Base rate- the new system of loan pricing seems to be proving more beneficial to the banks than the retail and SME customers for whom it was originally designed.

Base rate was implemented over Benchmark Prime Lending Rate (BPLR) so as to bring more transparency in the loan pricing mechanism of the Indian banking industry. Thus it seemed to all that base rate is better than BPLR.

Base rate has proved to be a boon for banks too. This can be understood from the fact that despite rise in their cost of funds by 50-100 basis points, their margins would not be seeing a dip in the September quarter due to base rate which holds them from lending at competitive low rates.

"Earlier, for building volumes, banks were undercutting each other. Since base rate is the floor rate, it has helped improve their yields on assets," pointed out Janak Desai, country head, wholesale banking, ING Vysya Bank.

However, how much is the common borrower benefitted from base rate seems to be a question yet not answered. Home loan scheme of Corporation Bank can be taken as an example for the same.

The bank is offering home loans to new customers at base rate of 7.75% for amount less than Rs 30 lakhs while the old borrowers still continue to pay 8.5% interest on their loan amount.

The festive offers currently being given out by banks also look to be benefitting only the new customers. Bankers say that since these offer rates are not less than base rate so they are in no way violating RBI guidelines.

"Also, the customer should move from the PLR system to the base rate system. Only then will they discover if they have benefited or not," said RIS Siddhu, chief general manager of Punjab National Bank.