Hurdle Rate Evaluation checks whether the proposed facility earns enough return for the level of risk being taken. For banks and NBFCs, pricing cannot be viewed only as customer negotiation; it must also cover cost of funds, operating cost, expected loss, capital usage, and relationship strategy. In MSME lending, a low-risk secured facility may justify finer pricing, while a high-risk unsecured or volatile borrower may require a higher spread. For example, if a borrower asks for a lower interest rate, the lender should compare the proposed yield with policy floor, risk grade, collateral comfort, and cross-sell value. This evaluation matters because weak pricing can make an otherwise approved loan unattractive from a risk-return perspective. The caution is not to ignore non-price conditions such as security, covenants, and monitoring requirements.