RBI's Draft Rule Would Make Floating Home Loan Rates Reset Every Three Months

An RBI draft proposes quarterly resets for floating-rate loans, a frozen spread for three years and a free move to the new framework. It would apply from 1 April 2027 if finalised.

If your home loan is linked to MCLR, a cut in the repo rate can take up to a year to reach your EMI. The RBI has proposed changing that.

What the draft proposes

Reset at least every three months for floating-rate loans. MCLR-linked loans can currently reset up to a year apart.
The credit risk premium could change only after an actual credit review or a change in the borrower's credit profile.
The rest of the spread would be frozen for three years, with limited exceptions.
Existing floating loans, including MCLR loans, would move to the new framework through a one-time mapping by 1 April 2029, with the borrower's consent, no migration fee and no rate increase just because of the switch.

Faster resets cut both ways. Rate cuts reach you sooner, and so do hikes.

Timing

Comments were invited until 11 September 2026. If finalised, the rules would apply from 1 April 2027. It is a draft, so details may change.

What it means for you

Borrowers on old MCLR loans could see rate changes pass through faster, in both directions.
A frozen spread limits a lender's ability to quietly widen your margin.
Until then, compare your rate with what new borrowers get. If the gap is large, see when a balance transfer is worth it.

Frequently asked questions

How often would floating home loan rates reset under the RBI draft?

At least once every three months, if the draft is finalised.

When would the new reset rules apply?

From 1 April 2027 if finalised, with existing loans mapped to the new framework by 1 April 2029 with borrower consent and no migration fee.

Sources

Outlook Money: RBI's 3-month reset rule and your loan EMIs

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