Most of the public sector banks were looking at country’s largest lender the State Bank of India for setting their base rates. Now most of them have fixed their minimum base rate in the range of 7.75 per cent to 8.25 per cent, higher than that of market leader SBI.
From July 1, the new rate system has replaced the Benchmark Prime Lending Rate (BPLR) that varies between 11-13.75%. The new lending rate system has been introduced to bring about more transparency in the lending operations of banks.
Bank of Baroda, Oriental Bank of Commerce, Allahabad Bank, Bank of India, Indian Bank and IDBI Bank have set their rate at 8 per cent. Syndicate Bank, Dena Bank and Indian Overseas Bank have fixed it at 8.25 per cent.
Among the private sector banks Dhanalakshmi Bank and DBS Bank India have fixed the rate at 7 per cent, lower than that of SBI, while Karur Vysya Bank’s- Kerala based private sector lender has fixed the rate at 8.5%.
Mangalore based Corporation Bank, State Bank of Mysore and Federal Bank has fixed the rate at 7.75 per cent. UCO bank has fixed its rate at 8 per cent.
Under this new system banks will charge interest rates over the base rate depending on borrower’s credit profile. RBI has clarified that the new system will not be applicable to concessional loans such as agriculture, export and other specified sectors.
The base rate system will be applicable for all new loans as well as existing loans that come up for renewal. Existing loans based on the BPLR system might continue till maturity of the existing contract and will be renewed on the basis of new system.
The existing borrowers have been given the option to switch over to the base rate system before the renewal or expiry of the existing contract without any charges.
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