How is the base rate calculated?

The base rate is calculated by the RBI. Many factors are taken into consideration while calculating base rate, some of them are, profitability of the bank, costs of the deposits, etc. From 1st April 2016, base rate has been replaced by Marginal Cost of Lending Rate (MCLR). You can read about The Reserve Bank of India: Functions and Composition in the given link.

Further readings:

  1. Non Performing Assets (NPA) – Facts for UPSC GS-III
  2. Monetary Policy – Objectives, Roles and Instruments

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