Prelims 2016 · Economy · Question 68
What is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI?<br/>1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.<br/>2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.<br/><br/>Select the correct answer using the code given below.
Answer
Both 1 and 2
1. Correct. RBI introduced MCLR to make banks' lending rate-setting more transparent and more closely linked to their actual marginal cost of funds.
2. Correct. MCLR was meant to improve fairness and transmission of policy rates, so borrowers get credit at more reasonable rates while banks also cover their funding costs.
Therefore, both 1 and 2 are correct.