"The marginal cost of funds
will have an impact only if deposit rates come down.
Using the marginal cost of funds
method will make the base rate more responsive to the policy rate.
I have suggested previously that the Slemrod and Yitzhaki's marginal cost of funds
might be a reasonable approach to the issue, although I am sure there are others.
A critical concept in that literature is the marginal cost of funds
. It has been shown that the value of the marginal cost of funds
for a given tax instrument depends on whether the public goods are separable or perfect substitutes for private goods.
The equivalent variation measure of the loss in utility is then given by JK, and the marginal cost of funds
Union Bank said to provide better interest rate transmission, it will soon link its housing and vehicle loan portfolio to repo rate from the current marginal cost of funds
based lending rate.
Considering the way floating rates are structured linked to marginal cost of funds
based lending rate (MCLR), if you are an existing borrower you will not see an impact due to the reset clause.
On October 4, 2017, the Reserve Bank of India placed on its website the Report of the Internal Study Group to Review the Working of the Marginal Cost of Funds
based Lending Rate (MCLR) System for seeking comments from general public and stakeholders by October 25, 2017.
As we show below, the second point here leads to the marginal cost of funds
Indian public sector banks, Bank of Maharashtra (532525.BOM) (MAHABANK.NS) and IDBI Bank (532235.BO) (IDBIBANK.NS) (IDBK.NS) have said that they have reduced their marginal cost of funds
based lending rate (MCLR) across select tenures by 10 basis points (bps) and 5-15 bps, respectively, Business Line has reported online.
Currently, banks follow system of internal benchmarks, including Prime Lending Rate (PLR), Benchmark Prime Lending Rate (BPLR), Base rate and Marginal Cost of Funds
based Lending Rate (MCLR).
Prior to this, the one year-MCLR (marginal cost of funds
based lending rate, on which most of the lending is based now, was at 7.95 per cent.