Loan

MCLR

Also known as: Marginal Cost of Funds based Lending Rate, Internal Benchmark

Marginal Cost of Funds based Lending Rate - Internal benchmark used by banks for loan pricing.

Detailed Explanation

MCLR (Marginal Cost of Funds based Lending Rate) is the minimum interest rate below which a bank cannot lend. It's calculated based on the bank's cost of funds, operating expenses, and tenor premium. MCLR rates are reset monthly but loan rates typically reset annually. Newer loans use external benchmarks like RLLR for faster policy transmission.

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Related Terms

RLLR

Repo Linked Lending Rate - External benchmark for loan interest rates linked to RBI repo rate.

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EBLR

External Benchmark Lending Rate - Loan rates linked to an external benchmark like repo or T-bill.

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