Question

What are the purposes of the Marginal Cost of Funds based Lending Rate announced by RBI?​

Answer 1

MCR (Marginal Cost of funds based Lending Rate) replaced the earlier base rate system to determine the lending rates for commercial banks. RBI implemented MCLR on 1 April 2016 to determine rates of interests for loans. It is an internal reference rate for banks to determine the interest they can levy on loans.

Answer 2

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Here is your answer-

MCLR guidelines helped in improving the transparency in the methodology followed by banks for determining the interest rates on advances and also ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.

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