Come July 1, Indian banks will have to use a “base rate” to price loans. The base rate, which will vary by institution based on cost of funds, will be the lowest rate a bank can charge on auto, home, and business loans.
Currently, banks use the benchmark prime lending rate. The problem with the BPLR is that it is often set high because it also serves as the ceiling price for higher risk small loans.
Click here to learn how banks will calculate the base rate and which loans will be exempt.