What is RLRR? How is RLLR calculated?

 What is RLRR?

Repo linked lending rate (RLLR): From October 1, 2019, all new floating rate personal or retail loans such as your car or home loans that are sanctioned by banks will have to be linked to external benchmarks, and the central bank's repo rate is one of them.

How is RLLR calculated?

RLLR is an external benchmark, wherein, the RBI's repo rate is used by commercial banks to calculate the retail loan interest rate. In case the repo rate of 5.75% is reduced by 35 basis points to settle at 5.40%, the RLLR of all banks having repo rate as the external benchmark will reduce by 35 basis points

Which is better Mclr or RLLR?

In RLLR linked loans the interest burden on customers is much less than MCLR linked loans. ... In RLLR linked loans, whenever RBI increases the Repo rate the interest rate will increase and whenever it will reduce the interest rate will reduce with the same increase or decrease.

What is the PLR rate?

PLR stands for Prime Lending Rate. It is the internal benchmark rate used for setting up the interest rate on floating rate loans sanctioned by Non Banking Financial Companies (NBFC) and Housing Finance Companies (HFC). PLR rate is calculated based on average cost of funds.

What is reverse repo rate?

Definition: Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.

How do you convert Mclr to RLLR?

The floating rate of interest on my/our loan converted from 3M MCLR to RLLR by the Bank will be reset when there is a change in the policy Repo Rate by RBI and consequently the RLLR. The rate of interest reset will be done by the 7th calendar day of the following month from RBI's announcement of change in Repo Rate.

Who can adjust the reverse repo rate?

Reverse Repo Rate is when the RBI borrows money from banks when there is excess liquidity in the market. The banks benefit out of it by receiving interest for their holdings with the central bank. During high levels of inflation in the economy, the RBI increases the reverse repo.

What is the purpose of reverse repo?

Reverse repos are commonly used by businesses like lending institutions or investors to lend short-term capital to other businesses during cash flow issues. In essence, the lender buys a business asset, equipment or even shares in the seller's company and at a set future time, sells the asset back for a higher price

What is Bank Rate vs Repo Rate?

Simply put, repo rate is the rate at which the RBI lends to commercial banks by purchasing securities while bank rate is the lending rate at which commercial banks can borrow from the RBI without providing any security

What happens when repo rate increases?

Repo rate is used by monetary authorities to control inflation. Description: In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

How does the Repo Rate affect inflation?

An increased Repo Rate discourages commercial banks from borrowing more money from SARB, and this can help to curb inflation. A decreased Repo Rate makes it easier for commercial banks to borrow money from SARB, but this also means that inflation could rise.

How does Repo Rate affect deposit rates?

For depositors

The repo rate cut will also result in a fall in the interest rates on fixed deposits (FDs). “Banks are sitting on liquidity with large deposits in savings accounts and FDs. ... State Bank of India (SBI) cut its interest on FDs by 20 bps on 12 May. Its one-year FD offers an interest rate of 5.50% a year