Q. Consider the following statements about Marginal Cost of Funds based Lending Rate:
Select the correct answer using the code given below:
Q. Consider the following statements about Marginal Cost of Funds based Lending Rate:
Select the correct answer using the code given below:
The correct option is B 1 and 2 only
Explanation:
Statement 1 is correct. MCLR replaced the previous process of the base rate system, which was introduced in July 2010 to measure the lending rates for commercial banks.
Statement 2 is correct. MCLR was introduced by RBI on 1 April 2016 to assess the interest rates for loans.
Statement 3 is incorrect. Negative Carry on account of Cash Reserve Ratio is one of the four components of MCLR Calculation. It occurs when the return on the balance of CRR is nil as the CRR balance is non interest paying. It happens whenever the actual return is less than the fund’s cost. It will impact the appropriate SLR (Statutory Liquidity Ratio) balance which must be maintained by each commercial bank.
Explanation:
Statement 1 is correct. MCLR replaced the previous process of the base rate system, which was introduced in July 2010 to measure the lending rates for commercial banks.
Statement 2 is correct. MCLR was introduced by RBI on 1 April 2016 to assess the interest rates for loans.
Statement 3 is incorrect. Negative Carry on account of Cash Reserve Ratio is one of the four components of MCLR Calculation. It occurs when the return on the balance of CRR is nil as the CRR balance is non interest paying. It happens whenever the actual return is less than the fund’s cost. It will impact the appropriate SLR (Statutory Liquidity Ratio) balance which must be maintained by each commercial bank.
