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In the context of the RBI’s monetary policy, the External Benchmark Lending Rate (EBL

Q: Answer-In the context of the RBI’s monetary policy, the External Benchmark Lending Rate (EBLR) framework wa...

To ensure that changes in the RBIs repo rate are passed on to borrowers more quickly, the RBI mandated the External Benchmark-based Lending Rate EBLR system. This requires banks to link specific loan categories to external market-determined benchmarks like the Repo Rate or T-bill yields rather than internal benchmarks like the MCLR, which were often slow to respond to policy changes.

R framework was introduced to improve the transmission of policy rates. Which of the following is true regarding the EBLR?

A Banks are free to reset the EBLR once every year to ensure profit stability.

B It allows banks to use their own internal cost of funds to set interest rates for retail loans.

C Banks must link the interest rates on specified floating-rate retail and MSME loans to an external benchmark, such as the Repo Rate.

D The EBLR framework applies only to Public Sector Banks, while private banks continue to use the MCLR.

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