EBLR (external benchmark lending rate) loans are linked to an outside benchmark, usually the RBI repo rate, and must reset at least once every three months. MCLR (marginal cost of funds based lending rate) loans are linked to the bank's own cost of funds and reset at intervals in the loan, often six months or a year. Since October 2019, new floating-rate home loans from banks are linked to an external benchmark.
Side by side
Factor
EBLR
MCLR
Benchmark
External: usually the RBI repo rate
The bank's own marginal cost of funds
Reset
At least once in three months
As the loan says, typically up to one year
Passes on rate changes
Faster
Slower
For new bank home loans
Required for floating-rate retail loans since 1 October 2019
Not offered for new floating-rate retail loans
Existing borrowers
Can switch to it
Can stay or switch, usually for a fee
Spread
Fixed unless credit risk changes
Set in the loan
When EBLR matters
If you are taking a new floating-rate home loan from a bank, it will be on an external benchmark; compare the spread.
When MCLR matters
If you have an older MCLR loan, compare its rate with what an EBLR loan would cost and the switching fee.
In more detail
Housing finance companies are not bound by the bank rules and often price loans on their own prime lending rate. Ask any lender which benchmark and spread apply.
The spread over the benchmark is what you negotiate. Under the RBI rules, a bank may change the credit-risk part of the spread only on a substantial change in the borrower's credit assessment.