RBI proposes Marginal cost of funds Methodology

Q.  What methodology has been proposed by RBI on 1st Sep’15 to make Base Rate sensitive to policy changes?
- Published on 08 Sep 15

a. Marginal cost of funds Methodology
b. Funds Methodology
c. Currency Methodology
d. All of these

ANSWER: Marginal cost of funds Methodology
The new methodology is aimed at bringing uniformity among Base Rate of banks so that they will be more sensitive to any changes in policy rates of the RBI like Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), etc. At present, banks are following different methodologies in computing their Base Rate like on the basis of average cost of funds, marginal cost of funds or blended cost of funds (liabilities).

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