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    Question

    In the term MCLR, introduced by the Reserve Bank of

    India to replace the base rate system, what does the letter тАЬLтАЭ stand for?
    A Leverage Correct Answer Incorrect Answer
    B Lending Correct Answer Incorrect Answer
    C Liability Correct Answer Incorrect Answer
    D Liquidity Correct Answer Incorrect Answer
    E Limit Correct Answer Incorrect Answer

    Solution

    тАв MCLR stands for Marginal Cost of Funds based Lending Rate. тАв It represents the minimum lending rate below which banks are not allowed to lend (except in specific cases permitted by RBI). тАв Introduced in April 2016, MCLR replaced the earlier Base Rate system to improve monetary policy transmission. тАв The framework links lending rates more closely with the marginal cost of funds (such as repo rate, deposit rates, and operating costs). Hence, in MCLR, the тАЬLтАЭ stands for Lending.

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