Minimum Collateralization Ratio (MCR)

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Minimum Collateralization Ratio (MCR)

What is Minimum Collateralization Ratio (MCR)?

The amount of investor money that must always be maintained in cash or cash equivalents is known as the minimum collateralization ratio. This is a legal need to safeguard the market’s integrity. The required minimal collateralization ratio varies depending on the kind of fund.

The minimum debt-to-collateral ratio is crucial because it provides lenders with a standard to utilize when determining whether or not to approve a loan. Although certain jurisdictions have explicit legislation enforcing particular criteria, minimum debt-to-collateral ratios are primarily determined by lenders within the sector and may vary from one lender to another.

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