The base rate system will be applicable to all fresh loan applications and also for old loans that have been demanded for renewal. If an existing borrower wants to change to the new lending system then it can be done by the mutual consent of both the customer and the respective bank.

Initially the base rate system was welcome by many criticisms arising from the banks. Since this system allowed every bank to price its loan individually so each bank would price its loan according to the cost of funds and operating efficiencies. This implies that a bank with a higher CASA ratio will benefit more than the one with a lower ratio.

CASA stands for current and savings account. The CASA ratio shows out of the total deposits available with a bank, how much is attributable to current and savings deposits.
An increased CASA ratio therefore would infer an increased source of funds from current and savings account deposits. CASA provides more liquidity as compared to term and demand deposits.

This infers that banks with high CASA ratios will benefit themselves and banks with base rates at the higher end are sure to have a tuff time competing in this highly competitive business. But in this race the customer seems to be in a win-win scenario. As the banks fight for the best lending rate, the customer gets to have the cherry of the cake.