BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Lucknow, Uttar Pradesh
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Jaipur, Rajasthan
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Kolkata, west Bengal
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Manipal, Karnataka
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Detailed explanation-1: -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.
Detailed explanation-2: -MCLR (Marginal Cost of Funds Based Landing Rate) refers to the minimum interest rate below which financial institutions can’t lend, except in certain cases. Earlier, when banks and financial institutions did lend on base rates, its prime customers used to get undue advantages.
Detailed explanation-3: -The base rate is calculated on the average cost of funds, while the MCLR is calculated on the marginal cost of funds. Base rate calculation includes the minimum returns or profit margins, but MCLR is calculated based on the tenor premium, i.e., the amount of time a borrower has to repay the loan.
Detailed explanation-4: -Ans: MCLR interest rate is based on the tenure of the loan, the cost of funds, operating expenses of the bank, and the negative carry on the CRR.