Repo rate changes and your loan: what the RBI's rules say
What an external benchmark loan is
Since 1 October 2019, banks have had to link new floating rate personal and retail loans, such as home and auto loans, and loans to micro and small enterprises, to an external benchmark. Medium enterprises followed from 1 April 2020. Under the RBI's Directions for commercial banks in force today, all floating rate personal or retail loans and floating rate loans to micro, small and medium enterprises are benchmarked this way.
Three kinds of rate count as an external benchmark: the RBI's policy repo rate, the three-month or six-month Treasury Bill yield published by Financial Benchmarks India (FBIL), and any other market rate FBIL publishes. A bank must use one benchmark within a loan category.
Why two borrowers at the same bank can pay different rates
The rate on an external benchmark loan is the benchmark plus a spread. The bank decides the spread under a policy approved by its Board, which sets the components and their range for each category of borrower. Once a loan is sanctioned, the credit risk premium in the spread may change only when the borrower's credit assessment changes substantially, as agreed in the loan contract. The other components, including operating cost, may be altered once in three years, and may be reduced sooner for a loan category for customer retention.
So two borrowers sanctioned on different dates, or with different credit assessments, can carry different spreads and different rates, while a repo change moves the benchmark under both by the same amount. This page compares your rate now with your rate on the reset date plus the repo change since then.
What a reset date is
A reset date is the day the loan's rate is brought in line with its benchmark. For an external benchmark loan, the rate must be reset at least once in three months, so a repo change can take up to three months to reach a loan. When a change is less than three months old, the tool also shows the comparison with only the older changes counted.
An MCLR-linked loan works differently. Its reset dates are set in the contract, one year or less apart, and the MCLR in force on a reset date applies until the next one, whatever the benchmark does in between. Such a loan does not have to move one-for-one with the repo rate; the rules on moving it to an external benchmark are in the questions below.
What the bank must give a borrower in writing
For EMI-based floating rate personal loans, the rules set out what a bank must communicate. At sanction, it must explain how a benchmark change can affect the EMI, the tenure or both, and it must communicate any later increase in EMI or tenure immediately. Each quarter it must make available a statement of principal and interest recovered, the EMI, the EMIs left and the annualised rate. The charges for exercising the options at a reset must be disclosed in the sanction letter and on the bank's website.
At a reset, the borrower must be offered a higher EMI, a longer tenure or a combination, and the option to prepay in part or in full at any time. A longer tenure must not lead to negative amortisation. A switch to a fixed rate is offered at the bank's option, under its Board policy. These requirements apply to loans linked to an external or an internal benchmark.
How to complain
A complaint goes first to the bank. Under the Reserve Bank – Integrated Ombudsman Scheme, 2026, in force from 1 July 2026, it can then go to the RBI Ombudsman if the bank has not replied within 30 days or the borrower is not satisfied with the reply. The time limit is 90 days from the end of that 30-day period or from the bank's last communication, whichever is later.
The Directions cited on this page apply to commercial banks. They do not cover small finance banks, local area banks, co-operative banks or NBFCs, including housing finance companies.