Module: | KYC, NPAs, Advances & Investment Valuations
Q230: Which of the following statements accurately reflect the review and reset mechanics of the Marginal Cost of Funds based Lending Rate (MCLR)?
1. Banks must review and publish their MCLR of different maturities once every quarter.
2. The MCLR prevailing on the date of first disbursement applies until the next reset date, irrespective of any changes in the benchmark during the interim.
3. The periodicity of reset for MCLR-linked loans shall be one year or lower.
4. The periodicity of reset must always be exactly equal to the tenor of the loan (e.g., a 20-year reset for a 20-year housing loan).
2. The MCLR prevailing on the date of first disbursement applies until the next reset date, irrespective of any changes in the benchmark during the interim.
3. The periodicity of reset for MCLR-linked loans shall be one year or lower.
4. The periodicity of reset must always be exactly equal to the tenor of the loan (e.g., a 20-year reset for a 20-year housing loan).
✅ Correct Answer: B
Statement 1 is incorrect; banks must review and publish MCLR *monthly*. Statement 4 is incorrect; the reset periodicity must be one year or lower, regardless of the total loan tenor.
Statements 2 and 3 are correct descriptions of the reset mechanics.
Statements 2 and 3 are correct descriptions of the reset mechanics.