The marginal cost of funds based lending rate is called as MCLR. It is the minimum rate of interest of a bank below which it is unable to lend, but there are some exceptional cases which can only be allowed by the RBI. Use the below MCLR formula which allows you to calculate the marginal cost lending rate based on marginal cost of borrowing, return on net worth, negative carry on CRR, operating costs and tenor premium as inputs.

Marginal Cost of Funds Based Lending Rate = MCF + CRR + OC + TP

Where,

MCB = Marginal Cost of Borrowing

RN = Return on Net Worth

CRR = Negative Carry on CRR

OC = Operating Costs

TP = Tenor Premium

The above MCLR formula will be the useful formula for the banks to calculate the marginal cost of funds based lending rate to ensure that they can lend money for the particular rate of interest.