RBI Guidelines on MCLR
ong>RBIong> ong>Guidelinesong> on MCLR 2018 There is a lot of buzz in the news that the ong>RBIong> has instructed all the banks to synchronise Base rate with MCLR by April 2018. It means all the home loan borrowers including pre-2016 borrower’s loan will be transferred to MCLR rate from the base interest rate. Let’s first understand what is an MCLR. MCLR full form is- Marginal Cost of Lending Rate. The name itself suggests that the rate of lending is marginal and below that rate banks are not allowed to lend to any customer. The MCLR is basically a way of calculating the interest rate which will be imposed on a customer. MCLR is an internal benchmark for a bank. The MCLR of any bank is calculated on the basis of Marginal Cost of Fund, the Cash Reserve Ratio (CRR), lenders’ operational costs, and tenure premium (which is an extra charge that Banks charge for long tenure loans). This method has been created by ong>RBIong> and it is mandatory for all banks to use MCLR for loans given after 1st April 2016.