The much-awaited Reserve Bank of India (RBI) guidelines on calculating the benchmark lending rate are finally out. In yet another attempt to make banks pass on policy rate cut benefits to borrowers, the RBI has brought out a new methodology: Marginal Cost of Funds based Lending Rate (MCLR). Marginal funds refer to money raised by banks in the last month or quarter before the lending rate review. The new methodology will come into effect from 1 April 2016 and is expected to curtail banks' abili ..
"They should move to the new system as it is more sensitive to interest rate changes, but they must be prepared for frequent changes in their loan tenure, given that interest rate changes typically affect tenure rather than EMIs," says Vineet Jain, Founder and CEO of loan aggregator portal loanstreet.in.
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