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Question

Which of the following is not a component of MCLR?

A Marginal cost of funds Correct Answer Incorrect Answer
B Negative carry on account of CRR Correct Answer Incorrect Answer
C Operating costs Correct Answer Incorrect Answer
D Tenor premium Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

All of the above are the components of MCLR Negative carry on account of CRR : is the cost that the banks have to incur while keeping reserves with the RBI. The RBI is not giving an interest for CRR held by the banks. Operating cost : is the operating expenses incurred by the banks. Tenor premium : denotes that higher interest can be charged from long term loans Marginal Cost : The marginal cost that is the novel element of the MCLR. The marginal cost of funds will comprise of Marginal cost of borrowings and return on networth.

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