Tag Archives: base rate

Will RBI adopt the marginal cost-of-funds approach?

When the Reserve Bank of India (RBI) reduced the repo rate by 0.25 percentage point in January 2015, it came as a pleasant surprise for millions of home loan borrowers. They were expecting the banks the follow suit and cut lending rates to pass on the benefits to customers. Banks, though, had different plans. They… Read More »

RBI move-base rate vs. current BPLR–What's new?

RBI has recommended that the BPLR system be replaced by a base rate system below which no lending can be done. This recommendation comes in the backdrop of the BPLR system failing to achieve what it was originally intended for – transparency in lending rates charged by banks. The report submitted by the working group… Read More »

Base rate-More transparency, more equality?

All loans given after 01 April 2010 will be calculated as Lending rate =Base rate + X. The variable X will be based on parameters fixed by the banks which could include Operating costs, duration of loan, risks involved etc. This would also include charges relating to specific borrowers.