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    Question

    Consider the following statements about Marginal Cost

    of Funds based Lending Rate (MCLR): (1) It was introduced in the year 2010 (2) It is the lowest rate of fund lending and no bank is permitted to lend below this rate. (3) It has replaced the earlier Base Rate System Which of the statements given above is/are correct?
    A Only 1 Correct Answer Incorrect Answer
    B Only 2 Correct Answer Incorrect Answer
    C Only 3 Correct Answer Incorrect Answer
    D Both 1 or 3 Correct Answer Incorrect Answer
    E All are correct Correct Answer Incorrect Answer

    Solution

    · Marginal Cost of Funds based Lending Rate is the lowest rate of fund lending. No bank is permitted to lend below this. The methods used to renew credit limits and sanction loans are per MCLR norms. It is determined by banks internally, depending upon the loan repayment time. · MCLR full form is Marginal Cost of Funds based Lending Rate. · RBI gives a fixed Internal Reference Rate for banks under it. · This Interest Rate is used by all banking and non-banking institutions as their minimum interest rate applicable for lending any loan. It has replaced the earlier Base Rate System, which was introduced in the year 2010. · State Bank of India has hiked its marginal cost of funds based lending rate (MCLR) by 10 basis points (bps) across tenures, effective May 15. This is the second time the state-owned lender has raised its MCLR in as many months. · SBI’s overnight, one-month, three-month MCLR now stands at 6.85 per cent as against 6.75 per cent earlier. · the six-month MCLR stands at 7.15 per cent, one-year MCLR, one-year MCLR stands at 7.20 per cent, two-year MCLR stands at 7.40 per cent, and three-year MCLR stands at 7.50 per cent. · The hike in MCLR by SBI comes after the monetary policy committee (MPC) hiked benchmark interest rate (repo rate) by 40 basis points to 4.40 per cent. · As of December 2021, a little over 39 per cent of banking system loans are linked to the external In a benchmark, shows Reserve Bank of India data, with 58.2 per cent of the home loans linked to external benchmarks.

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