The primary objective of the Marginal Cost of Funds-based Lending Rate (MCLR) introduced by the Reserve Bank of India (RBI) is to: |ForumIAS

Q. The primary objective of the Marginal Cost of Funds-based Lending Rate (MCLR) introduced by the Reserve Bank of India (RBI) is to:

[A] Increase the profitability of banks

[B] Ensure faster transmission of monetary policy rates to borrowers

[C] Stabilize the cash flow of banks

[D] Provide a fixed interest rate for borrowers

Answer: B

Notes:

Explanation – The MCLR system was implemented to improve the transmission of policy rate changes into the lending rates of banks, ensuring that changes in the RBI’s policy rates are quickly reflected in the interest rates offered to borrowers. This approach aims to enhance transparency and ensure that bank loans are available at fair rates to both lenders and borrowers.

Source: The Hindu

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