---
title: "MCLR: Marginal Cost of Funds Lending Rate | Model Diplomat"
description: "MCLR is the minimum lending rate set by Indian banks since 2016, based on their marginal cost of funds, crucial for borrowers and lenders alike."
url: "https://modeldiplomat.com/learn/glossary/mclr"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The MCLR is the minimum interest rate, introduced by the Reserve Bank of India in 2016, below which Indian banks cannot lend, calculated from their marginal cost of borrowing funds.
- How does the MCLR differ from the External Benchmark Lending Rate (EBLR)?
- What are the four components of the MCLR?
- Why did the RBI replace the Base Rate with the MCLR in 2016?
- Can a borrower still be on an MCLR-linked loan today?

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

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## Timeline

1. 17 December 2015

   The Marginal Cost of Funds Based Lending Rate (MCLR) is an internal benchmark lending-rate regime that the Reserve Bank of India (RBI) introduced through a c…

2. 1 April 2016

   The Marginal Cost of Funds Based Lending Rate (MCLR) is an internal benchmark lending-rate regime that the Reserve Bank of India (RBI) introduced through a c…

3. 1 October 2019

   That finding drove the RBI's next reform: from banks were directed to link all new floating-rate loans to retail and micro-and-small-enterprise borrowers to…

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Example

In April 2016 the State Bank of India set its one-year MCLR at 9.20 percent, anchoring most of its term and home loans to that benchmark under the RBI regime that took effect on 1 April 2016.

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