Bank Vs HFC’s:

Indian home loan market has two types of players’ i.e. Banks and Housing Finance Companies (HFC’s)  

In the year 2019, as per RBI guidelines all banks started linking their lending rates directly to an External Benchmark (EB) or to an External Benchmark Lending Rate (EBLR).

The external benchmark is the RBI REPO for some banks and for others it is the Government of India Treasury Bill reference rate.

Your home loan rate with any bank will be referenced to either the External Benchmark (EB) itself or an External Benchmark Linked Rate (EBLR) by way of a margin/discount also known as spread.

Lending Equation of Banks:   

A)  External Benchmark + Bank Margin = Lending Rate

External Benchmark (EB) being the RBI REPO Rate or Government of India Treasury Bills.

B)  External Benchmark Lending Rate - Discount = Lending Rate

External Benchmark Lending Rate (EBLR) is an internal benchmark of the bank and is linked to an External Benchmark like RBI REPO. A discount is given on EBLR to arrive at the lending rate.  

Lending equation of Housing Finance Companies (HFC’s):

Prime Lending Rate – Discount = Lending Rate

Prime Lending Rate (PLR) is an internal benchmark of the Housing Finance Companies (HFC’s). A discount is given on PLR to arrive at the lending rate.