Some of the differences between base rate and Marginal Cost of Lending Rate (MCLR) are given in the below table
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Base Rate |
Marginal Cost of Lending Rate (MCLR) |
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Base Rate does not depend on the repo rates changed by RBI |
MCLR depends on the repo rates changed by RBI |
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Base Rate is based on the average cost of funds. |
MCLR is based on incremental/marginal cost of funds. |
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Base rate is calculated by considering profit margin or minimum rate of return. |
MCLR is calculated considering tenor premium. |
You can read about The Reserve Bank of India: Functions and Composition in the given link.
Further readings:
- Non Performing Assets (NPA) – Facts for UPSC GS-III
- Monetary Policy – Objectives, Roles and Instruments
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Related Links |
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Bad Banks – Idea Proposed by Indian Banking Association (IBA) Due to COVID-19 |
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