Banks to switch to Base Rate system for lending from 1 July
09 Apr 2010
The Base Rate system will replace the benchmark prime lending rate (BPLR) system at all scheduled commercial banks (excluding RRBs) in the country with effect from 1 July 2010, the Reserve Bank of India (RBI) said in a notification issued today.
The Base Rate will include all those elements of the lending rates that are common across all categories of borrowers, RBI said in the notification.
Banks are free to choose any appropriate benchmark or methodology to arrive at the Base Rate for a specific tenor that may be disclosed transparently, provided it is consistent and is made available for supervisory review/scrutiny, as and when required, RBI said.
Banks may determine their actual lending rates on loans and advances with reference to the Base Rate and by including such other customer specific charges as considered appropriate.
RBI has allowed banks to change the benchmark and methodology any time, if need be, during the initial six-month period (ie, July-December 2010), in order to give them time to stabilise the system of Base Rate calculation.
Banks, however, have to make available the actual lending rates charged for supervisory review/scrutiny, as and when required and ensure it is transparent and consistent.