RBI has decided that the banks switch over to the system of Base Rate from the current BPLR system. The BPLR system, introduced in 2003, fell short of its original objective of bringing transparency to lending rates. This was mainly because under the BPLR system, banks could lend below BPLR. For the same reason, it was also difficult to assess the transmission of policy rates of the Reserve Bank to lending rates of banks. The Base Rate system is aimed at enhancing transparency in lending rates of banks and enabling better assessment of transmission of monetary policy. Accordingly, the guidelines are issued for implementation by banks.
Click here for the text of the circular DBOD. No. Dir. BC 88 /13.03.00/2009-10 dated April 9, 2010
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