Definition
External Benchmark Lending Rate (EBLR)
The External Benchmark Lending Rate is the rate at which banks price floating retail and MSME loans, linked to an external benchmark such as the RBI repo rate.
Since October 2019, the RBI has required banks to link new floating-rate personal, retail and small-business loans to an external benchmark, most commonly the repo rate, plus a spread. This is what gives rise to the repo-linked lending rate (RLLR).
EBLR ensures faster, fuller monetary policy transmission than the internal MCLR benchmark, because the rate resets at least quarterly with the benchmark. Borrowers benefit quickly when the RBI cuts rates but also face faster increases when it hikes.
Related terms
- MCLR (Marginal Cost of Funds Lending Rate)MCLR is an internal benchmark that determines the minimum interest rate at which a bank can lend, based on its cost of funds.
- Repo-Linked Lending Rate (RLLR)RLLR is a lending rate tied directly to the RBI's repo rate, so changes in the repo rate quickly flow through to borrowers.
- Monetary Policy TransmissionMonetary policy transmission is the process by which RBI changes in the repo rate flow through to the lending and deposit rates banks actually offer.
- Repo RateThe repo rate is the interest rate at which the RBI lends short-term money to commercial banks, and it is the central bank's main tool to balance inflation and growth.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.