Dear Champions, recently many banks changed the mclr interest here mclr stands for marginal cost of fund lending rate. In this article we are explaining what is mclr and
what is bank rate and mainly the difference between bank rate vs mclr rate. Let us first discuss the meaning of mclr in detail and we have attached recent mclr rates in pdf format to download.
What is MCLR ( Marginal Cost of Fund Lending Rate ) ?
The MCLR meaning is a reference rate or internal benchmark for all financial Institution. Marginal cost of fund based lending rate defines the method used to determine the minimum home loan rate of interest. The MCLR method was introduced in the Indian financial system by the RBI in the year 2016. The MCLR system has been replaced with the base rate system that was introduced in the year 2010. Thus, renewal of credit limits and sanctioning of loans is done as per MCLR rates.
What is Base Rate?
Base Rate can be defined as the minimum interest rate below which a lender is not permitted to offer loans. Introduced in the year 2011, the Base Rate System was implemented with the following objectives –
- To improve the transmission of monetary policy
- To introduce a higher level of transparency in the approach of a selection of lending rates by banks.
Difference between MCLR vs Base Rate :
|Based on the average cost of funds||Based on marginal/incremental cost of funds|
|Calculated by considering minimum rate of return/profit margin||Calculated by considering the tenor premium|
|The base rate is also governed by operating expenses, and expenses needed to maintain a cash reserve ratio||The MCLR is also determined by considering deposit rates and repo rates, along with operating costs and cost of maintaining the cash reserve ratio|
|The base rate can be changed by vendors every quarter||MCLR varies depending on the tenure of the given loan|
Recently, All PSU and private sector banks changed their MCLR rates hence its very important for upcoming competitive exams here by we have attached the
pdf kindly download the pdf to know the detailed rate.