ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Battle against the Prime Lending Rate

The prime lending rate and the benchmark PLR, on which banks are expected to base their lending rates, have failed to achieve the desired effect of efficiency in credit allocation and competitive pricing of bank loans. The Reserve Bank of India working group that reviewed the BPLR now recommends a "base rate" that will not in any way deal more effectively with the problem of a lack of transparency nor will it better reflect costs. Unfortunately, the working group did not take up any of the larger issues faced by our banks in their lending strategies. It falls back on a simplistic accounting approach and leaves out the imponderables in estimating banks' costs.

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