What is benchmark marginal cost of landing rate?
Benchmark Marginal Cost of Landing Rate (Benchmark Marginal Cost of Lending Rate – MCLR) is a specified financial parameter that banks set for their business loans. This rate is a part of the lending policies of financial institutions for their various loan products. The borrowing and lending rates by financial institutions depend on the loan interest determined by MCLR. This is directly related to the trade done with the Reserve Bank to exchange the financial supply of the bank i.e. repo rate. In addition, the bank’s cost of adequate cash supply, i.e. the cost of deposits, is also the rate at which the bank borrows additional cash from the Reserve Bank, the rate adopted by the financial institution for new lending schemes. Depending on the type of loan product you are applying for, the bank will determine the interest based on MCLR. Generally, banks set MCLR based on their margin or reverse repo rate, which helps in determining its costs.