BANKING AFFAIRS

Detailed explanation-1: -Individual Banks Boards sets up the base rate which is the rate below which no bank can allow their lending to anyone. 1. Banks prepare Marginal Cost of Funds based Lending Rate (MCLR) which is the internal benchmark lending rates.

Detailed explanation-2: -What is Base Rate? Base rate is defined as the minimum interest rate set by the RBI below which Indian banks are not permitted to lend to their customers. Unless there is a government mandate, the RBI rule specifies that no bank may offer loans at an interest rate lower than the base rate.

Detailed explanation-3: -The BR is basically an interest rate that the bank refers to, before it decides on the interest rate to apply to your home loan. It is calculated against each bank’s cost of funds and Statutory Reserve Requirement (SRR), along with the borrower’s credit risk, liquidity premium, operating cost, and profit margin.

Detailed explanation-4: -the rate of interest that is set by a central bank, and which is the lowest rate at which it lends money to other banks. This rate affects the interest rates which are then charged to customers by the banks: The base rate currently stands at just under 1%.

Detailed explanation-5: -Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend.