BANKING AFFAIRS

Detailed explanation-1: -Ans: MCLR or the Marginal Cost of funds based Lending Rate is a rate specified by RBI which serves as the minimum rate below which banks cannot extend a loan, except in certain cases.

Detailed explanation-2: -Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend. MCLR 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.

Detailed explanation-3: -What is MCLR? The MCLR (Marginal Cost of Funds Based Landing Rate) is the minimum interest rate a bank can charge for a loan. Banks are permitted to issue any category of loan on a fixed or floating interest rate under the MCLR regime.

Detailed explanation-4: -The correct answer is Base Rate. Key Points The Base Rate is the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is the minimum interest rate of a bank below which it is not viable to lend.

Detailed explanation-5: -What is the Marginal Cost of Funds? The increase in financing costs for a lending institution as a result of adding one more dollar of new funding is known as the marginal cost of funds. It is the incremental cost or differentiated cost and is considered important for making decisions on the capital structure.