What is the Link between CIBIL Score and MCLR?

CIBIL Score and Marginal Cost of Funding-based Lending Rate (MCLR) are closely related. MCLR is the lending rate charged by the banks and CIBIL score is your credit score by which your credit worthiness is rated.


MCLR is the new concept replacing the Base Rate of interest on loans. MCLR considers these factors:

  • Operating cost
  • Cash Reserve Ratio (CRR) costs
  • Related marginal costs
  • Tenor premium ( paying off the risk on long term loans)

Base rate, considers factors related to the minimum rate of return and average costs connected to the funds. It does not consider marginal cost and the tenor premium.

MCLR considers the guidelines released by RBI, for instance, it reflects the repo rates while the base rate does not. It may be understood better as, if the repo rates constantly stay low, or decrease further, the borrowers shall benefit with the decrease in interest rates. This change was brought for better release of loans by RBI to borrowers.

MCLR shall be implemented for the loans released in the fresh financial year i.e. -2016-17. Now on, whether you apply for personal or home loan, this will be having MCLR applicable on them. As per RBI rules, the MCLR applicable to every loan product should be the one year rate or of a lower tenure.

Here come the light changes. For instance, SBI will be granting home loans, with benchmark as MCLR for one year. On the other hand, Kotak Mahindra Bank will be going for MCLR for 6-months.

The banks can add an additional percentage of the interest rate, on the MCLR, on each and every loan issued. This clearly means that, interest rates will be reset with each and every new feature added by the MCLR. This will be irrespective of the duration of the loan.

Previously issued loans will be directly dependant and proportional on the base rate. If any borrower wishes to shift to MCLR, permission needs to be taken by the issuing bank.


CIBIL stands for Credit Information Bureau (India) Limited. It is the first company for credit information. It started functioning in the year 2000. A good CIBIL score highlights your credit worthiness.

Below mentioned points are considered while analyzing your credit worthiness:-

  • EMIs and Regularity of payment on your insurance and the premiums related
  • Timely payments of bills on your credit card

Such are the aspects that add weight to your score. These days, if anyone wants to take loan, most of the banks generate or ask for the credit report.

Connection between MCLR and CIBIL score

The moment your CIBIL score exceeds to 750 points, you will be applicable for loan. If the score is not good, then the banks will either not give you loan or charge higher interest rates. If you want to apply for any loan either it be vehicle or home loan on the lowest rates that are based on MCLR, then you should maintain a good CIBIL score.

Though the two aspects are not related directly, yet your CIBIL score indicates whether you are eligible to get a loan at the MCLR based interest rate.