All public sector banks are having almost the same "base rate" i.e.10.25% Reserve Bank of India had earlier advsed banks to come up with their own base rate to be calculated on the basis of their respective cost of funds, administrative costs and profit margin. Each borrower was supposed to be charged an interest rate that would be base rate plus borrower's risk premium. It is surprising that all banks are having similar cost structure!
RBI also was of the view that the Benchmark Prime Lending Rate (BPLR) which is sought to be replaced by Base Rate was non-transparently fixed by various banks. It now appears that the fate of Base Rate may be no different.
RBI also was of the view that the Benchmark Prime Lending Rate (BPLR) which is sought to be replaced by Base Rate was non-transparently fixed by various banks. It now appears that the fate of Base Rate may be no different.
3 comments:
In my view, the RBI is still giving banks some time to transition to the base rate system, before clamping down on this cartel. I agree that they cannot conceivably have the same cost structure, but then they are used to taking SBIs lead for BPLR and seem continuing it in this case.
Sir, I sent you an email on your gmail id. Pls take a look when free
Mr.Sundar:
I agree with your observation that RBI is still giving some more time to banks.Perhaps Base Rate is following the route of BPLR and to that extent the committee that recommended introduction of Base Rate in all sincerity may get disillusioned. Prof.TT Rammohan who was an active member in that committee has rightly observed, "It may not be cartelisation but banks wanting to be not far from the lowest or most acceptable rate".A point similar to the one you have made. I am afraid that pricing of advances instead of following "costing"of funds may actually lead to tinkering with costing.
Srivarahan
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