Page 3 - Digi Page - General Awareness - Dec, 2015
P. 3
www.bankersguru.org
(General Awareness)
Financial Term of the Week
Lending rates in Banks
Prime Lending Rate (PLR) -
It is a benchmark rate of interest at which banks lend to their credit
worthy customers. This rate is used as a yardstick to calculate interest
rates for other borrowers.
The rate of interest charged by a bank could be half a percent more than
the benchmark PLR.
A cut in the bank's PLR will reduce the interest burden for borrowers.
PLR was replaced by Benchmark Prime Lending Rate which was a
standard every bank had to follow.
Both had no lower limits which led to lack of transparency in lending of
Banks.
Base Rate –
The minimum interest rate of a bank, below which it cannot lend, except
for DRI allowances, loans to bank's own employees and loans to bank's
depositors against their own deposits.
The base rate system has replaced the BPLR from July 1, 2010
RBI does not fix the base rate. Individual banks fix their own base rates
and so each bank has its own base rate.
Banks have to declare their respective base rates in the website in order
to make lending more transparent.
Digi Note – Flexible Base rate pricing to help Bank and Borrowers.
Date of Release - 14-Dec-15 SUBJECT: GA www.bankersguru.org
(General Awareness)
Financial Term of the Week
Lending rates in Banks
Prime Lending Rate (PLR) -
It is a benchmark rate of interest at which banks lend to their credit
worthy customers. This rate is used as a yardstick to calculate interest
rates for other borrowers.
The rate of interest charged by a bank could be half a percent more than
the benchmark PLR.
A cut in the bank's PLR will reduce the interest burden for borrowers.
PLR was replaced by Benchmark Prime Lending Rate which was a
standard every bank had to follow.
Both had no lower limits which led to lack of transparency in lending of
Banks.
Base Rate –
The minimum interest rate of a bank, below which it cannot lend, except
for DRI allowances, loans to bank's own employees and loans to bank's
depositors against their own deposits.
The base rate system has replaced the BPLR from July 1, 2010
RBI does not fix the base rate. Individual banks fix their own base rates
and so each bank has its own base rate.
Banks have to declare their respective base rates in the website in order
to make lending more transparent.
Digi Note – Flexible Base rate pricing to help Bank and Borrowers.
Date of Release - 14-Dec-15 SUBJECT: GA www.bankersguru.org
