The RBI introduced MCLR in April 2016 to enhance monetary policy transmission and increase transparency in interest rate setting. Before MCLR, lending rates in India were linked to the Base Rate. MCLR facilitated faster policy rate transmission, reflected actual borrowing costs better, offered tenor-based lending rates, and allowed flexible pricing for loans. Its aim was to improve monetary policy effectiveness, ensure fair lending practices, and benefit borrowers from interest rate changes.