Market rate benefit to old home loans

The Reserve Bank of India advised banks to link older home loan rates to the current market-linked levels.

Prior to April 2016, home loans were linked to the base rate which was arbitrarily decided by banks. As there were complaints that the base rate was not reflecting rate cuts, the RBI introduced the formula-based marginal cost of lending rate (MCLR) which was linked to the cost of funds. While borrowers after April 2016 got the benefit of MCLR, those with older loans continued to pay as per the base rate.