Reserve Bank of India has clarified the provisions of Reserve Bank of India (Interest Rate on Advances) Directions, 2016 relating to the Marginal Cost of Funds based Lending Rate (MCLR) system. MCLR is a new method that banks will adopt to declare the lending rates, and it will replace the base rate. The new rate has to be a tenor-linked rate with a reset clause at least once a year. Earlier, for the customer, the MCLR, that is prevailing on the day the loan is sanctioned will be in application till the next reset even if the benchmark rate changes but now it is clarified, that MCLR that prevails on the date of first disbursement, whether partial or full, shall be applicable on the floating rate loan and future reset dates shall be determined accordingly. The RBI has also uploaded FAQs on MCLR.