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translateGLOSSARY · BANKING

What is MCLR (Marginal Cost of Funds based Lending Rate)?

MCLR is the minimum interest rate below which a bank cannot lend, based on its marginal cost of funds.

PrepClever Glossary · Banking

updateUpdated July 2026

Formula

MCLR = Marginal Cost of Funds + Negative Carry on CRR + Operating Costs + Tenor Premium

Introduced in 2016, the Marginal Cost of Funds based Lending Rate replaced the base rate to improve transmission of policy-rate changes. Many older floating loans are still MCLR-linked, though new retail loans are largely tied to external benchmarks like the repo rate (RLLR).

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Example

A home loan priced at 1-year MCLR + 0.30% spread reprices when the bank revises its MCLR.

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Relevant NISM series

JAIIBIBPS PORBI Grade B

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Glossary

FAQs about MCLR (Marginal Cost of Funds based Lending Rate)

MCLR or RLLR — what is the difference?add

MCLR is an internal benchmark based on the bank's own cost of funds; RLLR is linked to the external repo rate, so RLLR loans reprice faster and more transparently when the RBI changes rates.

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MCLR (Marginal Cost of Funds based Lending Rate) is one term in a much larger syllabus. These are the fastest routes into the rest of it.

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What is MCLR (Marginal Cost of Funds based Lending Rate)?

Related Terms

Repo-Linked Lending Rate (RLLR)

Repo Rate

Net Interest Margin (NIM)

FAQs about MCLR (Marginal Cost of Funds based Lending Rate)

Where to go from here

Master every term that matters

What is MCLR (Marginal Cost of Funds based Lending Rate)?

Related Terms

Repo-Linked Lending Rate (RLLR)

Repo Rate

Net Interest Margin (NIM)

FAQs about MCLR (Marginal Cost of Funds based Lending Rate)

Where to go from here

Master every term that matters