Question
As per RBI’s External Benchmark Based Lending framework, how frequently must the interest rate linked to an external benchmark be reset?
Solution
• RBI’s circular on External Benchmark Based Lending (EBLR) mandates that interest rates on floating rate loans linked to external benchmarks must be reset at least once every three months. • This ensures that lending rates move in tandem with market interest rate changes, providing transparency and faster transmission of monetary policy. • Example: If a loan is linked to the RBI repo rate, and repo changes, the loan interest rate must reflect this change within one quarter.
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