[Solved] Consider the following statements regarding MCLR: Statement 1: MCLR is calculated using average cost of funds. Statement 2:... Which of the above statements is/are correct? | Banking Awareness

Banking Awareness - Banking Acts, Reforms & Risk Management

Consider the following statements regarding MCLR: Statement 1: MCLR is calculated using average cost of funds. Statement 2: MCLR ensures the same lending rate across all banks. Which of the above statements is/are correct?

AOnly Statement 2 is correct

BBoth Statement 1 and Statement 2 are correct

CNeither Statement 1 nor Statement 2 is correct

DOnly Statement 1 is correct

Step-by-Step Solution

Step 1: Evaluate Statement 1
MCLR is based on marginal cost, not average cost.
Step 2: Evaluate Statement 2
Lending rates under MCLR differ from bank to bank.
Final Answer:
Neither Statement 1 nor Statement 2 is correct → Option C
Quick Check:
Marginal cost + bank-specific rates = MCLR ✅

Quick Trick: MCLR ≠ average cost and ≠ uniform rates.

Common Mistakes:

MISTAKES

Confusing MCLR with Base Rate characteristics.

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Which of the above statements is/are correct?

Step 1: Evaluate Statement 1

Step 2: Evaluate Statement 2

Final Answer:

Quick Check:

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