Base Rate System Replaces Benchmark Prime Lending Rate System; Expected to Increase Credit flow to Small Borrowers

The Base Rate system has replaced the Benchmark Prime Lending Rate (BPLR) system with effect from July 1, 2010. Since the Base Rate is the minimum rate for all loans, banks are not permitted to resort to any lending below the Base Rate. Accordingly, the current stipulation of BPLR as the ceiling rate for loans up to Rs. 2 lakh stands withdrawn. It is expected that the above deregulation of lending rate will increase the credit flow to small borrowers at reasonable rates and bank finance will provide effective competition to other sources of high cost credit.

This information was given by the Minister of State for Finance, Shri Namo Narain Meena in a written reply to an Unstarred Question raised in Lok Sabha today.