With banks hiking their prime lending rates (PLR), borrowers are forced to select between the base rate for car loans and PLR.
The step by banks to increase PLR is to make borrowers accept base rate. Bankers say that those who consider the base rate steadier and cheaper should opt fo it.
KR Kamath, CMD Punjab National Bank, said “Previous loans that are linked to PLR will get costlier. Hence, borrowers who feel that the hike in the rate will adversely impact them can shift to the base rate system”.
CS Jain, head of personal banking, IDBI Bank said, “Customers would now have to decide whether to exercise the option provided by the RBI. This system is theoretically less prone to fluctuations when compared to the PLR system where banks keep adjusting rates frequently.”
Kamath added, “Our base rate would be reviewed after every quarter. One of the inputs towards this will be our cost of deposits. We have also raised our deposit rates by matching amount to give our customers a fair deal.”
Ashish Jindal, regional director (north), Knight Frank India said, “I feel that borrowers would be better off under a more transparent base rate system. The previous system was anything but transparent where the benefits were often not passed on to the borrowers”.
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