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The full form of MCLR is the Marginal Cost of Funds based Lending Rate. It refers to the interest rate at which banks lend funds to borrowers. It is a new method introduced by the Reserve Bank of India (RBI) in April 2016 to determine lending rates for banks. This replaced the earlier base rate system and was implemented to ensure better transmission of policy rate changes to the end borrowers. In this blog, we will know the MCLR full form and its meaning in simple terms.
Also Read – What is the Full Form of BLR?
Understanding MCLR in Points
Table of Contents
To get a clearer understanding of MCLR, let’s break it down into key points:
- Marginal Cost: MCLR is calculated based on the marginal cost of funds, which essentially means the cost of funds for banks at any given point in time. It takes into account various factors like the repo rate, cost of deposits, operating expenses, and additional factors determined by the bank.
- Funds: MCLR considers the cost of different types of funds raised by the bank, such as savings and current account deposits, term deposits, and borrowings from other financial institutions. Each category of funds has a different cost associated with it, which is factored into the MCLR calculation.
- Based Lending Rate: MCLR serves as the minimum interest rate at which banks can lend funds to borrowers. It acts as a benchmark rate for various categories of loans, including home loans, personal loans, and business loans.
Also Read – What’s the Full Form of EMI?
How Does MCLR Benefit Borrowers?
Now that we know what MCLR stands for and how it is calculated, let’s explore some of the benefits it offers to borrowers:
- Better Transmission
- Competitive Rates
- Flexible Interest Rates
- Transparent Pricing
- Fair Bank credits to lenders
Banks are required to review and reset their MCLR at least once every month. This allows for better transmission of changes in the policy rates set by the RBI. Borrowers who have loans linked to MCLR may see changes in their interest rates when the MCLR is reset.
Popular Full Forms
We hope this blog has helped you understand the MCLR full form and everything related to it. If you want to know more, find the general full form list on our blog. In the world of short forms, you can rely on the Leverage edu page to know about more full forms like this! Connect with us study abroad experts to achieve your international dream today!