MCLR (Marginal Cost of Funds based Lending Rate)

The internal benchmark below which a bank cannot lend, based on its marginal funding cost.

MCLR is the minimum interest rate a bank can charge on loans, calculated from its marginal cost of funds, operating costs and tenor premium. It replaced the older Base Rate to make lending rates more responsive to RBI policy changes; many new retail loans now use external benchmarks (like the repo rate) instead.