatureMCLREBLRBenchmarkInternal bank costRBI / external rateRevision speedSlowFastBorrower reset6–12 months typical3 months or lessRate transmissionDelayedNear real-time4. Why EBLR Replaced MCLR (Mostly)RBI introduced EBLR to ensure:Faster transmission of policy rate cuts/hikesMore transparent loan pricingBetter benefit to borrowers when repo rate fallsSo now:New loans = mostly EBLR-linkedOlder loans = still MCLR unless switched5. Important Practical InsightEven if rates change frequently:Your EMI doesn’t change every timeOnly principal vs interest portion adjusts after resetLoan tenure may also change instead of EMI in some cases6. Bottom LineMCLR 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.
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 yieldsExternal 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 cyclesRarely, up to 6 months depending on agreement👉 So EBLR loans are much faster to adjust than MCLR loans.3. Key Difference in Reset SpeedFeatureMCLREBLRBenchmarkInternal bank costRBI / external rateRevision speedSlowFastBorrower reset6–12 months typical3 months or lessRate transmissionDelayedNear real-time4. Why EBLR Replaced MCLR (Mostly)RBI introduced EBLR to ensure:Faster transmission of policy rate cuts/hikesMore transparent loan pricingBetter benefit to borrowers when repo rate fallsSo now:New loans = mostly EBLR-linkedOlder loans = still MCLR unless switched5. Important Practical InsightEven if rates change frequently:Your EMI doesn’t change every timeOnly principal vs interest portion adjusts after resetLoan tenure may also change instead of EMI in some cases6. Bottom LineMCLR 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.