The Marginal Cost of Funds-based Lending Rate (MCLR) framework established by the Reserve Bank of India (RBI) enhances the transparency in how banks determine interest rates, thus allowing borrowers to better understand the factors influencing their loan costs. Additionally, by linking lending rates to a bank's marginal cost of raising funds, the MCLR ensures that interest rates reflect the actual cost of funds, promoting fairness for both borrowers and banks. This dual focus on transparency and fair pricing is crucial for fostering a more effective and competitive banking environment, which aligns with the broader objectives of financial stability and economic growth, relevant for UPSC Prelims GS Paper I.