MCLR
▪️MCLR or marginal cost of funds based lending rate has been introduced so that end borrowers can enjoy the benefits associated with repo rate cuts by the Reserve Bank of India (RBI). This has been implemented to make banking system even more transparent.
▪️MCLR depends on factors like CRR (Cash Reserve Ratio), marginal cost of funds, tenor premium, and operating cost.
▪️It is dependent on the repo rate changes made by the RBI.
▪️Marginal cost of funds based lending rate can be different for different loan tenures.
Base Rate
▪️The minimum rate of interest at which banks offer loan to their customers is called the base rate.
▪️Base rate depends on different factors like profit, bank deposit rates, bank costs, etc.
▪️It is not dependent on the repo rate set by the Reserve Bank of India.
▪️Banks can choose to change the base rate quarterly.
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