New Delhi, Aug. 15 -- The Reserve Bank of India (RBI) has proposed a new methodology for calculating the Marginal Cost of Funds Based Lending Rate (MCLR), under which banks would use a three-month moving average of their marginal cost of domestic deposits and borrowings.

The proposal is part of the draft Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026, which seeks to bring greater consistency and transparency to the way regulated lenders determine interest rates on loans. The proposed directions are set to take effect from April 1, 2027, subject to the finalisation of the framework after stakeholder feedback.

Under the proposed framework, the marginal cost component of MCLR would be determined using the mar...