Q. With reference to the Marginal Cost of Funds based Lending Rate (MCLR), consider the following statements:
1.MCLR is calculated by the Reserve Bank of India and is applicable uniformly across all banks.
2.Banks are not allowed to lend below the MCLR rate for loans linked to that benchmark.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: B
Notes:

Explanation:

  • The Marginal Cost of Funds-Based Lending Rate (MCLR) is the minimum interest rate that a bank is allowed to charge for lending.
  • It serves as a benchmark for determining the lowest possible interest rate at which banks can offer different types of loans.
  • MCLR is determined internally by individual banks, not by the RBI.
  • Banks are not permitted to lend below the MCLR for loans linked to it.

Source: Indian Economy (Ramesh singh)

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