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DISSRTTN : What is meant by Marginal Cost of Funds based Lending rate (MCLR) (With an example if possible)?
Can you give me an example of how MCLR works?
Sure. Let's say XYZ Bank has a cost of borrowing of 5.5%, a cost of deposits of 4.5%, and a statutory liquidity ratio (SLR) of 20%. To arrive at the MCLR, the bank will take into account these factors, along with operating expenses and profit margin, and set its lending rate accordingly. So, if the MCLR is set at 7.5%, a borrower will be charged an interest rate of 7.5% on their loan.