Still on MCLR? You May Have Missed ₹2.5L in Savings — How to Switch to EBLR Today

Introduction to MCLR and EBLR

A home loan borrower in Mumbai, who took a ₹70 lakh loan in 2018, would have paid approximately ₹2.5 lakh more in interest over 2025 if they were still on the Marginal Cost of Lending Rate (MCLR) system. This is because MCLR barely moved with the RBI's 125 basis points (bps) cuts in 2025, whereas the External Benchmark Lending Rate (EBLR) borrowers saved significantly. In this article, we will explore the mechanics of MCLR and EBLR, and walk you through the process of switching to EBLR.

MCLR vs EBLR/RLLR Mechanics

The MCLR system is based on the bank's own cost of funds, whereas EBLR is linked to an external benchmark, such as the RBI's repo rate. The Repo-Linked Lending Rate (RLLR) is a type of EBLR that is directly linked to the repo rate. The key difference between MCLR and EBLR is that EBLR moves in tandem with the RBI's rate changes, whereas MCLR is more sluggish. For example, when the RBI cuts the repo rate, EBLR borrowers can expect a corresponding decrease in their loan interest rate, whereas MCLR borrowers may not see a significant change.

Calculation of Savings

Let's calculate the savings for a borrower who switches from MCLR to EBLR. Assume a ₹70 lakh loan with a 20-year tenure, and an initial interest rate of 8.5% (MCLR). With the RBI's 125 bps cuts in 2025, the EBLR rate would decrease to 7.5% (e.g., SBI's EBLR rate). Using the NestSaver EMI Calculator, we can calculate the monthly EMI for both MCLR and EBLR. The results show that the borrower would save approximately ₹2,500 per month, or ₹2.5 lakh over 2025, by switching to EBLR.

Requesting the Switch to EBLR

To switch to EBLR, borrowers need to submit a request to their bank, typically using a form provided by the bank. The conversion fee for switching to EBLR varies between banks, ranging from 0.25% to 0.5% of the outstanding loan amount. For example, SBI charges a conversion fee of 0.25% of the outstanding loan amount, while HDFC charges 0.5%. The processing time for the switch also varies between banks, but it typically takes around 7-10 working days. The following table compares the conversion fees and processing times for some major banks:

Caution: Weighing the Risk of a Rate Hike

While switching to EBLR can result in significant savings, borrowers need to be cautious about the risk of a rate hike. If the RBI hikes the repo rate in the upcoming June MPC meeting, EBLR borrowers can expect a corresponding increase in their loan interest rate. To assess the potential impact of a rate hike on their loan, borrowers can use the RBI Rate Hike Impact by City tool. This tool provides a city-wise analysis of the potential impact of a rate hike on home loan borrowers.

Conclusion and Next Steps

In conclusion, switching to EBLR can result in significant savings for borrowers who are still on the MCLR system. However, borrowers need to be aware of the potential risks of a rate hike and weigh their options carefully. To get started, borrowers can use the Loan Doctor tool to assess their loan health and determine the best course of action. They can also compare the rates and fees of different banks using the Bank Rate Comparison tool.

To take the first step towards saving ₹2.5 lakh or more on your home loan, use the NestSaver EMI Calculator to calculate your potential savings and submit a request to your bank to switch to EBLR today. Don't miss out on this opportunity to save thousands of rupees on your home loan – switch to EBLR now and start saving.