If you are a bit aware of financial terms, you may have heard about MCLR in banking. But are you aware of the differences between MCLR and the base rate? If not, then here is a quick post to help you know more! Read on!
Key differences between MCLR and a base rate
MCLR in banking stands for Marginal Cost of Funds based Lending Rates. It is the minimum rate of lending below which a financial institution is not permitted to lend.
MCLR was implemented on 1 April 2016 by the Reserve Bank of India (RBI). It was to determine interest rates for loans like the best personal loan, home loans and more.
Both MCLR and the base rate appear almost the same at first glance offered by leading lenders. Yes, it is because both these terms are based on the same principle. They are also implemented with the same objectives.
But there are different factors that differentiate between MCLR in banking and the base rate.
The base rate gets calculated after the consideration of the minimum return rate or profit margin. MCLR rate is calculated after taking into account the tenor premium.
Base rates are also governed by elements, such as operating costs and expenses needed to maintain the cash reserve ratio.
On the other hand, MCLR in banking is governed by deposit rates, operating costs, repo rates, and the cost of the maintenance of cash reserve ratio.
Many lenders have slashed home loans, MCLR loans, and more. Hence, many prospective home loan buyers find MCLR in banking convenient and simpler.
If you need a large amount, you can apply for a personal loan.
The best personal loan interest rate could be availed with a higher CIBIL score, repayment and income record.
Based on your eligibility, it is possible to avail of up to Rs.25 lakh with a flexible repayment tenor from top lenders.
Must Read: Remember These Points About MCLR
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