What is a Bond?
When the government needs money, they introduce bonds in market.
People can buy these bonds and in return government will pay the interest and also return the money.
So basically government is taking a loan from public by using these bonds. Bonds are a promise that government will return the money in specific time limit.
What is floating interest rate?
Floating interest rate fluctuates over time. While fixed interest rate remains the same.
Floating interest rates are often linked to a benchmark interest rate, such as the repo rate, or to general market conditions.
How banks decides interest rate?
They take the MCLR as a reference. MCLR (Marginal Cost of Funds based Lending Rate) is a rate used by banks to calculate the interest rate on loans, including home loans.
When the MCLR changes, so does the interest rate on the loan.
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