All questions of Banking of India for BPSC (Bihar) Exam

Consider the following statements:
Statement-I:
Base Rate is the interest rate below which Scheduled Commercial Banks (SCBs) will lend no loans to its customers.
Statement-II:
MCLR (Marginal Cost of funds based Lending Rate) is a methodology introduced by banks in the financial year 2016-17 to compute their lending rates.
Which one of the following is correct in respect of the above statements?
a)
Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
b)
Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
c)
Statement-I is correct, but Statement-II is incorrect
d)
Statement-I is incorrect, but Statement-II is correct
Correct answer is option 'C'. Can you explain this answer?

T.S Academy answered

Base Rate is indeed the minimum interest rate below which banks like Scheduled Commercial Banks (SCBs) will not lend to their customers. This was introduced to bring transparency to lending rates and facilitate the transmission of monetary policy. On the other hand, MCLR (Marginal Cost of funds based Lending Rate) is a different methodology introduced by banks in the financial year 2016-17, not by the RBI. MCLR is a tenor-linked benchmark system that determines the lending rates of banks, not a replacement for the Base Rate system. Therefore, Statement-I is correct while Statement-II is incorrect.

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