Repo-linked vs MCLR: which rate are you on, and why it matters

If you took your home loan a few years ago, there is a real chance it is still linked to MCLR, and that you would be better off on a repo-linked rate today. Most borrowers have never been told the difference. Let’s fix that.

MCLR, in plain words

MCLR (Marginal Cost of Funds based Lending Rate) is an internal benchmark set by your bank, based largely on its own cost of funds. Because the bank controls it, MCLR tends to fall slowly when rates drop, and resets only at fixed intervals (often every 6 or 12 months). In other words: when the RBI cuts rates, you wait.

Repo-linked, in plain words

A repo-linked lending rate (RLLR) is tied directly to the RBI’s repo rate, an external benchmark the bank does not control. When the repo rate moves, your rate moves, and it typically resets every three months. The transmission is faster and far more transparent.

Why it matters to your wallet

• Speed of benefit. On a repo-linked loan you feel rate cuts sooner; on MCLR you may wait two to four quarters.
• Transparency. The repo rate is public. MCLR is a number your bank computes, harder for you to second-guess.
• The drift. Stay on an old MCLR loan long enough and you can end up a full percentage point above comparable repo-linked borrowers.

How to check which one you’re on

1. 1Look at your sanction letter or latest statement for “MCLR”, “RLLR”, “repo-linked” or “base rate”.
2. 2If it says MCLR or base rate, you are very likely a candidate for a reset.
3. 3If it is already repo-linked, the question becomes whether your spread over the repo rate is competitive.

Switching from MCLR to repo-linked is often a simple reset with your own bank, exactly the kind of low-effort, high-impact move Birbal is built to spot and execute for you.