An informed, educated customer would like to have a complete understanding about the financial matters or terms which can affect him/her either directly or indirectly. With that in mind, here is another brief article in which we will explain two financial terms which affect your lives and bank balances, especially if you are a home loan customer.
What Is BPLR?
BPLR stands for ‘Benchmark Prime Lending Rate’. It is also simply referred to as the ‘Prime Rate’ or the ‘Prime Lending Rate’. Originally, BPLR was the interest rate offered by a commercial bank to its most credit worthy customers, though it is not necessarily so now, with banks beginning to misuse BPLR. Earlier it was used by banks to lend money to its customers, each bank had its own BPLR which made difficult for borrowers to compare interest rates across banks. Comparison became much more complicated because some of the banks lent money below their BPLR. Another issue was, whenever RBI reduced its bench mark rate, bank did not reduce their BPLR proportionately which led to the introduction of Base Rate and Since then, the Reserve Bank of India (RBI) changed the benchmark interest index to the Base Rate.
What Is Base Rate?
It is the minimum rate of interest that a bank is allowed to charge from its customers. RBI rule stipulates that no bank can offer loans at a rate lower than Base Rate to any of its customers. Base rate as the name suggest, will be the base interest rate applicable to the borrowers. Even though banks are restricted from lending below the Base rate, in certain situations they can do so, but only for short term loans.
Difference Between BPLR & Base Rate
|No Transparency on loan pricing||Transparency On loan pricing|
|Old benchmark rate||New benchmark rate|
|No fixed time of revision of BPLR||It needs to be revised every quarter|