An external benchmark is a rate the bank does not set by itself. A floating home loan linked to one moves when that rate moves, plus or minus the spread in your sanction letter. An internal benchmark, such as an older base rate or an MCLR the bank builds from its own cost of funds, is a different system. New floating home loans from banks are on the external one.
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EMI Calculator
EMI, total interest and total payment for a home, car or personal loan.
Open calculatorCircular RBI/2019-20/53, dated 4 September 2019, changed the Master Direction on interest rates. From 1 October 2019, all new floating-rate personal or retail loans, and the circular names housing and auto loans, and floating-rate loans to micro and small enterprises, extended by banks, are benchmarked to one of four rates. They are the Reserve Bank of India policy repo rate, the Government of India 3-month Treasury bill yield published by Financial Benchmarks India Private Ltd, the 6-month Treasury bill yield published by FBIL, or any other benchmark market interest rate published by FBIL.
A bank must use one external benchmark inside a loan category. It cannot offer one home loan off the repo rate and another home loan off a Treasury bill. The spread over the benchmark is the bank’s to decide. The circular lets banks offer the same style of loan to other borrowers as well. The rate under the external benchmark resets at least once in three months.
When the benchmark moves, the reset rules decide what happens to your EMI. Circular RBI/2023-24/55, updated on 1 October 2025, says borrowers get the choice to raise the EMI, lengthen the tenure, or combine the two, and the choice to prepay. The prepayment guide links the repo rate page so you can see the policy rate separately from any one bank’s spread. The EMI guide shows why the same rate produces a different interest bill if the tenure changes.
The benchmark is not the EMI. A repo rate of a given percent does not mean your home loan costs that percent. Your rate is the benchmark plus the spread, and the spread is what the sanction letter should make obvious.
Two “repo-linked” loans can still differ by the spread, the reset date and the fees in the sanction letter. Compare those three, not the benchmark name alone. The policy rate itself is on the RBI rates page. It moves on the Reserve Bank’s calendar, and your loan moves on the reset date in the agreement.
Checked on 3 November 2026. Read the benchmark name on the sanction letter before you compare two lenders’ starting rates.
Questions
Which benchmarks can a bank use?
The 4 September 2019 circular names four: the RBI policy repo rate, the 3-month Treasury bill yield published by FBIL, the 6-month Treasury bill yield published by FBIL, or another benchmark market rate published by FBIL.
How often does the loan rate change?
At least once in three months. The bank can reset more often. The date is in the loan agreement. A change in the repo rate does not rewrite your EMI on the day of the Monetary Policy Committee meeting unless your reset date has arrived.
Can one bank use two benchmarks for home loans?
Not inside one loan category. The circular says a bank must adopt a uniform external benchmark within a loan category. The spread over that benchmark can still differ from borrower to borrower.
Sources
Figures checked 3 Nov 2026.