Every time RBI changes the repo rate, the news says "home loans will get costlier" or "EMIs will come down". Then many borrowers check their loan and find... nothing has changed. Others see their tenure jump by years without anyone asking them. As a banker, I get these questions every week, so here is everything explained in simple words.
The rates in the news, in one line each
- Repo rate (now 5.50%): the rate at which RBI lends money to banks for a short time. This is the main rate RBI uses to control inflation.
- Bank Rate (now 5.75%): RBI's rate for longer-term lending to banks. It is also used for some penalties and compensations. It does not directly decide your loan rate.
- SDF (5.25%) and MSF (5.75%): the floor and ceiling around the repo rate for banks' overnight money. You don't need to track these.
- EBLR / RLLR (External Benchmark / Repo Linked Lending Rate): your bank's lending rate that is directly linked to the repo rate. Since October 2019, new floating-rate home, personal and small business loans must use an external benchmark like this.
- MCLR (Marginal Cost of Funds based Lending Rate): each bank's own internal rate, based on its cost of money. Used for many loans taken between 2016 and 2019 (and some business loans now). It moves slowly.
- Base rate and BPLR: older systems (before 2016). Some very old loans are still on them, often at higher rates.
Step 1: Find out what your loan is linked to
Look at any one of these:
- Sanction letter or Key Fact Statement: it will say something like "RLLR + 0.50%", "EBLR + 1.10%" or "1-year MCLR + 0.25%".
- Loan account statement in net banking or the app, which often shows the benchmark and the next reset date.
- Still unsure? Ask the branch: "What is my loan's benchmark, spread and next reset date?"
Your rate is always benchmark + spread. The benchmark moves with RBI or the bank; the spread is your bank's margin and normally stays fixed.
Step 2: What happens to your loan
Repo-linked (EBLR / RLLR) loan
Your rate follows the repo rate fully. RBI rules require these loans to be reset at least once every three months. With the 0.25% hike, a loan at 8.25% becomes about 8.50% from your next reset. Your bank cannot increase the spread unless your credit profile changes substantially, as written in your loan agreement.
MCLR loan
Your rate changes only on your reset date, usually once every 6 or 12 months, and only by how much your bank's MCLR has moved by then. That is why many MCLR borrowers did not get the full benefit of the 2025 rate cuts, and why the October 2026 hike may also reach them late or partly.
Base rate / BPLR loan
It changes only when your bank changes its base rate, which is rare. These loans are often more expensive than today's repo-linked loans.
Fixed-rate loan
No change. But check your sanction letter: some "fixed" home loans are fixed only for the first few years.
Why didn't my EMI drop when RBI cut rates?
- Your loan is on MCLR or base rate, which moves slowly or not at all.
- Your reset date had not come yet. The change applies only from the next reset.
- The bank reduced your tenure instead of EMI. When rates fall, many banks keep the EMI the same and reduce the remaining tenure. You save interest, but the EMI doesn't change.
- The spread changed, for example after the bank reassessed your credit. Ask for the reason in writing.
When rates go up: your rights under RBI rules
RBI's rules on resetting floating interest rates on EMI-based loans (2023) protect you:
- The bank must inform you about the rate change and its effect on your EMI and tenure.
- You can choose: a higher EMI, a longer tenure, or a mix of both.
- You can prepay part or all of the loan. Floating-rate loans to individuals carry no prepayment charges.
- You can ask to switch to a fixed rate, as per the bank's policy.
- The bank must not stretch the tenure so far that your EMI no longer covers the interest.
Should you switch from MCLR or base rate to a repo-linked rate?
Existing borrowers can ask the bank to switch to a repo-linked rate, usually for a one-time fee. Things to consider:
- Compare the rates: ask what repo-linked rate the bank offers for your profile and compare it with your current rate.
- Count the fee: a one-time switching fee is usually worth it if the rate gap is about 0.25% or more and many years are left.
- Know the trade-off: repo-linked loans pass on cuts quickly, but also hikes, within three months.
- Balance transfer: if your bank won't offer a fair rate, other lenders may, but count processing fees and legal costs.
Frequently asked questions
RBI raised the repo rate. Will my EMI increase from tomorrow?
No. A repo-linked loan changes from its next reset date (at least once in three months). MCLR, base rate and fixed loans follow different rules, explained above.
My bank increased my tenure without asking. Is that allowed?
The bank must inform you and give you options. You can write to the bank asking to increase the EMI instead of the tenure, or to prepay. If it doesn't respond within 30 days, complain to the RBI Ombudsman at cms.rbi.org.in.
What is the difference between MCLR and RLLR?
RLLR is linked to RBI's repo rate and changes within three months of any repo change. MCLR is the bank's internal rate based on its cost of funds, and changes only on your reset date.
Is the Bank Rate the same as the repo rate?
No. The repo rate (5.50%) is for RBI's short-term lending to banks; the Bank Rate (5.75%) is for longer-term lending and is used for some penalties and compensation. Your loan is usually linked to the repo rate, not the Bank Rate.
Do personal loans and car loans also change?
Only if they are on a floating rate. Most personal and car loans are fixed-rate, so they don't change. Check your loan agreement.
Sources
- Reserve Bank of India: Monetary Policy Statement, 5–7 October 2026 (repo rate 5.50%, SDF 5.25%, MSF and Bank Rate 5.75%)
- RBI MPC hikes repo rate by 25 bps to 5.5% (Business Standard, 7 October 2026)
- RBI directions on interest rate on advances: external benchmark-based lending for floating-rate retail and MSE loans (from October 2019), and the 2023 framework for reset of floating interest rates on EMI-based personal loans