---
title: "MCLR: Marginal Cost of Funds Lending Rate | Model Diplomat"
description: "MCLR is the minimum interest rate for lending by Indian banks, crucial for effective monetary transmission since its introduction by the RBI in 2016."
url: "https://modeldiplomat.com/learn/glossary/marginal-cost-of-funds-based-lending-rate"
---

[New](https://modeldiplomat.com/)

#

Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Marginal Cost of Funds based Lending Rate is the minimum interest rate below which Indian banks cannot lend, calculated from their marginal cost of raising funds.
- How does MCLR differ from the External Benchmark Lending Rate (EBLR)?
- Why did the RBI replace the Base Rate with MCLR in 2016?
- What are the four components of MCLR?
- Are existing loans automatically moved from MCLR to EBLR?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

The Marginal Cost of Funds based Lending Rate is the minimum interest rate below which Indian banks cannot lend, calculated from their marginal cost of raising funds.

Go beyond the definition

## Research Marginal Cost of Funds based Lending Rate (MCLR) like a delegate

Model Diplomat's AI drafts position papers, speeches, and country research with real sources — built for MUN and politics students.

## Timeline

1. 17 December 2015

   The Marginal Cost of Funds based Lending Rate (MCLR) is the internal benchmark interest rate methodology that the Reserve Bank of India (RBI) mandated for sc…

2. 1 April 2016

   The Marginal Cost of Funds based Lending Rate (MCLR) is the internal benchmark interest rate methodology that the Reserve Bank of India (RBI) mandated for sc…

3. 4 September 2019

   During the RBI's accommodative cycle through 2019 and 2020, the central bank repeatedly observed that transmission under MCLR remained incomplete, prompting…

4. 1 October 2019

   During the RBI's accommodative cycle through 2019 and 2020, the central bank repeatedly observed that transmission under MCLR remained incomplete, prompting…

## Research it like a delegate

Research on modeldiplomat.com

## Ask a follow-up about Marginal Cost of Funds based Lending Rate (MCLR)

Open a cited briefing in Model Diplomat search — timelines, positions, and sources you can use in committee or exam answers.

[Start research on Marginal Cost of Funds based Lending Rate (MCLR)](https://modeldiplomat.com/search?q=Explain%20Marginal%20Cost%20of%20Funds%20based%20Lending%20Rate%20\(MCLR\)%20%E2%80%94%20key%20dates%2C%20actors%2C%20positions%2C%20and%20sources)

Example

The State Bank of India, India's largest lender, revised its one-year MCLR in 2024 as part of its monthly published schedule, a benchmark closely watched as a signal of corporate borrowing costs across the banking sector.

Keep learning

## Go deeper than the definition

[Explore all Civil Service & Diplomatic Exams lessons](https://modeldiplomat.com/learn/civil-services)[Test yourself with a quiz](https://modeldiplomat.com/learn/glossary/quiz/civil-services)

## Take Marginal Cost of Funds based Lending Rate (MCLR) beyond the glossary

Ask the AI research engine built for diplomacy — get briefings, position papers, and speeches with sources you can cite in committee.