MCLR Full Form - What does MCLR stand for?
MCLR stands for
Marginal Cost of Funds Based Lending Rate
Marginal Cost of Funds Based Lending Rate (MCLR) is the internal benchmark rate that the Reserve Bank of India introduced in April 2016 to replace the older base rate system. It represents the minimum interest rate a bank can charge on a fresh loan and is calculated using the bank's marginal cost of funds, the negative carry on cash reserve ratio balances, operating costs and the tenor premium. Each bank publishes MCLR for different maturities, from overnight to five years, and loans are priced as the applicable MCLR plus a spread that depends on the borrower's profile and the collateral. Deposits with a longer tenor pull the marginal cost up, so rising deposit rates eventually push MCLR higher. MCLR reset clauses mean existing borrowers see changes only when their reset date arrives, which slows the transmission of RBI rate cuts. Because of that lag, the regulator moved most retail loans to external benchmarks in 2019, and MCLR now mainly governs certain business and older housing loans that were never migrated.
What does MCLR stand for?
MCLR is an abbreviation of Marginal Cost of Funds Based Lending Rate. Each letter in MCLR maps to a word in the phrase:
| Letter | Word |
|---|---|
| M | Marginal |
| C | Cost |
| L | Lending |
| R | Rate |
Where is MCLR used?
Loan and credit abbreviations appear in sanction letters, EMI schedules and credit reports. Understanding them helps you compare offers and spot the real cost of borrowing.
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Frequently Asked Questions
What does MCLR stand for?+
MCLR stands for Marginal Cost of Funds Based Lending Rate.
What is MCLR?+
Marginal Cost of Funds Based Lending Rate (MCLR) is the internal benchmark rate that the Reserve Bank of India introduced in April 2016 to replace the older base rate system. It represents the minimum interest rate a bank can charge on a fresh loan and is calculated using the bank's marginal cost of funds, the negative carry on cash reserve ratio balances, operating costs and the tenor premium. Each bank publishes MCLR for different maturities, from overnight to five years, and loans are priced as the applicable MCLR plus a spread that depends on the borrower's profile and the collateral. Deposits with a longer tenor pull the marginal cost up, so rising deposit rates eventually push MCLR higher. MCLR reset clauses mean existing borrowers see changes only when their reset date arrives, which slows the transmission of RBI rate cuts. Because of that lag, the regulator moved most retail loans to external benchmarks in 2019, and MCLR now mainly governs certain business and older housing loans that were never migrated.
What is MCLR used for?+
MCLR (Marginal Cost of Funds Based Lending Rate) belongs to the Loans & Credit category. Loan and credit abbreviations appear in sanction letters, EMI schedules and credit reports. Understanding them helps you compare offers and spot the real cost of borrowing.
Which category does MCLR belong to?+
MCLR is filed under Loans & Credit, one of the 10 categories in our directory of 1538 full forms.