Home loan rates: SBI slashes EBLR, RLLR; home loans, other loans' lending rates to come down

Home loan rates: State Bank of India (SBI), India's largest lender, has recently announced a reduction in its External Benchmark-based Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR) for various loans, including home loans. The revised lending rates will come into effect on February 15, 2025. This decision follows the Reserve Bank of India's (RBI) recent cut in the repo rate by 25 basis points (bps) from 6.50% to 6.25% during its MPC meeting last week.

SBI has decided to maintain the current rates for marginal cost-based lending rates (MCLR), Base rate, and Benchmark Prime Lending Rate (BPLR) without any changes.

Banks determine the interest rates they offer to consumers based on the RBI's repo rate, known as the Repo Linked Lending Rate (RLLR). Since October 2019, banks have been required to link their retail loans to external benchmark lending rates, with many opting to use the repo rate as their benchmark.

Customers with RLLR-linked home loans may experience fluctuations in their interest rates as changes influence them in repo rates. The majority of borrowers choose floating-rate loans linked to RLLR for this reason.

Banks revising their loan rates

SBI has reduced its External Benchmark-based Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR) for various loans.

Canara Bank has updated its Repo Linked Lending Rate (RLLR) to 9% from 9.25%. This rate will be effective for new accounts opened on or after 12.02.2025 and accounts completing 3 years under the RLLR regime on or after 12.02.2025, as indicated on Canara Bank's website.

Bank of Baroda has implemented a BRLLR of 8.90% for Retail Loans starting from 10.02.2025, in accordance with the bank's website (Current RBI Repo Rate: 6.25% + MarkUp/Base Spread 2.65%).

Bank of India has decreased its repo-based lending rate from 9.35% to 9.10%, effective February 7, 2025.

Indian Overseas Bank's effective RLLR will be 9.10% as of February 11, 2025, calculated as 6.25% + 2.85%.

Union Bank of India has lowered its repo-based lending rate to 9 percent from 9.25 percent, effective February 11, 2025.

Punjab National Bank (PNB) has reduced its Repo Linked Lending Rate (RLLR) from 9.25 percent to 9 percent, effective February 10, 2025.

What's the difference between EBLR, MCLR, RLLR

External Benchmark Lending Rate

EBLR, short for External Benchmark Lending Rate, serves as a standard interest rate that banks utilize to determine loan interest rates. The EBLR is tied to an external benchmark, such as the RBI's repo rate. Consequently, alterations in the benchmark lead to adjustments in both the EBLR and loan interest rates. Typically, EBLR is employed for floating rate loans catered towards retail customers and MSMEs. Common examples of loans linked to EBLR include home, personal, and auto loans.

Repo-Linked Lending Rate

The term RLLR refers to Repo Linked Lending Rate, which banks utilize for retail loans such as home loans and auto loans. RLLR is tied to the repo rate determined by the Reserve Bank of India (RBI). As the repo rate undergoes changes, the RLLR also adjusts accordingly. This results in alterations to the interest rates on home loans. RLLR is determined by various factors, including the loan amount, borrower risk, and loan-to-value ratio.
The purpose of RLLR is to ensure transparency and facilitate prompt adjustments in loan interest rates in response to changes in the repo rate. In October 2019, the RBI instructed banks to connect their retail loans to external benchmark lending rates (E-BLR), with the repo rate becoming the primary benchmark for most financial institutions.

Marginal Cost of Funds-based Lending Rate

A bank's MCLR, or Marginal Cost of Funds-based Lending Rate, serves as the minimum interest rate that the financial institution can apply to loans. This benchmark, alongside indicators such as the Prime Lending Rate (PLR) and the RBI Base Rate, aids banks in setting interest rates. MCLR represents the floor for loan interest rates and may fluctuate over time, potentially increasing at the discretion of the bank.