Last updated 12 Nov 2026
The repo rate is the rate at which the Reserve Bank of India lends short-term money to banks. It is set by the Monetary Policy Committee, and it sets the tone for lending rates across the economy. Your own floating-rate loan is not tied to the repo rate in a vague way: it is priced as a benchmark plus a spread. For most new retail loans that benchmark is an external one, such as the repo rate, and the loan is called EBLR-linked. Older loans may be tied to a lender's MCLR, an internal benchmark.
This guide explains each term, how a change in the repo rate reaches your EMI, and what to ask your lender when your rate resets. It gives no current rates. See the interest rates page for the repo rate and for indicative loan rates, which LOANZ 360 draws from live data.
The terms in plain words
Key terms
| Term | What it means | Who sets it |
|---|---|---|
| Repo rate | The rate at which RBI lends to banks for the short term | RBI, through its Monetary Policy Committee |
| External benchmark | A rate outside the lender's control that a floating loan is linked to, such as the repo rate | A public source, chosen by the lender from those allowed |
| EBLR | External Benchmark Lending Rate: the benchmark plus the lender's spread | Benchmark by the market; spread by the lender |
| Spread | The lender's margin over the benchmark, covering its cost, risk and profit | The lender, within the rules |
| MCLR | Marginal Cost of Funds based Lending Rate: an internal benchmark based on a bank's own cost of funds | Each bank |
| Reset date | The date on which a floating rate is revised | Your loan agreement |
See EBLR, MCLR, repo rate and floating interest rate for short definitions.
How an EBLR-linked loan is priced
A floating-rate loan linked to an external benchmark is priced like this: your rate equals the benchmark plus a spread. When the benchmark moves, your rate moves with it, usually from the next reset date. The spread stays unless the lender changes it under conditions stated in your agreement, such as a change in your credit risk. A lender should not raise the spread simply because it wants a higher margin on an existing loan.
Direction of change (illustrative, no rate)
| If the repo rate | Your EBLR-linked rate | Your EMI or tenure |
|---|---|---|
| Falls by 0.25 percentage point | Falls by about the same amount at the next reset | EMI falls, or tenure shortens if the lender keeps the EMI |
| Stays the same | Stays the same | No change |
| Rises by 0.25 percentage point | Rises by about the same amount at the next reset | EMI rises, or tenure lengthens if the lender keeps the EMI |
What is MCLR and why do some loans still use it
Before external benchmarks, banks set loan rates from their MCLR, which reflected their own cost of funds. Because it was an internal figure, changes in the repo rate did not always pass through quickly. Loans taken during the MCLR period may still be MCLR-linked, with a reset, often yearly. Some borrowers have moved from MCLR to an EBLR-linked rate. If you have an older loan, ask your lender what you are on, what your next reset date is and what it would cost to switch.
MCLR compared with EBLR
| Point | MCLR-linked loan | EBLR-linked loan |
|---|---|---|
| Benchmark | Set inside the bank | External, outside the lender's control |
| How quickly repo changes reach you | Slower and less direct | Faster and more direct |
| Reset interval | Set in the agreement, often a longer period | Set in the agreement; may be shorter |
| Spread | Fixed at sanction unless the agreement says otherwise | Fixed at sanction unless the agreement says otherwise |
| Typical on | Older loans | Newer retail and MSME floating loans |
What happens to you when the rate changes
When your rate rises, the lender can raise your EMI, extend your tenure, or both. When it falls, the reverse. If the EMI stays unchanged and the rate rises, your tenure grows, and a large rise can add many months. Borrowers sometimes find this years later. RBI directions require lenders to tell you about the change and to give you choices. Ask which options your lender offers and what each costs.
Choices at a reset (check what your lender offers)
| Option | Effect | Trade-off |
|---|---|---|
| Keep the tenure, change the EMI | The EMI rises or falls | Your monthly budget changes |
| Keep the EMI, change the tenure | Tenure lengthens or shortens | You may pay interest for longer |
| Part-payment | Reduces the principal | Needs spare cash; cuts later interest |
| Switch to a fixed rate, where offered | The rate stops moving for the fixed period | A fixed rate is often set above floating at the start; ask for the APR |
| Move the loan to another lender | A new rate and new charges | Balance transfer has costs; compare using the APR |
A worked example without any rate. A borrower has ₹40,00,000 outstanding and a tenure of 15 years. If the rate rises at a reset and the borrower leaves the EMI unchanged, the loan runs longer. If the borrower raises the EMI instead, the schedule stays at 15 years. Use the balance transfer calculator, the prepayment calculator and the EMI calculator to compare with your real rate.
Questions to ask your lender
- Is my loan linked to an external benchmark or to MCLR?
- What is the benchmark, what is my spread, and when does my rate reset?
- How will I be told about a change, and what choices will I get?
- What is the cost to move from MCLR to an external benchmark?
- Can the spread change, and under what conditions?
- What are the part-payment and foreclosure terms for my loan?
Fixed rate or floating rate
A fixed rate stays the same for the fixed period, but lenders often set it higher to cover the risk of rate changes, and it may reset after a period. A floating rate moves with the benchmark. Neither is always better. Read Fixed vs floating interest rate for a fuller comparison.
LOANZ 360 is a loan aggregator, not a lender. The lender sets your rate, spread and reset date. Every offer you see should come with a Key Fact Statement that shows the APR. See Key Fact Statement and APR.
Frequently asked questions
If the repo rate falls, does my EMI fall at once?
Not at once. A floating-rate loan changes at its reset date, set in your agreement. After the reset, the lender should tell you the new rate and your choices, such as a lower EMI or a shorter tenure.
Is EBLR the same as the repo rate?
No. EBLR is the external benchmark, often the repo rate, plus the lender's spread. So your loan rate is higher than the benchmark itself. The spread is the lender's margin.
Can my lender raise the spread on my existing loan?
Only under the conditions stated in your agreement and the rules, such as a change in your credit risk. Ask for the clause. A change that is not in the agreement is a matter to raise with the lender and, if needed, the regulator.
Should I move from MCLR to EBLR?
It depends on the cost of switching and the spread offered. Ask your lender for the written terms, then compare the total cost until closure. A balance transfer to another lender is another route, with its own charges.
Why did my tenure increase when I did nothing?
If your rate rose and your EMI stayed the same, the loan needs more months to clear. Check your latest statement and ask the lender for a revised schedule, and consider a part-payment or a higher EMI.
Where can I see the repo rate?
On the RBI website and on the interest rates page of this site, which shows the current repo rate drawn from live data when available.
Related reading: Fixed vs floating interest rate, Flat vs reducing interest rate, Key Fact Statement and APR, Loan prepayment and foreclosure, Home loan balance transfer and top-up, Repo rate, EBLR, MCLR, Interest rates, Balance transfer calculator.