What is/are the purpose/purposes of the 'Marginal Cost of Funds based Lending Rate (MCLR)' announced by RBI? 1. These guidelines help improve the transparency in the methodology followed by banks for determining the interest rates on advances. 2. These guidelines help ensure availability of bank credit at interest rates which are fair to the borrowers as well as the banks. Select the correct answer using the code given below.

1. Statement 1 is correct. The Marginal Cost of Funds based Lending Rate (MCLR) system, introduced by the RBI, replaced the earlier Base Rate system. It mandated banks to calculate their lending rates based on the actual marginal cost of arranging new funds (along with other components like operating costs and tenor premium). This provided a more defined and transparent methodology for determining interest rates compared to the previous regime, thus aiming to improve transparency. 2. Statement 2 is correct. A key purpose of the MCLR guidelines was to improve the transmission of monetary policy changes to the lending rates of banks. By linking the interest rates on advances more closely to the current cost of funds, the MCLR aimed to ensure that interest rates on bank credit adjusted faster to changes in policy rates, making them fairer to both borrowers (reflecting rate cuts) and banks (reflecting rate hikes).