Ever since the RBI introduced the Prime Lending Rate (PLR) benchmark, several financial institutions enforce it to determine the rates they offer. Lenders apply PLR home loan rates uniformly across all their branches. Any changes in BPLR (Benchmark Prime Lending Rate) directly affect the floating rate of interest for a home loan, whereas loans with a fixed rate of interest are not affected by PLR.
Lenders ascertain the final home loan interest rate by using spread and PLR. It is the sum of the Prime Lending Rate and the applicable spread. The spread can be positive or negative and generally remains constant throughout the loan. However, do note that converting to a new benchmarking regime can change the spread. For instance, if the borrower converts a home loan from an old scheme to a new external benchmark, there may be a revised spread applicable.