MCLR Vs. RLLR - Full Form, Meaning, Difference in Home Loan Rate Terms
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When you decide to buy a home of your own, a home loan comes out to be the most convenient way to make this dream a reality. Home loan lenders can offer you a home loan with either the Repo Linked Lending Rate (RLLR) or the Marginal Cost of Fund Based Lending Rate (MCLR). You must know everything about these to understand your home loan better.

What is the Repo Linked Loan Rate (RLLR)?

As the name suggests, RLLR is linked to the Repo rate set by RBI and is revised occasionally. All the banks have different rates. The RLLR full form tells you what it is- a loan rate linked to the repo rate. It depends on many factors, for example, the loan amount, risk groups, loan-to-value, etc. When lending is done based on the RLLR interest rate, the home loan interest rate moves up and down based on the change in the repo rate.

How to Calculate RLLR & How Does It Affect Loans?

RLLR, or Repo Linked Lending Rate, is pivotal in determining loan interest rates, especially home loans. Understanding how to calculate RLLR and its impact is crucial for people seeking transparency in their loan agreements. Here, we delve into the formula and key points related to RLLR:

The formula for Calculating RLLR:

RLLR = Repo Rate + Spread

  • Repo Rate: The rate at which banks borrow funds from the Reserve Bank of India (RBI).
  • Spread: The additional percentage the lending institution adds to cover its operational costs and profit margin.


Key Points to Note:

  • RLLR is directly linked to the RBI's monetary policy, making it more dynamic than MCLR (Marginal Cost of Funds Based Lending Rate).
  • Changes in the repo rate by the RBI can lead to fluctuations in RLLR, impacting your loan's interest rate.
  • Transparent and predictable, RLLR provides borrowers a clear understanding of how interest rates are determined.

What is the Marginal Cost of a Fund-Based Lending Rate (MCLR)?

If you’re thinking what is MCLR in loan, MCLR means the rate below which a bank cannot charge its customers. It is set by the bank adhering to the guidelines set by the RBI.

The MCLR full form- MCLR full form in banking suggests its function. It is the lowest rate at which Banks can lend funds. MCLR rate means a reference rate for banks to decide the interest rate they can charge on loans.

How to Calculate MCLR & How Does It Affect Loans?

Now that you know the MCLR Rate Meaning, it is imperative to understand how it is calculated. 

MCLR is calculated by considering various factors, including the cost of funds, operational expenses, and the desired margin. The formula to calculate MCLR involves these components:

MCLR = Marginal Cost of Funds (Weighted Average Cost of Current and Savings Account Deposits + Borrowings + Term Deposits) + Operation Costs + Tenor Premium

Now, let's explore how MCLR affects loans:

Key Points:

  • MCLR is the benchmark rate banks use to determine the interest rate on various loans, including home loans.
  • The loan interest rate is typically set as MCLR plus a spread or margin, which depends on the borrower's credit risk and other factors.
  • As MCLR changes periodically, usually monthly or quarterly, the interest rate on loans linked to MCLR also adjusts accordingly.
  • When MCLR rates decrease, borrowers may benefit from lower loan interest rates, potentially reducing their EMI payments.
  • Conversely, when MCLR rates rise, borrowers may face higher loan interest rates and increased EMI payments.

Difference Between MCLR & RLLR

Here are some key differences between MCLR and RLLR that will help you understand what MCLR and RLLR are

S. No. Parameters MCLR RLLR


Benchmark Link

Internal mechanism of Bank

External(RBI Repo Rate)


Reset period

Varies from Bank to Bank but is usually 6-12 months

3 months


Transmission rate

Comparatively slower

Faster Transmission

Key Points Summary of MCLR & RLLR in Terms of Differences

1. Benchmark Linking

  • In RLLR: It’s an external benchmark linked to RBI’s Repo Linked Lending Rate. If there’s a change in the repo rate by RBI, it would also affect your home loan interest rate.
  • In MCLR: It’s an internal benchmarking where the bank sets interest rates considering its cost of funds. The repo rate is not the only factor affecting the interest rate; factors like banking system liquidity, low-cost deposits, etc., also affect it.

2. Reset Period

  • In RLLR: The reset period in RLLR Rate is three months which means your EMI can be revised every three months. This is beneficial because borrowers can enjoy the repo rate cut through lower EMIs. However, if the repo rates escalate, a similar impact is also seen on the EMI payouts.
  • In MCLR: The reset period is usually six months or a year. Hence, banks may choose to revise their interest rates half-yearly or annually. This gives borrowers a good time lag before their EMI changes.

Read a Similar Article: Understanding Interest Rate On Housing Loans

3. Transmission Rate

  • In RLLR: The change in rate cuts by RBI is transferred to the borrowers quickly and quickly.
  • In MCLR: The transmission of the rate cuts is slow, and it usually takes time before the actual benefit is finally transferred to the borrower.

In a nutshell

If you borrow a Repo Rate Linked Home Loan, you can enjoy more transparency and expect to benefit from repo rate reduction quickly. MCLR, on the other hand, is a more stable option if you estimate the repo rate to rise.


Read also: ईएमआई का मतलब क्या है

Frequently Asked Questions

1.) What is the Full form of MCLR?

MCLR is the Marginal Cost of a Fund-Based Lending Rate. MCLR full form in banking means the lowest rate at which banks can lend funds to their borrowers as per RBI regulations. The MCLR full form suggests the meaning of this rate as it is a fund-based rate.

2.) What is the Full form of RLLR?

RLLR full form is Repo Linked Loan or Lending Rate. Repo Linked Lending Rate is a rate linked to RBI’s repo rate. The home loan interest rate depends on the repo rate.

3.) What is MCLR in loan?

What is MCLR in loan is easily understood with the MCLR full form in banking, which is the Marginal Cost of Fund- based Lending Rate. It helps borrowers benefit from RBI’s rate reduction.

4.) What is MCLR meaning, and how it is calculated?

MCLR means the lowest rate for lending loans. It helps bring transparency to financial institutions when deciding interest rates.

5.) What is the current MCLR rate by RBI?

MCLR rate means the minimum lending rate. The current MCLR rate by RBI is 6.80%-7.65%.

6.) What is the current RLLR rate?

RLLR rate, or Repo Linked Lending Rate, is linked to RBI’s rate. It is currently 8.40%

7.) Which one is better, Mclr or RLLR?

MCLR meaning clearly suggests that it is the lowest rate banks can lend money to a borrower. They are always a better option because RLLR rates change, and it becomes difficult for the borrower if it increases.

8.) Are all home loans linked to the repo rate?

All major banks have their housing loan linked with the repo rate but not all financial institutions are linked.


We now hope you understand what MCLR means, what RLLR interest rate is, and how these two work. At Kotak Mahindra Bank, we provide Repo Rate Linked Home Loan and MCLR loans at affordable interest rates and quick approvals.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.