Changes in EBLR & MCLR framework, interest rate charging mechanism and how reset dates are decided- RBI proposal

At the end of the Monetary Policy Committee (MPC) meeting today (August 5, 2026), Reserve Bank of India (RBI) governor Sanjay Malhotra announced that the central bank plans to rationalise the rules around interest rates for all Regulated Entities (REs) through a principle-based approach.

The RBI governor mentioned that the proposed simplification aims to align the guidelines across different categories of regulated entities while ensuring that the framework remains proportionate to the nature and size of each entity.

The RBI also intends to address certain operational issues within the existing lending rate framework, particularly those relating to the Marginal Cost of Funds-based Lending Rate (MCLR) and External Benchmark Lending Rate (EBLR).


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Elaborating on the proposal, the RBI governor said the central bank plans to standardise certain market practices related to interest charging, including the day count convention and benchmark reset dates, where divergent practices currently exist.

These measures are designed to promote greater uniformity and transparency to loan pricing, improve monetary transmission and strengthen consumer protection, the RBI governor explained.

Malhotra also mentioned that the RBI will soon release draft directions for these proposals, and invite public comments before finalising the framework.

At this stage, RBI has only outlined the broad contours of the proposed changes. Detailed provisions are expected to become clear once the draft directions are released for public consultation.

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What are EBLR and MCLR benchmarks?

External Benchmarks Lending Rate (EBLR) and Marginal Cost of Funds-Based Lending Rate (MCLR) are used to determine interest rates for loans in India.

Many home loans in India are linked to the Repo Linked Lending Rate (RLLR) benchmark, which is also one of the EBLRs. So, any change in repo rate is directly reflected in the home loan interest rates.

On the other hand, borrowers with their home loans linked to Marginal Cost of Funds-based Lending Rate (MCLR), experience a slower transmission of the repo rate cut into their loan EMIs.

As far as borrowers with fixed interest rate loans are concerned, their loans are not linked to the repo rate and there is no change in their interest rates.