While looking for loan interest rates, you must have come across ‘benchmark prime lending rate’ or even ‘prime lending rate meaning’. Ever wondered what they are?
Here you will find answers to what is prime lending rate and what it means.
If you are searching for ‘PLR full form in banking’, it stands for - Prime Lending Rate. But before understanding prime lending rate meaning, it is important to understand what lending rate is.
The lending rate is the rate at which any lender or bank gives out or lends money.
The prime lending rate is the rate at which leading commercial banks lend money to their most credit-worthy customers. The most creditworthy customers can be defined as the customers whose loans carry the least risk.
BPLR stands for ‘benchmark prime lending rate’ which is related to the PLR. It was started in April 2003, and replaced PLR. As time progressed, it became obvious that there were no restrictions at lending rates that went below the BPLR. Thus, the RBI came up with base rates in July, 2010.
The following table shows the change in the BPLR in the past few years -
The Base Rate system replaced the BPLR system in July, 2010. Here are some details about the base rates -
If your question is who sets up base rate for banks, it is the Reserve Bank of India. The RBI controls the minimum rates at which loans are given out so that some customers are not unfairly favored above others. This also helps keep the economy in check.
Given below are the base rates for some of the top banks in the country -
|State Bank of India||10.10%|
|Kotak Mahindra Bank||7.65%|
The Marginal Cost of Fund-based Lending Rate or MCLR was introduced on 1st April, 2016. Here are some details about it -
The EBLR stands for External Benchmark Lending Rate, and it was introduced in 2019. Some details about this regime are mentioned below -
Customers have an option to change to the new system or stick to the old one. They can either change while their loans are being renewed, or they can also pay a nominal fee to switch from one regime to another.
It is advisable to calculate your loan using every regime to see which will be the best option for you.
The Reserve Bank of India maintains a balance in the economy of the country by deciding many factors including the lowest lending rates. Banks are supposed to adhere to these rates for all new loans as well as loans that are getting restructured.
No, the BPLR replaced the PLR in April 2003 while the base rate regime replaced the BPLR in July 2010.
Since the base rates have replaced PLR, you need to check the base rate before deciding to take a loan. Base rates are decided by the RBI for all banks and the banks are required to maintain transparency. You can visit the bank’s website or check with the bank officials to find out the base rates.
No, it is not possible to get a loan at rates lower than the base rate.
The bank will take into account factors that will calculate your creditworthiness and then add that on top of the base rate to calculate your effective rate of interest.
Yes, the base rates vary for different banks. However, they cannot be lower than the base rate set by the RBI.
Thank you. Your feedback is important to us.