Correct Option
The Marginal Cost of Funds based Lending Rate (MCLR) system was introduced by the Reserve Bank of India (RBI) on April 1, 2016, replacing the erstwhile Base Rate system. Its primary objectives include:
- Statement 1: These guidelines enhance transparency in the methodology followed by banks for determining interest rates on advances. MCLR links lending rates to the marginal cost of funds, providing a more explicit and standardized framework for interest rate calculation, which improves clarity for both banks and borrowers.
- Statement 2: These guidelines aim to ensure the availability of bank credit at interest rates that are fair to both borrowers and banks. By facilitating better transmission of monetary policy, MCLR ensures that changes in RBI's policy rates are reflected in banks' lending rates, promoting equitable credit pricing.
Therefore, both statements accurately describe the purposes of MCLR.
Incorrect Options
- Option (a) is incorrect because statement 2 is also a correct purpose of MCLR, making this option incomplete.
- Option (b) is incorrect because statement 1, which highlights transparency, is also a correct and significant purpose of MCLR, making this option incomplete.
- Option (d) is incorrect because both statements 1 and 2 correctly identify the purposes of MCLR as outlined by the RBI.