If your home loan is from before October 2019, it may still be linked to your bank's MCLR or even its older base rate. Such loans often change rate slowly and can stay higher than what the same bank charges new borrowers. RBI rules let many of these borrowers move to a repo-linked rate. This guide explains the three systems, the rules on switching, the fee, and what to ask your bank.
What are base rate, MCLR and repo-linked (EBLR) rates?
On a floating-rate loan, your rate is a benchmark plus a spread (the bank's margin). The benchmark is what changes over time. Banks have used three:
| Benchmark | Used for | Who sets it | How often your rate can change |
|---|---|---|---|
| Base rate | Floating loans sanctioned from July 2010 to March 2016 | The bank, from its own costs; reviewed at least once a quarter | When the bank changes its base rate |
| MCLR (marginal cost of funds based lending rate) | Floating loans sanctioned or renewed from 1 April 2016 | The bank, from its cost of funds | On your reset date; reset periodicity is one year or less, as written in your loan contract |
| EBLR (external benchmark lending rate) | New floating-rate retail and MSE loans by banks from 1 October 2019 | An outside benchmark, such as the RBI repo rate, plus spread | At least once in three months |
The repo rate is the rate at which the Reserve Bank of India (RBI) lends to banks. RBI raised it to 5.50% on 7 October 2026, from 5.25%. MSE means micro and small enterprises.
Many loans are still on the old benchmark. RBI data shows that at the end of June 2026, 29.6% of banks' outstanding floating-rate rupee loans were linked to MCLR, and 68.2% to an external benchmark.
How do I know if my loan is on MCLR or base rate?
- Look at your sanction letter or loan agreement for words like "MCLR", "base rate", "RLLR" (repo-linked lending rate) or "EBLR".
- Check your loan statement or the bank's app. Many show the benchmark and the reset date.
- Ask the bank in writing: "What benchmark is my loan linked to, what is my spread, and when is my next reset?"
Can I move my home loan from MCLR to a repo-linked rate?
Yes, in most cases. RBI's directions on interest rates on advances for commercial banks say:
- Existing loans linked to MCLR, base rate or BPLR (an even older benchmark) continue until repayment or renewal, unless you ask to switch.
- A floating-rate term loan whose borrower can prepay without charges can switch to the external benchmark without any charges or fees, except reasonable administrative or legal costs.
- After the switch, your rate should be the same as the rate for a new loan of the same category, type, tenor and amount.
- Other existing borrowers may switch on mutually acceptable terms.
- The switch is not treated as foreclosure of your loan. Foreclosure means closing the loan early. Your account continues.
Floating-rate home loans to individuals usually meet the "prepay without charges" condition. Banks have not been allowed to charge foreclosure or prepayment penalties on floating-rate term loans to individuals since 2014.
What is the conversion fee?
RBI does not fix a number. It only limits eligible borrowers to "reasonable administrative or legal costs". Banks publish their own fees, so ask for the exact amount, including taxes, before you agree.
How much can switching save? (worked example)
Say ₹30,00,000 is outstanding with 15 years (180 months) left. The loan is on MCLR at 9.35%. The bank's repo-linked rate for a similar new loan is 8.60%. The EMI (equated monthly instalment, your fixed monthly payment) uses the standard formula:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the amount outstanding, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the months left.
| Option | Rate | EMI | Result |
|---|---|---|---|
| Stay on MCLR | 9.35% | ₹31,056 | 180 months left |
| Switch, take lower EMI | 8.60% | ₹29,718 | ₹1,338 less a month; ₹1,338 × 180 = ₹2,40,840 over the tenure |
| Switch, keep paying ₹31,056 | 8.60% | ₹31,056 | Loan ends in 166 months, 14 months early; about ₹4,64,357 less paid in total |
If the fee were ₹6,000 all-in, it would be recovered in under five months (₹6,000 ÷ ₹1,338 is about 4.5). These rates are for illustration. Your bank sets the actual rates.
Is a repo-linked rate always better than MCLR?
Not always. A repo-linked rate passes on RBI's changes faster, in both directions. When repo falls, your rate may fall within three months. When repo rises, as it did on 7 October 2026, your rate may rise at the next reset too. An MCLR loan moves more slowly, on its reset date, when the bank revises MCLR.
In the example above, even if the repo-linked rate rose by 0.25 percentage points to 8.85%, the EMI would be ₹30,161. That is still ₹895 a month below the MCLR EMI of ₹31,056, unless the MCLR rate also changes. What matters most is the gap between your rate and what the bank offers today, and the spread you lock in.
What should I ask my bank before I switch?
- What will my new rate be, and how is it built: benchmark plus how much spread?
- Is that the same rate you give a new borrower for the same category, type, tenor and amount?
- What is the total fee, including taxes? Is it only administrative or legal cost?
- When will my rate reset, and how will I be told about changes?
- Will part of the spread depend on my credit score, and when can that part change?
- Can I keep my EMI the same so the tenure falls, or will you reduce my EMI?
- Will you give me a revised repayment schedule and written confirmation?
What if my loan is with an NBFC or housing finance company?
The external benchmark rule applies to banks. Floating-rate loans from NBFCs (non-bank finance companies) and housing finance companies are often linked to the lender's own benchmark rate. You can still ask them for a lower spread, or move the loan to a bank's repo-linked loan through a balance transfer. Compare the full costs first.
Do it in 10 minutes, free
Enter your loan details on LowerMyEMI and choose MCLR or base rate as your benchmark. We draft a letter to your bank asking to move to its repo-linked rate on RBI's terms, with the fee and rate in writing. Day-3 reminder and day-7 escalation texts are ready too. Use the rate change calculator to see what the new rate does to your EMI or tenure.