Q. Which of the following is/are the features of Marginal Cost of funds-based Lending Rate (MCLR)?
1.It will be a tenor linked internal benchmark, to be reset on quarterly basis.
2.It will be reviewed every month on a pre-announced date.
3.Existing borrowers will have the option to move to it.
Choose the correct answer from below given codes:

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: C
Notes:

Explanation: From the financial year 2016-17 (i.e., from 1st April, 2016), banks in the country have shifted to a new methodology to compute their lending rate.

The new methodology—MCLR (Marginal Cost of funds-based Lending Rate) — which was articulated by the RBI in December 2015. The main features of the MCLR are—

  • It will be a tenor linked internal benchmark, to be reset on annual basis.
  • Actual lending rates will be fixed by adding a spread to the MCLR.
  • To be reviewed every month on a pre-announced date.
  • Existing borrowers will have the option to move to it.
  • Banks will continue to review and publish ‘Base Rate’ as hitherto

Source: TMH Ramesh Singh