ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Base Rate Transition and Transparency Issues

While it will take some time for the new base rate system to have its full impact on the pricing of loans, certain patterns are already discernible. The BR of all banks is considerably lower than the former benchmark prime lending rate and the range of the BR in various bank groups is also narrower than the BPLR earlier. Following the State Bank of India's decision to launch BR-based deposits, an intriguing question is that while deposit rates are to infl uence the BR, if the latter itself determines the former, what then is to determine the BR? With the shift to the BR, corporates are showing signs of moving to non-bank sources for their working capital. The burden of higher borrowing costs may then fall on the public sector which was earlier drawing on sub-BPLR fi nance.

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