About Marginal Cost of funds based Lending rate(MCLR)

About Marginal Cost of funds based Lending rate(MCLR)

Marginal Cost of funds based Lending rate(MCLR)

Marginal Cost of funds based Lending rate (MCLR)


Lending is an activity that fetches huge profit to the Banks and Financial Institutions that offer money to its customers in the form of loans and advances. However, it becomes a viable one to customers only when the cost of the same is affordable by them. MCLR targets to address this aspect of lending by Banks. MCLR means Marginal Cost of Funds based Lending Rate. Let us look at reasons for introducing MCLR, its components, calculations and guidelines in detail for clear understanding.

Reasons for introducing MCLR

Funding rates depend highly on monetary Policy changes and so it is important to understand the advantages of shifting the same from base rate to MCLR Rates. Some reasons are enlisted below for clarity.

  • To bring in transparent systems pertaining to the fixation of Interest rates for advances given to customers
  • To increase the competitiveness of Banks by focussing on measures that would enhance their value on the long run
  • To enable Banks to contribute in a considerable manner to the economic growth of the Country
  • To ensure the gelling of policy rates along with the lending rates
  • To enable a win-win situation for both the Banks as well as the customers by working on the interest rates

Components of MCLR

MCLR differs from the base rate in many aspects. Let us look at some of the main components of MCLR that differentiates MCLR from the base rate.

  • Cost calculated in MCLR is highly marginal
  • The minimum rate of return factor is completely excluded from MCLR
  • MCLR is highly dynamic since the rate revision happens on a monthly basis
  • Repo rate is considered for calculating the Marginal rate making it profitable for Banks and affordable for the general public

Calculation of MCLR

MCLR is basically calculated taking into consideration the negative carry on account aspect of CRR (Cash Reserve Ratio), Tenor Premium and Operating costs. The simple formula involved in the calculation of MCLR is as follows.

Marginal Cost of Funds is equal to (Return on Net worth X 8%) plus (Marginal cost of borrowings X 92%)

The actual figures that are arrived after calculation of this formula differ from one Bank to another based on their real-time performance.

Guidelines on MCLR

Some guidelines for implementing MCLR are given below.

  • Banks are to review MCLR system on a monthly basis
  • The review is to be published on the specified date every month
  • Banks that do not possess the wavelength to review MCLR on a monthly basis may do so once in a quarter. However such Banks must initiate monthly review soon coming out of the quarterly review system
  • Banks may have their interest reset dates based on the floating rate of loans they offer to customers
  • Such interest rate reset dates can be just once in a year or in periodicities that the Banks feels deem fit
  • The floating rate of loans that prevails on the date when the first disbursement happens shall be in vogue until the next date it is reset

  • Muskaan


    • Bubli

      thoda ruk jati Mai first aane wali thi😂😂😂😂

      • Muskaan

        koi na agli baar aa jaiyo 😀

  • Bubli

    Boss baby post🤘🙏👏👏👏

  • Muskaan

    bye ..aati hu

    • Bubli

      Haan tb tk BOSS baby ka ye post read kr lu
      Jao bath le lo lazy

    • Celestial ~ Bleeding Edge

      happie new yar muskaan ..

      • Muskaan

        same to u prasanna 🙂

  • Celestial ~ Bleeding Edge

    super post..!!

  • Bubli

    🎓Vocab of the day 🎓
    ★Word ~ Mellifluous
    ★Part of speech ~ Adjective
    ★ Meaning ~ Having a smooth, flowing sound 🔊 (मधुर)
    ★Synonyms~ Euphonious, Lyrical, Melodious, Musical 🎶
    ★Antonyms~ Discordant, Dissonant, Inharmonious, Harsh
    ★Example Sentence ~ Arijit singh is known for his mellifluous voice. ( अरिजीत सिंह अपनी मधुर आवाज के लिए जाने जाते हैं।)

    🎓 One word substitutions 🎓
    ◆Interment~ To burry (दफन कर देना)
    ◆Internment~ To confine someone especially in war. ( नजर बंद करना)


    🎓Idioms of the day🎓
    ◆Cry in wilderness ~ Unpopular opinion. (अप्रसिद्ध विचार/मत)
    ◆Utopian idea~ Having impossibly ideal conditions especially of social organization.
    (अवास्तविक कल्पना)

    🎓 Difficult Spellings of the day🎓
    ◆Accumulate ~ (इकट्ठा करना)
    ◆Restaurateur~ (जलपान गृह का स्वामी)

  • Bubli

    🔘Lok Sabha takes up judges’ salary Bill

    Infrastructure projects for public purposes allowed in prohibited areas

    The Lok Sabha on Tuesday took up a Bill to hike the salaries of judges of the Supreme Court and High Courts. “We are taking note of your concerns and the proper course will be followed,” Law Minister Ravi Shankar Prasad said, beginning the debate on The High Court and Supreme Court Judges (Salaries and Conditions of Service) Amendment Bill, 2017.

    Mr. Prasad said the Bill was necessary because the salaries of judges needed to be aligned with those of government servants after the 7th Pay Commission.

    🔘Iran’s top leader blames protests on meddling by ‘enemies’

    “In the recent days’ incidents, enemies of Iran utilized various means including money, weapons, politics and intelligence apparatuses to create problems for the Islamic system,” he said.

    Iran’s supreme leader on Tuesday blamed the protests roiling the country on “enemies of Iran” who he said were meddling in its internal affairs, as state television reported that overnight clashes between protesters and security forces killed another nine people.

    The demonstrations, the largest seen in Iran since its disputed 2009 presidential election, have brought six days of unrest across the country and resulted in at least 20 deaths.

    🔘S. Korea offers talks with North ahead of Olympics

    Open to talking with Pyongyang regardless of time, location and form’, says Unification Minister

    South Korea on Tuesday offered talks with North Korea amid a stand-off over its weapons programmes, a day after North Korean leader Kim Jong-un said he was open to negotiations but that his country would push ahead with “mass producing” nuclear warheads.

    The offer for high-level talks next Tuesday had been discussed with the United States, the South’s Unification Minister said, while a decision on whether to push back a massive joint military drill between South Korea and the United States until after the Winter Olympics was pending

  • Bubli

    69,000 babies born on new year’s day in india estimated by UNICEF ,the highest no.of births across the world😠😠😠😠on the day

  • Ashutosh Srivastava

    Good morning.

  • ROSY

    Thank you sat

  • ROSY
  • ROSY

    👉1. RBI – Reserve Bank of India
    Sector: Banking & Finance, Monetary Policy
    Head: Governor – Urjit Patel
    Headquarters: Mumbai
    Established on: 1st April 1935
    👉2. SEBI – Securities and Exchange Board of India
    Sector: Securities (Stock) & Capital Market
    Head: Chairman – Ajay Tyagi
    Headquarters: Mumbai
    Established on: 12th April 1988
    👉3. IRDAI – Insurance Regulatory and Development Authority
    Sector: Insurance
    Head: Chairman – T.S. Vijayan
    Headquarters: Hyderabad
    Established on: 1999
    👉4. PFRDA – Pension Fund Regulatory & Development Authority
    Sector: Pension
    Head: Chairman – Hemant Contractor
    Headquarters: New Delhi
    Established on: 23rd August 2003
    👉5. NABARD – National Bank for Agriculture and Rural Development
    Sector: Financing Rural Development
    Head: Chairman – Harsh Bhanwala
    Headquarters: Mumbai
    Established on: 12th July 1982
    👉6. SIDBI – Small Industries Development Bank of India
    Sector: Financing Micro, Small and Medium-Scale Enterprises
    Head: Chairman – Kshatrapati Shiaji
    Headquarters: Lucknow
    Established on: 2nd April 1990
    👉7. NHB – National Housing Bank
    Sector: Financing Housing
    Head: MD & CEO – Sriram Kalyanaraman
    Headquarters: New Delhi
    Established on: 9th July 1988
    👉8. TRAI – Telecom Regulatory Authority of India
    Sector: Telecommunication & Tariffs
    Head: Chairman – Ram Sewak Sharma
    Headquarters: New Delhi
    Established on: 20th February 1997
    👉9. CBFC – Central Board of Film Certification
    Sector: Film/TV Certification & Censorship
    Head: Chairman – Pahlaj Nihalani
    Headquarters: Mumbai
    Established on: 1952
    👉10. FIPB – Foreign Investment Promotion Board
    Sector: Foreign Direct Investment
    Head: Chairman (Secretary, Dept. of Economic Affairs, GoI) – Shaktikanta Das
    Headquarters: New Delhi
    👉11. FSDC – Financial Stability and Development Council
    Sector: Financial Sector Development
    Head: Chairman (Finance Minister, GoI) – Arun Jaitley
    Headquarters: New Delhi
    Established on: 2010
    👉12. FSSAI – Food Safety and Standards Authority of India
    Sector: Food
    Head: Chairman – Ashish Bahuguna
    Headquarters: New Delhi
    Established on: August 2011
    👉13. BIS – Bureau of Indian Standards
    Sector: Standards & Certification
    Head: Director General – Alka Panda
    Headquarters: New Delhi
    Established on: 23rd December 1986
    👉14. ASCI – Advertising Standards Council of India
    Sector: Advertising
    Head: Chairman – Narendra Ambwani
    Headquarters: Mumbai
    Established on: 1985
    👉15. BCCI – Board of Control for Cricket in India
    Sector: Cricket
    Head: President – Vinod Rai, Secretary – Anurag Thakur
    Headquarters: Mumbai
    Established on: December 1928

    • ROSY

      Donno guys whether the chaimans are updated or not verify before reading.

      • Bubli


  • ROSY

    Session 10 of Norman Lewis-
    1. Graphology – analysis of handwriting
    2. Calligraphy – beautiful handwriting; handwriting as an artistic expression
    3. Cacography- ugly, bad, illegible handwriting
    4. Gerontology – science of the social, economic, etc problems of the aged
    5. Senility – deteriorated old age
    6. Senescence – condition of aging or growing old

  • Bubli

    Flipkart founders launch new venture named ‘Sabin Advisors’

    • ROSY

      sabin-sachin bansali and binni bansali

      • Bubli

        Yes sa+bin😂

  • SAT
Skip to toolbar