Economics • Banking & FinanceMedium
What does 'Marginal Cost of Funds based Lending Rate (MCLR)' replace in the Indian banking system?
A. Base Rate system✓ Correct Answer
B. Cash Reserve Ratio system
C. Statutory Liquidity Ratio framework
D. Bank Rate mechanism
💡 Solution & Explanation
The Marginal Cost of Funds based Lending Rate system was introduced by the Reserve Bank of India in 2016 to replace the older Base Rate mechanism for determining minimum loan pricing. This framework improves the transmission of monetary policy rates to ultimate borrowers across commercial banks. Banking reforms and interest rate structures are important topics for Indian economy preparation.
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