What is/are the purpose/purposes of the ‘Marginal Cost of Funds based Lending Rate (MCLR)’ announced by RBI? 1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances. 2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks. Select the correct answer using the codes given below:

Question

What is/are the purpose/purposes of the &lsquo;Marginal Cost of Funds based Lending Rate (MCLR)&rsquo; announced by RBI? 1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances. 2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks. Select the correct answer using the codes given below:

CollectorBabu · Accepted Answer

Correct Answer: Both 1 and 2. ● The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR describes the method by which the minimum interest rate for loans is determined by a bank. MCLR aims: ● To improve the transmission of policy rates into the lending rates of banks ● To bring transparency in the methodology followed by banks for determining interest rates on advances ● To ensure availability of bank credit at interest rates which are fair to borrowers as well as banks ● To enable banks to become more competitive and enhance their long run value and contribution to economic growth

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