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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?
Most Upvoted Answer
Consider the following statements:Statement-I:Base Rate is the intere...
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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Community Answer
Consider the following statements:Statement-I:Base Rate is the intere...
Explanation:

Statement-I:
- Base Rate is the minimum interest rate set by the Reserve Bank of India below which commercial banks are not allowed to lend to their customers.
- This rate serves as a benchmark for banks to determine the interest rate on various loans they offer.

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.
- MCLR is based on the marginal cost of funds, tenor premium, operating expenses, and the repo rate.
- It is more dynamic compared to the Base Rate as it considers changes in the repo rate set by the RBI.

Analysis:
- Statement-I is correct in stating the definition of Base Rate.
- Statement-II is incorrect in stating that MCLR was introduced by banks in 2016-17. MCLR was actually introduced by the RBI in April 2016 to bring more transparency and efficiency in determining lending rates.
Therefore, the correct answer is option 'C' - Statement-I is correct, but Statement-II is incorrect.
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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-Ib)Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-Ic)Statement-I is correct, but Statement-II is incorrectd)Statement-I is incorrect, but Statement-II is correctCorrect answer is option 'C'. Can you explain this answer?
Question Description
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-Ib)Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-Ic)Statement-I is correct, but Statement-II is incorrectd)Statement-I is incorrect, but Statement-II is correctCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about 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-Ib)Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-Ic)Statement-I is correct, but Statement-II is incorrectd)Statement-I is incorrect, but Statement-II is correctCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 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-Ib)Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-Ic)Statement-I is correct, but Statement-II is incorrectd)Statement-I is incorrect, but Statement-II is correctCorrect answer is option 'C'. Can you explain this answer?.
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