Rise in MCLR will intensify policy transmission next fiscal year

Current Context: The transformation of the monetary policy will affect the new fiscal year extensively because of the increase in the marginal cost. Rating agency India Ratings and Research (Ind-Ra) expects MCLR (Marginal cost of funds-based lending rate) to increase in FY24.

• In FY23, reverse repo rate of 5lakh crores is enabled in banks to review the increase in credit and deposit. This process will not be made available in FY24.
• Deposit rates in the banking sector have risen from 150 to 200 basis points in the last year, which is resulted 75 basis points increase rate.
• Balance of payments (BoP) is around 60,000 crores, which is not considered to be favorable in the FY24 and the banking sector will face upward pressure.
• Liquidity will tighten in the upcoming end of March 2023 because of the effect by advance tax payment, GST payment and TLTRO maturity.
• Ind-Ra that the upcoming liquidity rate will be affecting the weak banks with low liquidity.

Question:

Q.1 Deposit rates in the banking sector have risen from 150 to ____ basis points in 2022.

a. 250

b. 200
c. 300
d. 400