NEWS & ADVICE : PERSONAL LOAN
BPLR or Base rate?? Which is better…?
By Vaibhav Aggarwal
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BPLR or Benchmark Prime Lending Rate is the rate charged by commercial banks to their most credit worthy customers. According to the Reserve Bank of India, banks are free to fix their BPLRs but the interest rates charged by them have to bear relevance to the BPLR. Banks are free to fix BPLRs for credit limit beyond Rs.2 lakhs. Lending rates for the agricultural sector was set by the RBI.

Questions about the BPLR system being out of sync with market conditions have been arising since quite some time. Customers were dissatisfied with this system of lending as they felt banks lent money to strong and rich corporates at sub BPLR rate. Lending operations in a bank act as a major aid in the growth of the economy of a nation. It is through reasonable and just lending rates that banks can direct fund flow in the economy for productive purposes. Also the variation in BPLR was so wide amongst banks that it stretched to over 4% sometimes.

Thus in order to come over all these delinquencies, the RBI appointed a working group headed by Shri Deepak Mohanty to study the ongoing activities pertaining to BPLR and hence present a report. The report was submitted in October 2009. The working group in it report clearly mentioned that it strongly felt that "The BPLR has tended to be out of sync with market conditions and does not adequately respond to changes in monetary policy. In addition, the tendency of banks to lend at sub-BPLR rates on a large scale raises concerns of transparency.....On account of competitive pressures, banks were lending at rates which did not make much commercial sense."


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(Comments Posted : 10) Post Your Comments
1. iam holding a housing loan with IOB from 2008, it was in BPLR, and recently changed to base rate. please adz if Iam entitle for any interest refund from 2010 till date the difference of interest charged.
saseendran (Posted: Jul 19, 2013)
2. which rate is better base or bplr.....
madhur ahluwalia (Posted: Aug 18, 2012)
3. which one is best??
1-bplr
2-base rate..
ayush agrawal (Posted: Feb 22, 2012)
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