However the spread fixed at the time of sanction of loans to all borrowers should remain fixed all through the term of the loan. Benchmark prime lending rate by rbi in 2003.
Vajiram Ravi Rbi Cuts Benchmark Interest Rate Again Facebook
At present interest rates on loans are linked to a banks marginal cost of fund based interest rate known as the marginal cost of lending rate mclr.
Benchmark interest rate upsc. Prime lending rateplr a prime rate or prime lending rate is an interest rate average rate of interest charged on loans used by banks usually the rate at which banks lend to favored customers ie. Marginal cost of lending rate. What does the rbi move mean for you banks will have to link interests to external benchmarks instead of internal ones which is the current norm.
It is a benchmark lending rate for floating rate loans. Linking interest rate to external benchmark. External benchmark based lending of rbi or floating rate loan in hindi for upsc ias exam.
Plr was replaced by bplr. It came into effect in april 2016. This rate is based on four componentsthe marginal cost of funds negative carry on account of cash reserve ratio operating costs and tenor premium.
A minimal interest rate set and published by commercial banks for accumulating interest on different credit types. The marginal cost of funds based lending rate mclr is the minimum interest rate that a bank can lend at. What is external benchmarking of loans.
12 upsc prelims 2020 economy external benchmark interest rate marginal cost of fund interest rate crux of indian economy. Mclr is a tenorlinked internal benchmark which means the rate is determined internally by the bank depending on the period left for the repayment of a loan. Those customers with good credit.
This is the minimum interest rate at which commercial banks can lend. Existing loans and credit limits linked to the mclr base rate or benchmark prime lending rate would continue till repayment or renewal. The marginal cost of fund based lending rate mclr is currently the benchmark for all loan rates.
Most commercial banks in india are likely to select rbis repo rate as the external benchmark to decide their lending rates from april 1. Interest rate spread also the decision on the interest rate spread over the external benchmark should be left to the commercial judgment of banks. The repo rate is the key policy rate of the reserve bank of india rbi.
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