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 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 »
The evolution of the BPLR can be traced back to September 1990 when the first attempt to rationalize the administered lending rate structure was made by removing multiplicity and complexity of interest rates. According to this structure, the advances of scheduled commercial banks were divided into six slabs and progressively higher interest rates were prescribed… Read More »
Banks have something called the benchmark prime lending rate, which is a reference interest rate that is used as a benchmark to determine the interest rate that is passed on to the customer. This will accordingly reflect in the EMI the borrower has to shell out to repay his loan. The interest rate that is… Read More »
This interest range for the bank to choose from is termed a spread. This spread is left to the discretion of the bank and depends on the other factors involved in loan eligibility like the credit profile of the loan consumer for instance. According to RBI regulations, banks are required to make changes in existing… Read More »