What is the RLLR Rate?

RLLR-linked rates of interest on loans are calculated based on the current Repo Rate set by the RBI.

The RLLR of PNB or any other bank is calculated as the total of the Repo Rate and Spread. The Repo Rate is the rate at which RBI offers loans to commercial banks and Spread is the percentage calculated by each bank to cover their operational costs and profit margin. For this reason, different banks have different interest rates on loans due to different Spread values. 

Calculation of RLLR = Repo Rate + Spread

Repo Rate: The rate at which RB lends funds to commercial banks.

Spread: The additional percentage banks charged to cover operational expenses and profit margins.

Any change in the Repo Rate decided by the RBI leads to changing the calculation of the RLLR. These changes, in turn, impact the interest rate calculation of loans.

You can also check the Base Rate online.

The RLLR has a profound impact on loan interest rates, especially on home loans. Unlike the Marginal Cost of Funds based Lending Rate (MCLR), RLLR has a direct correlation with the RBI’s monetary policy. Understanding the calculation process RLLR and its implications is crucial for individuals in their loan agreements.

When the RBI changes its Repo Rate, fluctuations in RLLR will also follow suit, impacting the interest rates on loans. This transparency inherent in RLLR provides borrowers with a clear understanding of how interest rates are determined, leading to informed decisions in loan agreements.

There is a specific reason for the immediate effect on borrowers with a floating rate, as it is linked to a benchmark such as the Repo Rate. The subsequent effect on RLLR, such as the floating rate, is seen within a quarter of the fluctuation in the benchmark.

Investment home buyers usually tend to avail of higher loan amounts as compared to self-occupied and affordable home buyers. This is because they use the purchased properties as an investment source or even rent them out if there is profit in selling them off at higher prices later.

Since investment home buyers avail of a higher loan amount, they are more impacted by hikes in a floating RLLR home loan interest rate option. As a result, they have to pay more on the interest component on their loans as the lenders increase the rates triggered by RBI’s Repo Rate increase.

The self-occupied affordable home buyers with a lower loan amount are less likely to be impacted by the rate hike. 

The existing borrowers who pay EMIs for a long tenure can consider shifting from the earlier lending rate systems like MCLR or BLR to the RLLR interest rate because it is more transparent. Furthermore, borrowers can expect a lower EMI payment burden as the RBI cuts the Repo Rate.

However, if your loan repayment tenure is about to end soon, then it is advised not to switch the existing lending rate as you may end up paying unnecessary expenses.

You can also check how to pay property tax online.

The PNB RLLR is 9% at present (Repo Rate of 6.50% + Mark-up of 2.50%) for all customers. Along with RLLR rate of PNB, a BSP of 0.25% will be charged.

All new floating rate retail loans (including home loans, auto loans, personal loans, etc.) and floating rate Micro, Small and Medium Enterprise (MSME) loans will continue with the markup of 2.50% + 25 bps of BSP w.e.f. 8th November 2021 onwards and the same will be reset after 3 years from the date of opening the account.

In case of existing borrowers with loans linked to RLLR PNB sanctioned between 1st October 2019 and 31st August 2020, will have the Mark-up of 2.65% which will be reset after a period of 3 years from the date of opening of the account.

Effective from 1st October  2019, in terms of RBI guidelines, Canara Bank has shifted to the pricing of MSME and retail loans/ advances linked to external benchmark i.e. RLLR. RLLR Canara Bank is 9.25% w.e.f 12th July 2024. This rate will be applicable only to the new accounts opened on or after 12th November 2023 and accounts completing 3 years under RLLR regime on or after 12th November 2023 (from the date of granting loan/ advance). The said RLLR will be effective till the next review. The accounts having not completed 3 years under the RLLR regime will be linked to the earlier RLLR of Canara Bank i.e. 9.40%. Further, the benchmark fixed under the Fixed Interest Rate regime will be for 3 years.