UPSC CSE Prelims
Question 2
What is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI?
- These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances.
- These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks.
Select the correct answer using the code given below.
View correct answer and explanation
Correct answer: C
Correct Option: C
Explanation: RBI introduced MCLR-based pricing in 2016 to make lending-rate determination more transparent and responsive to banks’ marginal funding costs. Both aims in the question are valid.
Statement/Pair-wise Analysis:
Statement/Item 1: Correct - The marginal-cost benchmark improves visibility of how a bank arrives at lending rates.
Statement/Item 2: Correct - A consistent benchmark aims at fair, transmission-sensitive credit pricing for borrowers and banks.
Option-wise Analysis:
A: Incorrect - omits correct statement/item 2.
B: Incorrect - omits correct statement/item 1.
C: Correct - includes all and only the true statements/items.
D: Incorrect - omits correct statement/items 1, 2.