With base rate coming into play from 1st July 2010, it was apprehended by many banks that their profitability would be hit by the step. But rating agency Crisil has said that the profitability of banks is unlikely to get hit by the new mechanism.

The agency also said that base rate is expected to respond more efficiently to monetary policy measures.

Crisil added that base rate would restrict flexibility of banks' to provide finer rates.

Public sector lenders have set base rate in the range of 7.5% to 8.25% while it is lower by 50-100 basis points for their private sector counterparts.